described in 2 U.S.C. 441(i). This section does not preclude the acceptance of a modest gift for participation as a speaker, as provided in Rule 3.

(c) No employee shall appear in court or on a brief in a representative capacity (with or without compensation) or otherwise accept or perform legal, accounting, engineering, or similar professional work, unless specifically authorized to do so by the Commission. Acceptance of a forwarding fee shall be deemed to be within the foregoing prohibition. As a matter of general policy, outside or private professional work or practice by the staff is discouraged and only in unusual cases or circumstances will it be authorized. However, the Commission encourages its employees, in off-duty hours and consistent with official responsibilities, to participate, without compensation, in programs to provide legal or other appropriate assistance and representation to indigents.12 Such participation may include limited appearances in court and on briefs when required in connection with such programs. However, such participation may not involve any activities which are prohibited by law, Executive orders, Office of Personnel Management regulations, or this subpart M.13 For example, 18 U.S.C. 205

12 As a matter of policy, the Commission encourages members of its staff to participate in matters involving improvement to their communities and service to indigent persons, provided that the necessary approval is obtained in advance. However, in no case will approval be given to participate in matters involving securities.

13 Attention is called to Title 18, United States Code, sections 201 through 209 which provide, among other things, that Federal employees are prohibited from acting as agent or attorney in prosecuting any claim against the United States or from aiding and assisting in any way, except as otherwise permitted in the discharge of official duties, in the prosecution or support of any such claim, or from receiving any gratuity, or any share of an interest in any claim from any claimant against the United States; and from directly or indirectly receiving or agreeing to receive any compensation whatever for services rendered or to be rendered to any persons in relation to any matter in which the United States is a party or directly or indirectly interested. 18 U.S.C. 205 contains an exception from the foregoing restrictions for acting as agent or attorney,

prohibits a Federal employee from appearing in court in a matter in which the United States has an interest (other than on behalf of the United States), without regard to compensation.

(1) The provisions of this paragraph (c) and §200.735-3(b)(2) do not preclude an employee from:

(i) Acting without compensation as agent or attorney (A) for a Commission employee who is sued or is under investigation in connection with his or her official duties; (B) for any Commission employee who is the subject of disciplinary, loyalty or other personnel administrative proceedings in connection with those proceedings; or (C) for any Commission employee who raises claims or against whom allegations of wrongdoing are made pursuant to the Commission's Equal Opportunity regulations, if such representation is not inconsistent with the faithful performance of the employee's duties.14

(d) No member or employee shall hold office in or be a director of any company which has public security holders, except not for profit corporations, savings and loan associations, and similar institutions, whose securities are exempted under section 3(a)(4) or 3(a)(5) of the Securities Act of 1933 (15 U.S.C. 77c(a)(4), 77c(a)(5)).

(e)(1) As paragraph (b)(5) of this section indicates, the Commission encourages employees to engage in teaching, lecturing and writing activities.15 It is understood, however, that Commission employees in their teaching, writing and lecturing shall not

(i) Use confidential or nonpublic information;

without compensation, for government employees who are the subject of disciplinary, loyalty or other personnel-type proceedings, in connection with these proceedings.

14 This is adapted from the provision in 18 U.S.C. 205 and expresses the Commission's general policy which favors the representation of fellow employees without compensation. However, it may be necessary to look to other regulations for specific provisions regarding such representation.

15 This paragraph (e), requiring review of prepared speeches or writings relating to the Commission, does not apply to teaching activities.

174-049 0-97--5

(ii) Make comments on pending litigation in which the Commission is participating as a party or amicus curiae;

or

(iii) Make comments on rulemaking proceedings pending before the Commission which would adversely affect the operations of the Commission.

(2) To assist employees in conforming to these requirements the following procedure for reviewing writings prior to publication, or prepared speeches prior to delivery, has been established:

(i) Employees must submit proposed publications or prepared speeches relating to the Commission, or the statutes or rules it administers, to the General Counsel for review. Employees will be notified as promptly as possible, with due regard to publication deadlines, but in any event within 30 days of receipt of the written document, whether such document conforms to the requirements of this Rule.

