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Fact Sheet: Prohibited Financial Interests for FDA Employees

Fact Sheet: Prohibited Financial Interests for FDA Employees

General Prohibition

The HHS Supplemental Regulations prohibit employees of the Food and Drug Administration, or the spouse or minor child of the employee, from holding a financial interest (e.g., a stock holding) in any FDA "significantly regulated organization."

"Significantly regulated organization" is defined as an organization for which the sales of products regulated by the FDA constitute ten percent or more of annual gross sales in the organization’s previous fiscal year; where an organization does not have a record of sales of FDA-regulated products, it will be deemed to be significantly regulated if its operations are predominately in fields regulated by FDA, or if its research, development, or other business activities are reasonably expected to result in the development of products that are regulated by FDA.

Exceptions to the General Prohibition

  1. An employee, or spouse or minor child of an employee, may hold a pension, or other employee benefit, arising from employment with a significantly regulated organization if such holding does not conflict with the employee’s official duties and thus require recusal from duties that are critical or central to their position.
  2. An employee, or spouse or minor child of an employee, who is not required to file a public or confidential financial disclosure report may hold a financial interest in a significantly regulated organization under certain conditions including that the value of the holding is less than $15,000.
  3. An employee, or spouse or minor child of an employee, may have an interest in a significantly regulated organization that constitutes any interest in a publicly traded mutual fund, or a widely held pension or similar fund, which, in its literature distributed to prospective and current investors, does not indicate the objective or practice of concentrating its investments in significantly regulated organizations, and the employee neither exercises control nor has the ability to exercise control over the financial interests held in the fund.
  4. The Commissioner or the Commissioner’s designee may grant an employee a written exception to hold a financial interest in a significantly regulated organization based upon an exceptional circumstance as determined by the Commissioner or the designee.

OGE Form 450 – "Confidential Financial Disclosure Report"

Employees that are designated as confidential filers are required to complete and submit a report of their financial interests on Form OGE 450 “Confidential Financial Disclosure Report” within 30 days of entrance on duty, and then on an annual basis thereafter. (Note: applicants to higher level confidential filing positions in FDA may be asked to provide an OGE 450 form prior to entrance on duty as part of an internal pre-clearance process.)

The OGE 450 form undergoes an initial review by designated reviewers in the Centers and Offices, then an extensive review by the Division of Ethics and Integrity. Employees will be directed to divest of any financial holding that is prohibited by regulation or that will create a conflict of interest with the employee’s official duties.

HHS Form 717-2 "Report of Prohibited Financial Interests"

Employees are required to complete Form HHS 717-2 “Report of Prohibited Interests for Employees of the Food and Drug Administration.” as follows:

  1. New entrant Employees. A new entrant employee, who is not a public filer or confidential filer, must complete and submit the report within 30 days after entering on duty, or being reassigned to the FDA.
  2. Incumbent employees. An incumbent employee who acquires any prohibited financial interest must complete and submit the report within 30 days after acquiring the financial interest.

Employees are responsible for monitoring their financial interests and if an employee learns that a financial holding has become “prohibited,” the employee should immediately complete and submit Form HHS 717-2.

Agency Financial Review Process

The Agency conducts a review of the financial interests of public and confidential filers and an employee who is found to have a financial interest in a significantly regulated entity is notified in writing and directed to the proper course of action. Employees have four options to satisfy the divestiture requirements:

  1. Include documentation to support that the company is not significantly regulated; or
  2. Divest of the prohibited financial interest, which could include transferring the interest to someone other than a spouse or minor child; or
  3. Apply for a Certificate of Divestiture from the Office of Government Ethics (OGE); or
  4. Request an exception to hold the financial interest.

Note: Employees have an affirmative obligation to monitor their own compliance with the prohibition, apart from any review conducted by the Agency.

Certificate of Divestiture

This document allows for the deferral of capital gains for Federal Income Tax purposes if the monies derived from a directed divestiture action are rolled over into any obligation of the United States or any diversified investment fund. The OGE determines whether to issue a Certificate of Divestiture pursuant to certain conditions including the following:

  1. Any employee who purchases a financial interest at a time when that interest is already prohibited for the employee will not be eligible for a Certificate of Divestiture. The “Listing of U.S. Industries” provides the names of U.S. public companies and indicates whether they are acceptable or prohibited holdings. The Listing can be accessed on the FDA Internet.
  2. If divestiture will not occur within 90 days after the date divestiture is first directed by the agency, the employee will not be eligible for a Certificate of Divestiture unless OGE concurs with an extension of time because of unusual hardship.

Employee Request for an Exception to Retain a Prohibited Financial Interest

In cases involving "“exceptional circumstances,” the employee may be able to qualify for an exception to hold the prohibited interest. The Conflict of Interest Review Board will evaluate employee requests for an exception on an individual basis, and a determination will be made pursuant to applicable regulations. Please be aware that an exceptional circumstance does not include any of the following situations: purchasing a prohibited interest either personally or through the efforts of another person such as an investment broker, before or during FDA employment; receiving a prohibited interest as a gift, inheriting a prohibited interest, or obtaining a prohibited interest through marriage.

Reminder:

It is the responsibility of the employee, not the Agency, to ensure that he/she remains in compliance with the financial interest regulations.

Division of Ethics and Integrity
Office of Operations
Food and Drug Administration