What legal or ethical rules govern federal nominees divesting investments tied to agencies they would oversee?
Executive summary
Federal nominees facing investments that intersect with the agencies they would oversee are governed by a mix of statutory conflict-of-interest laws, agency ethics regulations administered by the Office of Government Ethics (OGE), and case- or program-specific authorities that can require or force divestiture; nominees may be asked to sell, seek a Certificate of Divestiture, place assets in blind trusts, or recuse from particular matters depending on the risk [1] [2] [3]. In narrow national-security contexts, executive tools like CFIUS and statutes implementing the Defense Production Act can compel divestment of foreign-controlled assets or trigger presidential orders to divest, separate from OGE mechanics [4] [5] [6].
1. The core federal ethics framework that triggers divestiture
Nominees and appointees are subject to federal conflict-of-interest rules that implement 18 U.S.C. 208 and related statutes through OGE’s regulations, which authorize agency ethics officials to require divestiture when necessary to avoid conflicts or appearances of conflicts; the regulatory scheme includes Certificates of Divestiture when a sale will produce capital gains and provides standards for permitted reinvestments and timing [1] [7] [2]. The Certificate process is an administrative mechanism: an ethics official can determine divestiture is reasonably necessary and, where sale will produce taxable gains, issue a certificate allowing tax-deferral treatment under certain internal revenue provisions, subject to limits tied to particular offices [1] [7] [2].
2. Practical remedies: sell, recuse, blind trust, or divest by order
OGE guidance and agency practice present a menu of remedies: nominees typically can divest problematic holdings, place assets into qualified blind trusts, or agree to recusal from specific matters; OGE explicitly advises contacting designated agency ethics officials to determine permitted reinvestment options and whether statutes or executive orders restrict those options [2] [7]. When ordinary remedies are insufficient or when statutory prohibitions apply, agencies may require sale before confirmation or condition confirmation on divestiture—examples in the regulatory text show nominees selling DOD-contractor stock at hearings and then seeking Certificates thereafter, illustrating administrative sequencing and limits on post-sale tax treatment [7] [1].
3. Where national security and foreign investment law add a second layer
Separate from OGE conflict rules, national-security review regimes can force or mandate divestment: CFIUS reviews foreign investments under Section 721 of the Defense Production Act and can lead to presidential orders requiring divestiture of assets the Committee finds pose national-security risks, as shown in the Treasury and White House statements ordering divestment of specific corporate assets [4] [6]. Courts have recognized that presidential remedial powers under Section 721 can be broad and, in some cases, largely unreviewable, meaning a nominee’s private foreign holdings could be subject to executive divestiture remedies that operate outside standard ethics procedures [5].
4. Congressional statutes and reporting regimes that shape incentives and enforcement
Laws aimed at transparency and trading—such as the Ethics in Government Act (EIGA) and the STOCK Act—require financial disclosures that expose conflicts and create political and legal pressure to divest; legislative proposals and ethics rules have long debated timelines and mechanisms for selling complex assets held by officials, and Congress has periodically considered stricter divestment schedules or penalties for covered officials [3]. Those disclosure regimes do not by themselves force divestment but make conflicts visible to confirmation bodies, ethics offices, and the public, often prompting negotiated divestiture or recusal conditions [3].
5. Limits, gaps, and who decides — ethics officials, agencies, or the President
The practical outcome for any nominee depends on overlapping authorities and discretion: agency ethics officials apply OGE rules and can issue Certificates of Divestiture and stipulate permitted reinvestments, while national-security bodies like CFIUS or executive orders can compel divestment in targeted cases; courts have sometimes constrained review of those executive powers, leaving substantial room for unilateral remedies in national-security contexts [2] [1] [5] [4]. Reporting and disclosure statutes shape public and congressional pressure, but if an asserted claim about a specific nominee or asset is not documented in these sources, available reporting does not establish whether a particular divestment was legally mandated or voluntarily arranged [3].