(ii) A determination by the General Counsel that a proposed publication conforms to the requirements of the rule will not involve adoption of, or concurrence in, the views expressed. Therefore, such publication or speech shall include at an appropriate place or by way of footnote, or otherwise, the following disclaimer of responsibility:

The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the author and do not necessarily reflect the views of the Commission or of the author's colleagues upon the staff of the Commission.

In appropriate cases, the above disclaimer may be modified by the General Counsel or the Commission to reflect the circumstances of an individual case. In addition, any publication or speech which reflects positions taken by the Commission shall set forth those positions accurately and, if it contains differences with Commission positions, it shall clearly state that such positions are those of the employee.

(f) An employee who intends to accept or perform any outside or private employment or professional work shall obtain necessary authorization in advance of such acceptance or performance. A request for such authorization

shall be submitted to the Division Director, Office Head or Regional Administrator concerned, together with all pertinent facts regarding the proposed employment, such as the name of the employer, the nature of the work to be performed, its estimated duration, and the fee or compensation to be received. Division Directors, Office Heads and Regional Administrators have been delegated the authority to approve routine requests for outside employment. The approving official shall forward to the Director of Personnel a copy of each request showing the date of approval. Requests of a non-routine nature should be forwarded to the Director of Personnel.

(g) The Director of Personnel, or his designee, is authorized to approve or disapprove requests for outside or private employment under this rule, except as to those cases which, in his judgment, should be considered and decided by the Commission. An employee may appeal a disapproved request to the Commission. The written appeal, submitted through the Director of Personnel, shall give reasons why the proposed outside or private employment is consistent with this rule. The Director of Personnel may not approve proposed outside or private employment which is absolutely prohibited by these rules. The Commission may, in a particular case, approve such employment.16

(Pub. L. 98-38)

[45 FR 36064, May 29, 1980; 45 FR 40975, June 17, 1980; 48 FR 39216, Aug. 30, 1983; 50 FR. 45603, Nov. 1, 1985]

$ 200.735-5 Securities transactions.

(a)(1) This section applies to all transactions effected by or on behalf of a member or employee. This includes transactions for the accounts of other persons effected by the member or employee, directly or indirectly, under a power of attorney or otherwise. In addition, a member or employee is considered to have sufficient interest in the securities transactions of his or her spouse or unemancipated minor child or other member of his or her immediate household so that transactions

16 The Commission does not favor the granting of waivers from the provision of this subsection.

effected by or on behalf of such persons must be reported and are subject to all the terms of this section.

(1) Except, this section shall not apply to securities transactions of a legally separated spouse living apart from the member or employee, including transactions for the benefit of a minor child, if the member or employee has no power to control and does not, in fact, advise or control with regard to such transactions. If the member or employee has knowledge of securities held by a separated spouse or for the benefit of a minor child, the disqualification provisions of Rule 6, 17 CFR 200.735-6, and 18 U.S.C. 208 are applicable.

(ii) For purposes of this section member of his or her immediate household means a resident of the member's or employee's household who is related to the employee by blood or marriage or who is in the legal care and/or custody of the employee by reason of adoption, prospective adoption or guardianship.

(2) Members and employees are prohibited from recommending or suggesting the purchase or sale of securities:

(1) Based on non-public information gained in the course of employment; or (ii) Which a member or employee could not purchase because of the restrictions of this rule, in any circumstance in which the member or employee could reasonably expect to benefit from the recommendation, or to anyone over whom the member or employee has or may have control or substantial influence.

(b)(1) No member or employee shall effect or cause to be effected any transaction in a security except for bona fide investment purposes. Therefore, all securities purchased by a member or employee must be held for a minimum of six months. Except, this holding period is not applicable to

(1) Securities sold for less than the purchase price pursuant to a stop-loss order entered at the time of purchase and submitted to the Office of Personnel with the report of purchase;

(ii) Money market fund shares; 17

17 For purposes of this rule a money market fund is defined as an open end investment company whose investment policy calls for investment of at least 80% of its assets in

(iii) Securities purchased by a member or employee prior to entrance on duty with the Commission;

(iv) Debt securities with an initial term of less than six months which are held to term;

(v) Shares of a unit investment trust having a term of less than six months;

or

(vi) The transferring of funds within a family of registered investment companies.

