Title IV Conservators, Receivers, and Voluntary Liquidations; Receivership Repudiation Authorities, 21685-21688 [05-8237]
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Federal Register / Vol. 70, No. 80 / Wednesday, April 27, 2005 / Proposed Rules
compatibility rulemakings by both the
NRC and the DOT.
DATES: Proposed changes will be
accepted until July 1, 2005. Proposed
changes received after this date will be
considered if it is practical to do so, but
the NRC is able to assure consideration
only for proposed changes received on
or before this date.
ADDRESSES: Mail proposed changes to
Michael Lesar, Chief, Rules and
Directives Branch, Division of
Administrative Services, Office of
Administration, U.S. Nuclear Regulatory
Commission, Washington, DC 20555–
0001.
Hand deliver proposed changes to
Two White Flint North, 11545 Rockville
Pike (Mail Stop T6D59), Rockville,
Maryland 20852, between 7:30 a.m. and
4:15 p.m. Federal workdays.
FOR FURTHER INFORMATION CONTACT: John
Cook, Office of Nuclear Material Safety
and Safeguards, U.S. Nuclear Regulatory
Commission, Washington, DC 20555–
0001, telephone: (301) 415–8521; e-mail:
jrc1@nrc.gov.
SUPPLEMENTARY INFORMATION:
Background
The IAEA periodically revises its
Regulations for the Safe Transport of
Radioactive Material (TS–R–1) to reflect
new information and accumulated
experience. The DOT is the U.S.
competent authority before the IAEA for
radioactive material transportation
matters. The NRC provides technical
support to the DOT in this regard,
particularly with respect to Type B and
fissile packages.
On April 7, 2005, the IAEA posted for
comment 28 proposed changes to TS–R–
1. The IAEA’s review process calls for
Member States and International
Organizations to provide comments to
the IAEA by August 5, 2005. The
proposed changes may be incorporated
in a revised edition of the regulations in
2007, nominally to become effective
worldwide in 2009. To assure
opportunity for public involvement in
the international regulatory
development process, the DOT and the
NRC are soliciting comments on the
proposed changes at this time. This
information will assist the DOT and the
NRC in having a full range of views as
the agencies develop comments the U.S.
will submit to the IAEA.
The following documents are
available for viewing and downloading
on the Internet at: https://
hazmat.dot.gov/regs/files/
IAEADraftChanges.htm.
• Table of the regulatory changes
proposed by the IAEA.
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• A consolidated draft of the
proposed TS–R–1 revision.
• A standard comment form for the
proposed TS–R–1 revision.
• Table of the advisory material
changes proposed by the IAEA.
• A consolidated draft of the
proposed TS–G–1.1 revision.
• A standard comment form for the
proposed TS–G–1.1 revisions.
Public comments on proposed
changes must be submitted in writing
(electronic file on disk in Word format
preferred) using the standard comment
forms referred to above. The NRC and
the DOT will review the public
comments received by July 1, 2005.
Based in part on the information, the
agencies will determine the U.S.
comments on the proposed changes to
be submitted to IAEA by August 5,
2005.
Comments on the proposed changes
from the U.S., other Member States and
International Organizations will be
considered at an IAEA Review Panel
Meeting to be convened by IAEA on
September 5–9, 2005, in Vienna,
Austria. Note that future domestic
rulemakings, if necessary, will continue
to follow established rulemaking
procedures, including the opportunity
to formally comment on proposed rules.
Dated in Rockville, Maryland, this 21st day
of April 2005.
For the Nuclear Regulatory Commission.
David W. Pstrak,
Transportation and Storage Project Manager,
Office of Nuclear Material Safety and
Safeguards.
[FR Doc. 05–8371 Filed 4–26–05; 8:45 am]
BILLING CODE 7590–01–P
FARM CREDIT ADMINISTRATION
12 CFR Part 627
RIN 3052–AC26
Title IV Conservators, Receivers, and
Voluntary Liquidations; Receivership
Repudiation Authorities
Farm Credit Administration.
Proposed rule.
AGENCY:
ACTION:
SUMMARY: The Farm Credit
Administration (FCA) is proposing a
rule on how the Farm Credit System
Insurance Corporation (FCSIC), as
receiver or conservator of a Farm Credit
System (System) institution, will treat
financial assets transferred by the
institution in connection with a
securitization or in the form of a
participation. The rule would resolve
issues raised by Financial Accounting
Standards Board (FASB) Statement No.
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140, Accounting for Transfers and
Servicing of Financial Assets and
Extinguishment of Liabilities (SFAS
140). Under conditions described in the
rule, the FCSIC will not seek to recover
or reclaim certain financial assets in
exercising its authority to repudiate or
disaffirm contracts pursuant to 12 CFR
627.2725(b)(2), (b)(14) and 627.2780(b)
and (d). The proposed rule also provides
that the FCSIC will not seek to enforce
the ‘‘contemporaneous’’ requirement of
section 5.61(d) of the Farm Credit Act of
1971, as amended (Act) (12 U.S.C.
