Post-Employment Reference Guide – An Ethics Reminder
May 12, 2017
Employees who have left or who leave the SEC are subject to the executive branch post-employment restrictions. Three of these bans apply to all employees, and two bans apply to most senior employees. In addition, other post-employment restrictions specifically apply to SEC employees.
A. 18 USC 207 (Criminal Statute)
Permanent bar: If you worked, personally and substantially, on a government matter that has specific parties (such as a contract, opinion letter, examination, investigation or litigation), you are barred permanently from communicating to or appearing before a federal employee, on behalf of someone other than yourself or the United States, with the intent to influence that employee on that same matter (i.e., you may not "switch sides" on the same matter).
Question: What does it mean to work "personally and substantially" on something?
Answer: The term "personal and substantial participation" is to be read broadly. Most participation is personal and substantial.
Q: How do I know if a matter involved "specific parties"?
A: This is a complicated question, and it's not always easy to tell. Your best course of action is to seek advice from the Ethics Office. Once you have left the agency, if a matter comes up involving the same individuals' names, or issues similar to, names or issues involved in a matter that you personally and substantially participated in at the SEC, it is advisable to consult with the Ethics Office before undertaking the representation.
Q: What does it mean to "communicate" or "appear" with intent to influence?
A: Communications prohibited by the post-employment statute include oral or written communications, telephone calls, communications by electronic media or any other means. Appearances prohibited by the statute may include the mere physical presence of a former employee when the circumstances make it clear that his or her attendance is intended to influence the United States.
Official Responsibility Bar: If you did not work personally on a matter described above, but it was pending under your official responsibility (your chain of supervision) during your last year of government service, you are barred for two years from communicating to or appearing before a federal employee, on behalf of someone other than yourself or the United States, with the intent to influence that employee on that matter.
Senior Employee Bar: If you served as a "senior employee" during your last year of government service, you are restricted for one year from communicating to or appearing before an employee of the SEC on behalf of someone other than yourself or the United States, with the intent to influence that employee on any matter, regardless of whether the matter involves specific parties and regardless of whether you ever worked on or supervised the matter. A "senior employee" for this purpose includes all commissioners, senior officers and any employee (including employees on the SK pay scale) whose base pay (excluding locality pay) is equal to or greater than $160,111.50.*
Senior Employee: If you served as a "senior employee," you also are restricted for one year from representing, aiding or advising a foreign government or foreign political party, with an intent to influence an officer or employee of any department or agency.
- Procurement Officers: If you worked on certain procurements over $10 million or in the administration of SEC contracts, you may not be able to accept compensation from certain contractors for one year.
B. 18 USC 203 (Criminal Statute)
Prohibits certain profits from representation before the government: If you will be working for a firm that has represented clients before federal agencies or courts, another criminal law (18 USC 203) prohibits you from sharing in the profits earned by the firm for work before a government agency, or from a court case in which the government had an interest, while you were still employed by the government. Individuals who will be joining a firm as a partner, or pursuant to any other arrangement that involves receiving a share or percentage of the profits of a firm, should be aware of this restriction and seek ethics advice before agency departure.
Q: How would I avoid running afoul of this if I leave the SEC to become a partner in a firm?
A: Potential violations of this statute generally can be avoided by arranging a contract partnership or a fixed salary for a sufficient period to be certain that all profits attributable to representations before the United States that occurred before the date you left the SEC have been distributed.
C. SEC Specific Rules 8(b) and 8(d) – 17 CFR 200.735-8
8(b) – rule for all former employees
To ensure compliance with the post-employment restrictions, all former employees of the SEC are required, for two years after leaving the agency to file a notice with the Ethics Counsel of any proposed appearance before, or communication with, on behalf of another, the agency or its employees within 10 days of the communication (8(b) letter). You should receive permission to do so from the SEC before proceeding with any appearance or communication.
Q: How does the 8(b) process work?
A: You file notice using this sample Notice of Appearance, within 10 days after you are retained or employed, or within 10 days of the time a communication with, or appearance before, the agency is contemplated. You can submit in paper or electronic format. The electronic submission also can be accessed through SEC.gov.
The notice must include an affirmative statement that the former employee did not participate personally and substantially in the matter while at the SEC, and that the matter did not fall within the former employee's official responsibility while he or she was with the agency.
In addition, the statement must include a description of the contemplated representation and the name of the division or office in which the person had been employed. Staff review of your 8(b) notice can be expedited if the statement identifies your supervisor(s) while you were at the SEC (or other person(s) familiar with your work) and, if you know, the SEC staff assigned to the matter in which you would like to appear. Employment of a recurrent character can be covered by a single comprehensive statement. All particular matters should be specifically identified. You will then either receive approval or denial of your appearance.
8(d) – SEC-specific rule for lawyers
Q: How does the 8(d) process work?
A: If a former employee is disqualified from a matter before the SEC, the former employee's disqualification may be imputed to his or her partners and associates, unless the firm obtains a waiver. Waivers ordinarily will be granted if a firm makes a satisfactory representation that it has adopted screening measures that effectively will wall off the former employee who is subject to the disqualification. The firm's managing partner should file the request for a waiver of imputed disqualification. Here is a sample.
If you are an attorney or other licensed professional, you also should consult your local bar rules or similar professional code for any special restrictions on employment following government service.
If you have any other questions, please contact the Ethics Office at 202-551-5170.
*$160,111.50 is the pay threshold applicable as of Jan. 6, 2015. The relevant base salary threshold generally changes annually, and the Ethics Office can advise you on the applicable threshold for the current calendar year.