(2) For purposes of this provision a family means any two or more registered investment companies which share the same investment adviser or principal underwriter and hold themselves out to investors as related companies for purposes of investment and investor services.

(c) No member or employee shall effect any purchase or sale of an option, future contract, or option on a future contract involving a security or group of securities.

(d) No member or employee shall (1) Carry securities on margin;

(2) Borrow funds or securities, with or without collateral, for the purpose of purchasing or carrying securities with the proceeds, unless the prior approval of the Commission has been secured; or

(3) Sell a security which he or she does not own, or consummate a sale by the delivery of a security borrowed by or for such member's or employee's account.

(e)(1) Except as provided in this paragraph (e) or paragraph (f) below, members and employees are prohibited from purchasing or selling any security which is the subject of a registration statement filed under the Security Exchange Act of 1934 (15 U.S.C. 78a et seq.), the Securities Act of 1933 (15 U.S.C. 77a et seq.), or a letter of notification filed under Regulation A, or any security of the same issuer while such a registration statement or letter of notification is pending or during the first 60 days after its effective date. This prohibition shall not apply to:

(i) A security which is the subject of a pending registration statement filed

debt securities maturing in 13 months or less.

on Forms S-2, S-3, S-8, F-2, F-3, 8-A, or 8-B; or

(ii) Offerings, except initial public offerings, of shares by an investment company, other than a closed-end investment company, or to offerings by a registered separate account (as defined in section 1(a)(37) of the Investment Company Act of 1940 (15 U.S.C. 80a2(a)(37)) which become effective pursuant to 17 CFR 230.485(b).

(2) Securities of a unit investment trust whose registration statements become effective pursuant to 17 CFR 230.487 may be purchased immediately upon effectiveness of the registration statement.

(3) Securities which are registered for delayed distribution pursuant to 17 CFR 230.415 may be purchased 60 days after the registration becomes effective. The subsequent filing of a pricing amendment or sticker does not revive the prohibition on purchase.

(f) A member or employee may sell a security which is referred to in paragraph (e) of this section only if:

(1) The member or employee certifies that he or she has no information which is not publicly available concerning or relating to the issuer; and

(2) The employee's Division Director, Office Head or Regional Administrator certifies that the employee has not participated in the registration processing. Members, Division Directors, Office Heads, and Regional Administrators are required to submit such certification on their own behalf to the Director of the Office of Personnel.

(g) No member or employee shall purchase any security which to his or her knowledge is involved in any pending investigation by the Commission, or in any proceeding before the Commission, or to which the Commission is a party.

(h) No member or employee shall purchase any security of any company which is in a receivership or bankruptcy proceeding in which the Commission has filed a notice of appear

ance.

(i) No member or employee shall purchase securities of:

(1) Any holding company registered under section 5 of the Public Utility Holding Company Act of 1935 (15 U.S.C. 79e), or any subsidiary thereof, or

(2) Any company, if its status under such Act, or the applicability of any provision of the Act to it, is known by the employee to be under consideration.

(j) The restrictions imposed in paragraphs (e), (g), (h), and (i) of this section do not apply;

(1) To the exercise of a privilege to convert or exchange securities;

(2) To the exercise of rights accruing unconditionally by virtue of ownership of other securities (as distinguished from a contingent right to acquire securities not subscribed for by others);

(3) To the acquisition and exercise of rights in order to round out fractional shares;

(4) To the acceptance of stock dividends on securities already owned; to the reinvestment, under a reinvestment program, of cash dividends on a security already owned; or the participation in a periodic investment plan for the purchase of a security when the original purchase was consistent with the provisions of this rule; or

(5) Investments in funds established pursuant to the Federal Employees Retirement System.