2277a–10(d)). The proposed rule is
substantially identical to receivership
rules issued by the Federal Deposit
Insurance Corporation (FDIC) and the
National Credit Union Administration
(NCUA).
DATES: Please send your comments to us
by June 27, 2005.
ADDRESSES: You may send comments by
electronic mail to ‘‘reg-comm@fca.gov,’’
through the Pending Regulations section
of FCA’s Web site, ‘‘https://
www.fca.gov,’’ or through the
Governmentwide ‘‘https://
www.regulations.gov’’ Web site. You
may also send comments to S. Robert
Coleman, Director, Regulation and
Policy Division, Office of Policy and
Analysis, Farm Credit Administration,
1501 Farm Credit Drive, McLean, VA
22102–5090 or by fax to (703) 734–5784.
You may review copies of comments we
receive at our office in McLean,
Virginia, or from our Web site at http:/
/www.fca.gov. Once you are in the Web
site, select ‘‘Legal Info,’’ and then select
‘‘Public Comments.’’ We will show your
comments as submitted, but for
technical reasons we may omit items
such as logos and special characters.
Identifying information you provide,
such as phone numbers and addresses,
will be publicly available. However, we
will attempt to remove electronic-mail
addresses to help reduce Internet spam.
FOR FURTHER INFORMATION CONTACT:
Robert E. Donnelly, Senior Accountant,
Office of Policy and Analysis, Farm
Credit Administration, McLean, VA
22102–5090, 703–883–4498, TTY (703)
883–4434, or Rebecca S. Orlich, Senior
Attorney, Office of General Counsel,
Farm Credit Administration, McLean,
VA 22102–5090, 703–883–4020, TTY
(703) 883–4020.
SUPPLEMENTARY INFORMATION:
I. Objective
Our objective in proposing this rule is
to give certainty to System institutions
regarding how participations and
securitizations engaged in by a System
institution will be treated by the FCSIC
if the institution is subsequently placed
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Federal Register / Vol. 70, No. 80 / Wednesday, April 27, 2005 / Proposed Rules
in conservatorship or receivership. The
rule will achieve this by ensuring that
the FCSIC will not attempt to ‘‘pull
back’’ the subject assets into the
conservatorship or receivership estate if
the transaction meets specified
conditions.
II. Background
Under generally accepted accounting
principles (GAAP), a transfer of
financial assets is accounted for as a sale
if the transferor surrenders control over
the assets. This principle is set forth in
the SFAS No. 140, Accounting for
Transfers and Servicing of Financial
Assets and Extinguishment of
Liabilities, issued by the FASB.1 One of
the conditions for determining that the
transferor has surrendered control is
that the assets have been isolated from
the transferor, i.e., put presumptively
beyond the reach of the transferor, its
creditors, a trustee in bankruptcy, or a
receiver. This is known as the ‘‘legal
isolation’’ condition.
Whether the legal isolation condition
has been met is determined primarily
from a legal perspective. This
determination involves considerations
of the kind of receivership into which
the transferor may be placed and the
powers of the receiver to reach assets
that were transferred prior to its
appointment. If the available evidence
provides reasonable assurance that the
transferred assets would be beyond the
reach of the powers of a bankruptcy
trustee or receiver for the transferor,
then a determination that the transferred
assets have been legally isolated is
appropriate.
Where the transferor is a System
institution for which the FCSIC may be
appointed conservator or receiver, the
issue arises whether financial assets
transferred in connection with a
securitization or in the form of a
participation would be put beyond the
reach of the FCSIC as conservator or
receiver. This issue arises because of the
FCSIC’s authority to repudiate
burdensome contracts under
§§ 627.2725(b)(2), (b)(14) and
627.2780(b) and (d) of FCA regulations;
and because of section 5.61(d) of the
Act.2 Under §§ 627.2725(b)(2) and
1 SFAS
140 replaced SFAS 125 (which had
covered the same issues and was identically titled)
in September 2000. SFAS 140 revised the standards
for accounting for securitizations and other
transfers of financial assets and collateral and
required certain disclosures, but it carried over
most of the provisions of SFAS 125 without
reconsideration. The FDIC receivership issues and
its related rule 12 CFR 360.6, which are discussed
later in this preamble, are described in paragraphs
157–160 of SFAS 140.
2 See 12 CFR 627.2725(b)(2), (b)(14) and
627.2780(b) and (d), and 12 U.S.C. 2277a–10(d).
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627.2780(d), the FCSIC may take any
action it considers appropriate or
expedient to carry on the business of the
institution during the process of
liquidation or during the
conservatorship. Under
§ 627.2725(b)(14), the FCSIC, when
acting as conservator or receiver of a
System institution, has the power to
disaffirm or repudiate any contract or
lease to which the institution is a party,
the performance of which the FCSIC
determines to be burdensome.