(k) Members and employees holding a Senior Executive Service position in the Division of Investment Management or the Office of Compliance Inspections and Examinations may make discretionary investments in any investment company registered under the Investment Company Act of 1940, 15 U.S.C. 80a et seq., provided that the registered investment company is diversified pursuant to section 5(b)(1) of the Investment Company Act of 1940, 15 U.S.C. 80a-5(b)(1). The Directors of the Division of Investment Management and the Office of Compliance Inspections and Examinations, in consultation with the Office of the General Counsel, shall determine in writing whether Senior Executive Service positions in their respective Division or Office whose duties do not include fund matters also may invest in nondiversified registered investment companies.

(1) No member or employee shall have a beneficial interest in any broker, dealer or investment adviser

through ownership of securities or otherwise. However, if a corporation acquires or establishes a subsidiary or affiliate subject to regulation by the Commission (regulated entity),

(1) A member or employee may retain his or her existing holdings in the corporation, provided the security was originally acquired in compliance with the provisions of this rule or prior to entry on duty with the Commission.

(2) Purchases of the corporation's shares will be permitted so long as the regulated entity subsidiary or affiliate provides less than 10% of the corporation's gross revenue. Except for reinvestment of cash dividends, additional purchases are prohibited when the regulated entity provides 10% or more of the corporation's gross revenues.

(3) A member or employee who owns shares in a corporation with a regulated entity subsidiary or affiliate is disqualified from participating in any matter including rulemaking which affects the regulated entity unless the disqualification is waived in accordance with the provisions of Rule 6, of this section, 17 CFR 200.735-6, and 18 U.S.C. 208(b).

(m)(1) Annually, in accordance with the procedures adopted by the Director of Personnel, every member and employee shall furnish the Director of Personnel with a complete list of all securities in which he or she has an interest. Employees having no interests in securities and required to so state.

(2) Except as provided in paragraphs (m)(3) and (m)(4) of this section, members and employees shall report every acquisition or sale of any security within five business days of the transaction date or date confirmation is received. (Reports submitted by employees in field offices must be placed in the mails within five business days of the transaction date or date the confirmation is received for each transaction.)

(3) After the initial purchase of shares in a mutual fund, employees shall report holdings in that mutual fund only on the annual statement.

(4) Changes in holdings, other than by purchase, which do not affect disqualification, such as those resulting from the automatic reinvestment of dividends, stock splits, stock dividends

or reclassifications, may be reported on the annual statement rather than when notification of the transaction is received. But, the acquisition of holdings by, for example, gifts, inheritance or spin-offs, which may result in additional disqualifications pursuant to Rule 6 of this section, 17 CFR 200.735-6, and 18 U.S.C. 208 shall be reported within five days of the receipt of the notice of the change in holdings.

(n) At the time of taking the oath of office, or prior thereto if requested by the Director of Personnel, a new member or employee shall provide to the Office of Personnel, as requested, information relating to—

(1) Securities owned by or held for the benefit of him or her, or his or her spouse or unemancipated minor child, or a member of his or her immediate household, or by any trust or estate of which he or she is a trustee or other fiduciary or beneficiary, or by any person for whom he or she effects transactions under a power of attorney or otherwise;

(2) Accounts with securities firms;

(3) Close relatives (i.e. children, parents, grandparents, siblings, aunts, uncles, or like relations of a spouse), who are partners or officers of securities firms, investment advisers, or registered public utility holding companies or their affiliates;

(4) The holding of office in or being a director of any company which has public security holders; and

(5) Such other information as may be required by the Director of Personnel. Employees are required to advise the Office of Personnel of changes in the foregoing information within ten business days of the time the new information is learned.

(0) Paragraphs (b), (m), and (n) of this section do not apply to personal notes, individual real estate mortgages, securities issued by the U.S. Government or its agencies, and securities issued by building and loan associations or cooperatives.

(p) Any member or employee who is a trustee or other fiduciary or a beneficiary of a trust or estate holding securities not exempted by paragraph (0) of this section, shall report the existence and nature of such trust or estate to the Director of Personnel. The