Repudiation of a contract relieves the
FCSIC from performing any
unperformed obligations remaining
under the contract. Section 5.61(d) of
the Act provides that no agreement that
tends to diminish or defeat the FCSIC’s
interest in an asset acquired by the
FCSIC as conservator or receiver is
enforceable against the FCSIC unless the
agreement meets certain requirements.
One of those requirements is that the
agreement must be executed, by the
institution and by any person claiming
an adverse interest under it,
contemporaneously with the acquisition
of the asset by the institution. This is
referred to as the ‘‘contemporaneous’’
requirement.
The FDIC and the NCUA each
adopted a rule in 2000 3 to resolve the
issues discussed above in SFAS 140.4
Specifically, the two agencies addressed
whether their authorities to repudiate
contracts would prevent a transfer of
financial assets by an insured
depository institution or a credit union
in connection with a securitization or in
the form of a participation from
satisfying the ‘‘legal isolation’’ condition
of SFAS 140. The Act and FCA
regulations contain substantially similar
provisions that apply when the FCSIC is
appointed conservator or receiver for a
System institution, and we are
proposing to resolve the issues in the
same way.5 As such, this preamble and
proposed rule track the language of the
FDIC’s and NCUA’s rules. We note that
nothing in this proposed rule is
intended to provide any System
institutions with the authority to engage
in any transaction that is not otherwise
authorized.
III. Description of the Proposed Rule
This proposal would add a new
§ 627.2726 to the conservatorship and
3 See 12 CFR 360.6 (65 FR 49189 (Aug. 11, 2000))
and 12 CFR 709.10 (65 FR 55439 (Sept. 14, 2000)).
4 These issues were originally raised in SFAS 125,
which was replaced by SFAS 140 as described in
footnote 1 above. The issues continue to be
discussed SFAS 140.
5 See 12 U.S.C. 1821(e) for the law pertaining to
the FDIC, and 12 U.S.C. 1787(b)(9) and 1788(a)(3)
for the laws pertaining to the NCUA.
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receivership provisions in part 627 of
FCA’s regulations. The proposed rule
would apply only to those
securitizations or participations in
which the transfer of financial assets
meets all conditions for sale accounting
treatment under GAAP, other than the
‘‘legal isolation’’ condition as it applies
to institutions for which the FCSIC may
be appointed as conservator or receiver,
which would be addressed by the
proposed rule. The proposed rule
provides that, for these transfers, the
FCSIC will not, by exercise of its
authority to repudiate contracts under
§ 627.2725(b)(2) or (b)(14), reclaim,
recover, or recharacterize as property of
the institution or the receivership any
financial assets transferred by a System
institution in connection with a
securitization or in the form of a
participation. Although the repudiation
of a securitization or participation will
not affect transferred financial assets,
repudiation will excuse the FCSIC from
performing any continuing obligations
imposed by the securitization or
participation. If the FCSIC, in order to
terminate such continuing obligations or
duties, seeks to repudiate an agreement
or contract under which a System
institution has transferred financial
assets in connection with a
securitization or in the form of a
participation, the FCSIC will not seek to
reclaim, recover, or recharacterize as
property of the institution or the
receivership such financial assets.
The definition of ‘‘participation’’ in
the proposed rule is specifically limited
to participations that are ‘‘without
recourse’’ to the selling or ‘‘lead’’
institution. ‘‘Without recourse’’ would
mean that the participation must not be
subject to any agreement that requires
the selling or ‘‘lead’’ institution to
repurchase the participant’s interest or
to otherwise compensate the participant
upon the borrower’s default on the
underlying obligation. The term
‘‘without recourse’’ does not, however,
preclude the lead institution from
retaining a subordinated interest in the
participated obligation, against which
losses are initially allocated.
The proposed rule would not apply
unless the System institution received
adequate consideration for the transfer
of financial assets at the time of the
transfer, and the documentation
effecting the transfer of financial assets
reflects the intent of the parties to treat
the transaction as a sale, and not as a
secured borrowing, for accounting
purposes.
The proposed rule further provides
that it will not be construed as waiving,
limiting, or otherwise affecting the
rights or powers of the FCSIC to take
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Federal Register / Vol. 70, No. 80 / Wednesday, April 27, 2005 / Proposed Rules
any action or to exercise any power not
specifically limited by this section.
Such rights or powers include, but are
not limited to, any rights, powers or
remedies of the FCSIC regarding
transfers taken in contemplation of the
institution’s insolvency or with the
intent to hinder, delay, or defraud the
institution or the creditors of such
institution, or that is a fraudulent
transfer under applicable law.
The proposed rule further provides
that the FCSIC will not seek to avoid an
otherwise legally enforceable
securitization agreement or
participation agreement executed by a
System institution solely because such
agreement does not meet the
‘‘contemporaneous’’ requirement of
section 5.61(d) of the Act.
The FCA intends the proposed rule to
apply to securitizations and
participations engaged in by System
institutions while the rule is in effect,
even if the rule is later amended or
repealed. Section 627.2726(g) provides
that any repeal or amendment of the
rule by the FCA will not apply to any
transfer of financial assets made in
connection with a securitization or
participation that was in effect before
such repeal or amendment. As a result
of § 627.2726(g), where a transfer of
financial assets in connection with a
securitization or in the form of a
participation is made by a System
institution and the securitization or
participation was in effect before any
repeal or amendment of the rule by the
FCA, such transfer will continue to
satisfy the legal isolation requirement
notwithstanding the repeal or
amendment.
We also propose a conforming change
to § 627.2780(h) to clarify that the
provisions of this proposed rule apply
to a conservatorship as well as to a
receivership.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.), FCA hereby certifies that the
proposed rule will not have a significant
economic impact on a substantial
number of small entities. Each of the
banks in the Farm Credit System,
considered together with its affiliated
associations, has assets and annual
income in excess of the amounts that
would qualify them as small entities.
Therefore, Farm Credit System
institutions are not ‘‘small entities’’ as
defined in the Regulatory Flexibility
Act.
List of Subjects in 12 CFR Part 627
Agriculture, Banks, Banking, Claims,
Rural areas.
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For the reasons stated in the
preamble, we propose to amend part
627 of Chapter VI, title 12, of the Code
of Federal Regulations as follows:
PART 627—CONSERVATORS,
RECEIVERS, AND VOLUNTARY
LIQUIDATIONS
1. The authority citation for part 627
is revised to read as follows:
Authority: Secs. 4.2, 5.9, 5.10, 5.17, 5.51,
5.58, 5.61 of the Farm Credit Act (12 U.S.C.
2183, 2243, 2244, 2252, 2277a, 2277a–7,
2277a–10).
Subpart B—Receivers and
Receiverships
2. Add a new § 627.2726 to read as
follows:
§ 627.2726 Treatment by the conservator
or receiver of financial assets transferred in
connection with a securitization or
participation.
(a) Definitions.
Beneficial interest means debt or
equity (or mixed) interests or obligations
of any type issued by a special purpose
entity that entitle their holders to
receive payments that depend primarily
on the cash flow from financial assets
owned by the special purpose entity.
Financial asset means cash or a
contract or instrument that conveys to
one entity a contractual right to receive
cash or another financial instrument
from another entity.
Participation means the transfer or
assignment of an undivided interest in
all or part of a loan or a lease from a
seller, known as the ‘‘lead’’, to a buyer,
known as the ‘‘participant’’, without
recourse to the lead, pursuant to an
agreement between the lead and the
participant. Without recourse means
that the participation is not subject to
any agreement that requires the lead to
repurchase the participant’s interest or
to otherwise compensate the participant
due to a default on the underlying
obligation.
Securitization means the issuance by
a special purpose entity of beneficial
interests:
(1) The most senior class of which at
the time of issuance is rated in one of
the four highest categories assigned to
long-term debt or in an equivalent shortterm category (within either of which
there may be sub-categories or
gradations indicating relative standing)
by one or more nationally recognized
statistical rating organizations, or
(2) Which are sold in transactions by
an issuer not involving any public
offering for purposes of section 4 of the
Securities Act of 1933 (15 U.S.C. 77d),
as amended, or in transactions exempt
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21687
from registration under such Act
pursuant to Regulation S thereunder (or
any successor regulation).
Special purpose entity means a trust,
corporation, or other entity
demonstrably distinct from the Farm
Credit institution that is primarily
engaged in acquiring and holding (or
transferring to another special purpose
entity) financial assets, and in activities
related or incidental thereto, in
connection with the issuance by such
special purpose entity (or by another
special purpose entity that acquires
financial assets directly or indirectly
from such special purpose entity) of
beneficial interests.
(b) The receiver shall not, by exercise
of its authority to repudiate contracts
under § 627.2725(b)(2) and (b)(14),
reclaim, recover, or recharacterize as
property of the institution or the
receivership any financial assets
transferred by a Farm Credit institution
in connection with a securitization or
participation, provided that such
transfer meets all conditions for sale
accounting treatment under generally
accepted accounting principles, other
than the ‘‘legal isolation’’ condition as it
applies to institutions for which the
FCSIC may be appointed as receiver
which is addressed by this section.
(c) Paragraph (b) of this section shall
not apply unless the Farm Credit
institution received adequate
consideration for the transfer of
financial assets at the time of the
transfer, and the documentation
effecting the transfer of financial assets
reflects the intent of the parties to treat
the transaction as a sale, and not as a
secured borrowing, for accounting
purposes.
(d) Paragraph (b) of this section shall
not be construed as waiving, limiting, or
otherwise affecting the power of the
receiver to disaffirm or repudiate any
agreement imposing continuing
obligations or duties upon the insured
depository institution in receivership.
(e) Paragraph (b) of this section shall
not be construed as waiving, limiting or
otherwise affecting the rights or powers
of the receiver to take any action or to
exercise any power not specifically
limited by this section, including, but
not limited to, any rights, powers or
remedies of the receiver regarding
transfers taken in contemplation of the
institution’s insolvency or with the
intent to hinder, delay, or defraud the
institution or the creditors of such
institution, or that is a fraudulent
transfer under applicable law.
(f) The receiver shall not seek to avoid
an otherwise legally enforceable
securitization agreement or
participation agreement executed by a
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Farm Credit institution solely because
such agreement does not meet the
‘‘contemporaneous’’ requirement of
section 5.61(d) of the Act.
(g) This section may be repealed or
amended by the Farm Credit
Administration, but any such repeal or
amendment shall not apply to any
transfers of financial assets made in
connection with a securitization or
participation that was in effect before
such repeal or modification.
Subpart C—Conservators and
Conservatorships
3. Amend § 627.2780(b) by adding a
second sentence to read as follows:
§ 627.2780 Powers and duties of
conservators.
*
*
*
*
*
(b) * * * The provisions of
§ 627.2726 shall also apply to the
conservator of a Farm Credit
institution.* * *
*
*
*
*
*
Dated: April 20, 2005.
Jeanette C. Brinkley,
Secretary, Farm Credit Administration Board.
[FR Doc. 05–8237 Filed 4–26–05; 8:45 am]
BILLING CODE 6705–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Parts 23, 25, 27, 29, 91, 121,
125, 129 and 135
[Docket No. FAA–2005–20245; Notice No.
23–56, 25–118, 27–41, 29–48, 91–286, 121–
308, 125–47, 129–40 and 135–95]
2005–20245] using any of the following
methods:
• DOT Docket Web Site: Go to
https://dms.dot.gov and follow the
instructions for sending your comments
electronically.
• Government-wide Rulemaking Web
Site: Go to https://www.regulations.gov
and follow the instructions for sending
your comments electronically.
• Mail: Docket Management Facility;
U.S. Department of Transportation, 400
Seventh Street, SW., Nassif Building,
Room PL–401, Washington, DC 20590–
001.
• Fax: 1–202–493–2251.
• Hand Delivery: Room PL–401 on
the plaza level of the Nassif Building,
400 Seventh Street, SW., Washington,
DC, between 9 a.m. and 5 p.m., Monday
through Friday, except Federal holidays.
For more information on the
rulemaking process, see the
SUPPLEMENTARY INFORMATION section of
this document.
Privacy: We will post all comments
we receive, without change, to https://
dms.dot.gov, including any personal
information you provide. For more
information, see the Privacy Act
discussion in the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT:
Timothy W. Shaver, Avionics Systems
Branch, Aircraft Certification Service,
AIR–130, Federal Aviation
Administration, 800 Independence
Avenue, SW., Washington, DC 20591;
telephone (202) 385–4686; facsimile
(202) 385–4651; e-mail
tim.shaver@faa.gov.
and 135–95, Revisions to Cockpit Voice
Recorder and Digital Flight Data
Recorder Regulations (70 FR 9752)
(February 28, 2005) (‘‘NPRM’’). The
comment period for the NPRM ends on
April 29, 2005.
By letter dated April 1, 2005, the
Aerospace Industries Association (AIA)
asks the FAA to extend the NPRM’s
comment period by thirty days. AIA
believes extensive coordination is
necessary with the suppliers of ‘‘Buyer
Furnished Equipment (BFE)’’ and
‘‘Supplier Furnished Equipment (SFE)’’
because of the significant and complex
contents of the NPRM. AIA states an
extension is necessary to provide a
meaningful, thorough set of comments.
The FAA agrees with AIA’s request
for an extension of the comment period.
We recognize the NPRM’s contents are
significant and complex and that a
sixty-day comment period is
insufficient. We also believe that
additional requests for extensions will
be filed shortly based on the lack of
comments from those entities that will
be affected by the proposals in the
NPRM.
We have determined that an
additional sixty days will be enough for
potential commenters to collect the cost
and operational data necessary to
provide meaningful comments to the
NPRM. Absent unusual circumstances,
the FAA does not anticipate any further
extension of the comment period for
this rulemaking.
SUPPLEMENTARY INFORMATION:
In accordance with 14 CFR 11.47(c),
the FAA has reviewed the petition
submitted by Aerospace Industries
Association (AIA) for an extension of
the comment period to the NPRM. The
FAA finds that an extension of the
comment period for Notice No. 23–56,
25–118, 27–41, 29–48, 91–286, 121–308,
125–47, 129–40 and 135–95 is
consistent with the public interest, and
that good cause exists for taking this
action. The FAA also has determined
that AIA has a substantive interest in
the proposed rule and has shown good
cause for the extension.
Accordingly, the comment period for
Notice No. 23–56, 25–118, 27–41, 29–
48, 91–286, 121–308, 125–47, 129–40
and 135–95 is extended until June 28,
2005.
RIN 2120–AH88
Comments Invited
Revisions to Cockpit Voice Recorder
and Digital Flight Data Recorder
Regulations
The FAA continues to invite
interested persons to take part in this
rulemaking by submitting written
comments, data, or views about the
NPRM we issued on February 28, 2005
(Revisions to Cockpit Voice Recorder
and Digital Flight Data Recorder
Regulations (70 FR 9752) (February 28,
2005). We also invite comments about
the economic, environmental, energy, or
federalism impacts that might result
from adopting the proposals in that
document. The most helpful comments
reference a specific portion of the
NPRM, explain the reason for any
recommended change, and include
supporting data. We ask that you send
us two copies of written comments.
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM); extension of comment period.
AGENCY:
SUMMARY: This action extends the
comment period for an NPRM published
on February 28, 2005. In that document,
the FAA proposed to amend the cockpit
voice recorder and digital flight data
recorder regulations for certain air
carriers, operators, and aircraft
manufacturers. This extension is a result
of a request from the Aerospace
Industries Association to extend the
comment period for the NPRM.
DATES: Send your comments on or
before June 28, 2005.
ADDRESSES: You may send comments
[identified by Docket Number FAA–
VerDate jul<14>2003
20:02 Apr 26, 2005
Jkt 205001
Background
On February 28, 2005, the Federal
Aviation Administration (FAA) issued
Notice No. 23–56, 25–118, 27–41, 29–
48, 91–286, 121–308, 125–47, 129–40
PO 00000
Frm 00010
Fmt 4702
Sfmt 4702
Extension of Comment Period
Issued in Washington, DC, on April 21,
2005.
John J. Hickey,
Director, Aircraft Certification Service.
[FR Doc. 05–8457 Filed 4–26–05; 8:45 am]
BILLING CODE 4910–13–P
E:\FR\FM\27APP1.SGM
27APP1
]]>Agencies
[Federal Register Volume 70, Number 80 (Wednesday, April 27, 2005)]
[Proposed Rules]
[Pages 21685-21688]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-8237]
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FARM CREDIT ADMINISTRATION
12 CFR Part 627
RIN 3052-AC26
Title IV Conservators, Receivers, and Voluntary Liquidations;
Receivership Repudiation Authorities
AGENCY: Farm Credit Administration.
ACTION: Proposed rule.
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SUMMARY: The Farm Credit Administration (FCA) is proposing a rule on
how the Farm Credit System Insurance Corporation (FCSIC), as receiver
or conservator of a Farm Credit System (System) institution, will treat
financial assets transferred by the institution in connection with a
securitization or in the form of a participation. The rule would
resolve issues raised by Financial Accounting Standards Board (FASB)
Statement No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities (SFAS 140). Under conditions
described in the rule, the FCSIC will not seek to recover or reclaim
certain financial assets in exercising its authority to repudiate or
disaffirm contracts pursuant to 12 CFR 627.2725(b)(2), (b)(14) and
627.2780(b) and (d). The proposed rule also provides that the FCSIC
will not seek to enforce the ``contemporaneous'' requirement of section
5.61(d) of the Farm Credit Act of 1971, as amended (Act) (12 U.S.C.
2277a-10(d)). The proposed rule is substantially identical to
receivership rules issued by the Federal Deposit Insurance Corporation
(FDIC) and the National Credit Union Administration (NCUA).
DATES: Please send your comments to us by June 27, 2005.
ADDRESSES: You may send comments by electronic mail to ``reg-
comm@fca.gov,'' through the Pending Regulations section of FCA's Web
site, ``https://www.fca.gov,'' or through the Governmentwide ``https://
www.regulations.gov'' Web site. You may also send comments to S. Robert
Coleman, Director, Regulation and Policy Division, Office of Policy and
Analysis, Farm Credit Administration, 1501 Farm Credit Drive, McLean,
VA 22102-5090 or by fax to (703) 734-5784. You may review copies of
comments we receive at our office in McLean, Virginia, or from our Web
site at https://www.fca.gov. Once you are in the Web site, select
``Legal Info,'' and then select ``Public Comments.'' We will show your
comments as submitted, but for technical reasons we may omit items such
as logos and special characters. Identifying information you provide,
such as phone numbers and addresses, will be publicly available.
However, we will attempt to remove electronic-mail addresses to help
reduce Internet spam.
FOR FURTHER INFORMATION CONTACT: Robert E. Donnelly, Senior Accountant,
Office of Policy and Analysis, Farm Credit Administration, McLean, VA
22102-5090, 703-883-4498, TTY (703) 883-4434, or Rebecca S. Orlich,
Senior Attorney, Office of General Counsel, Farm Credit Administration,
McLean, VA 22102-5090, 703-883-4020, TTY (703) 883-4020.
SUPPLEMENTARY INFORMATION:
I. Objective
Our objective in proposing this rule is to give certainty to System
institutions regarding how participations and securitizations engaged
in by a System institution will be treated by the FCSIC if the
institution is subsequently placed
[[Page 21686]]
in conservatorship or receivership. The rule will achieve this by
ensuring that the FCSIC will not attempt to ``pull back'' the subject
assets into the conservatorship or receivership estate if the
transaction meets specified conditions.
II. Background
Under generally accepted accounting principles (GAAP), a transfer
of financial assets is accounted for as a sale if the transferor
surrenders control over the assets. This principle is set forth in the
SFAS No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities, issued by the FASB.\1\ One of
the conditions for determining that the transferor has surrendered
control is that the assets have been isolated from the transferor,
i.e., put presumptively beyond the reach of the transferor, its
creditors, a trustee in bankruptcy, or a receiver. This is known as the
``legal isolation'' condition.
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\1\ SFAS 140 replaced SFAS 125 (which had covered the same
issues and was identically titled) in September 2000. SFAS 140
revised the standards for accounting for securitizations and other
transfers of financial assets and collateral and required certain
disclosures, but it carried over most of the provisions of SFAS 125
without reconsideration. The FDIC receivership issues and its
related rule 12 CFR 360.6, which are discussed later in this
preamble, are described in paragraphs 157-160 of SFAS 140.
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Whether the legal isolation condition has been met is determined
primarily from a legal perspective. This determination involves
considerations of the kind of receivership into which the transferor
may be placed and the powers of the receiver to reach assets that were
transferred prior to its appointment. If the available evidence
provides reasonable assurance that the transferred assets would be
beyond the reach of the powers of a bankruptcy trustee or receiver for
the transferor, then a determination that the transferred assets have
been legally isolated is appropriate.
Where the transferor is a System institution for which the FCSIC
may be appointed conservator or receiver, the issue arises whether
financial assets transferred in connection with a securitization or in
the form of a participation would be put beyond the reach of the FCSIC
as conservator or receiver. This issue arises because of the FCSIC's
authority to repudiate burdensome contracts under Sec. Sec.
627.2725(b)(2), (b)(14) and 627.2780(b) and (d) of FCA regulations; and
because of section 5.61(d) of the Act.\2\ Under Sec. Sec.
627.2725(b)(2) and 627.2780(d), the FCSIC may take any action it
considers appropriate or expedient to carry on the business of the
institution during the process of liquidation or during the
conservatorship. Under Sec. 627.2725(b)(14), the FCSIC, when acting as
conservator or receiver of a System institution, has the power to
disaffirm or repudiate any contract or lease to which the institution
is a party, the performance of which the FCSIC determines to be
burdensome. Repudiation of a contract relieves the FCSIC from
performing any unperformed obligations remaining under the contract.
Section 5.61(d) of the Act provides that no agreement that tends to
diminish or defeat the FCSIC's interest in an asset acquired by the
FCSIC as conservator or receiver is enforceable against the FCSIC
unless the agreement meets certain requirements. One of those
requirements is that the agreement must be executed, by the institution
and by any person claiming an adverse interest under it,
contemporaneously with the acquisition of the asset by the institution.
This is referred to as the ``contemporaneous'' requirement.
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\2\ See 12 CFR 627.2725(b)(2), (b)(14) and 627.2780(b) and (d),
and 12 U.S.C. 2277a-10(d).
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The FDIC and the NCUA each adopted a rule in 2000 \3\ to resolve
the issues discussed above in SFAS 140.\4\ Specifically, the two
agencies addressed whether their authorities to repudiate contracts
would prevent a transfer of financial assets by an insured depository
institution or a credit union in connection with a securitization or in
the form of a participation from satisfying the ``legal isolation''
condition of SFAS 140. The Act and FCA regulations contain
substantially similar provisions that apply when the FCSIC is appointed
conservator or receiver for a System institution, and we are proposing
to resolve the issues in the same way.\5\ As such, this preamble and
proposed rule track the language of the FDIC's and NCUA's rules. We
note that nothing in this proposed rule is intended to provide any
System institutions with the authority to engage in any transaction
that is not otherwise authorized.
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\3\ See 12 CFR 360.6 (65 FR 49189 (Aug. 11, 2000)) and 12 CFR
709.10 (65 FR 55439 (Sept. 14, 2000)).
\4\ These issues were originally raised in SFAS 125, which was
replaced by SFAS 140 as described in footnote 1 above. The issues
continue to be discussed SFAS 140.
\5\ See 12 U.S.C. 1821(e) for the law pertaining to the FDIC,
and 12 U.S.C. 1787(b)(9) and 1788(a)(3) for the laws pertaining to
the NCUA.
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III. Description of the Proposed Rule
This proposal would add a new Sec. 627.2726 to the conservatorship
and receivership provisions in part 627 of FCA's regulations. The
proposed rule would apply only to those securitizations or
participations in which the transfer of financial assets meets all
conditions for sale accounting treatment under GAAP, other than the
``legal isolation'' condition as it applies to institutions for which
the FCSIC may be appointed as conservator or receiver, which would be
addressed by the proposed rule. The proposed rule provides that, for
these transfers, the FCSIC will not, by exercise of its authority to
repudiate contracts under Sec. 627.2725(b)(2) or (b)(14), reclaim,
recover, or recharacterize as property of the institution or the
receivership any financial assets transferred by a System institution
in connection with a securitization or in the form of a participation.
Although the repudiation of a securitization or participation will not
affect transferred financial assets, repudiation will excuse the FCSIC
from performing any continuing obligations imposed by the
securitization or participation. If the FCSIC, in order to terminate
such continuing obligations or duties, seeks to repudiate an agreement
or contract under which a System institution has transferred financial
assets in connection with a securitization or in the form of a
participation, the FCSIC will not seek to reclaim, recover, or
recharacterize as property of the institution or the receivership such
financial assets.
The definition of ``participation'' in the proposed rule is
specifically limited to participations that are ``without recourse'' to
the selling or ``lead'' institution. ``Without recourse'' would mean
that the participation must not be subject to any agreement that
requires the selling or ``lead'' institution to repurchase the
participant's interest or to otherwise compensate the participant upon
the borrower's default on the underlying obligation. The term ``without
recourse'' does not, however, preclude the lead institution from
retaining a subordinated interest in the participated obligation,
against which losses are initially allocated.
The proposed rule would not apply unless the System institution
received adequate consideration for the transfer of financial assets at
the time of the transfer, and the documentation effecting the transfer
of financial assets reflects the intent of the parties to treat the
transaction as a sale, and not as a secured borrowing, for accounting
purposes.
The proposed rule further provides that it will not be construed as
waiving, limiting, or otherwise affecting the rights or powers of the
FCSIC to take
[[Page 21687]]
any action or to exercise any power not specifically limited by this
section. Such rights or powers include, but are not limited to, any
rights, powers or remedies of the FCSIC regarding transfers taken in
contemplation of the institution's insolvency or with the intent to
hinder, delay, or defraud the institution or the creditors of such
institution, or that is a fraudulent transfer under applicable law.
The proposed rule further provides that the FCSIC will not seek to
avoid an otherwise legally enforceable securitization agreement or
participation agreement executed by a System institution solely because
such agreement does not meet the ``contemporaneous'' requirement of
section 5.61(d) of the Act.
The FCA intends the proposed rule to apply to securitizations and
participations engaged in by System institutions while the rule is in
effect, even if the rule is later amended or repealed. Section
627.2726(g) provides that any repeal or amendment of the rule by the
FCA will not apply to any transfer of financial assets made in
connection with a securitization or participation that was in effect
before such repeal or amendment. As a result of Sec. 627.2726(g),
where a transfer of financial assets in connection with a
securitization or in the form of a participation is made by a System
institution and the securitization or participation was in effect
before any repeal or amendment of the rule by the FCA, such transfer
will continue to satisfy the legal isolation requirement
notwithstanding the repeal or amendment.
We also propose a conforming change to Sec. 627.2780(h) to clarify
that the provisions of this proposed rule apply to a conservatorship as
well as to a receivership.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), FCA hereby certifies that the proposed rule will
not have a significant economic impact on a substantial number of small
entities. Each of the banks in the Farm Credit System, considered
together with its affiliated associations, has assets and annual income
in excess of the amounts that would qualify them as small entities.
Therefore, Farm Credit System institutions are not ``small entities''
as defined in the Regulatory Flexibility Act.
List of Subjects in 12 CFR Part 627
Agriculture, Banks, Banking, Claims, Rural areas.
For the reasons stated in the preamble, we propose to amend part
627 of Chapter VI, title 12, of the Code of Federal Regulations as
follows:
PART 627--CONSERVATORS, RECEIVERS, AND VOLUNTARY LIQUIDATIONS
1. The authority citation for part 627 is revised to read as
follows:
Authority: Secs. 4.2, 5.9, 5.10, 5.17, 5.51, 5.58, 5.61 of the
Farm Credit Act (12 U.S.C. 2183, 2243, 2244, 2252, 2277a, 2277a-7,
2277a-10).
Subpart B--Receivers and Receiverships
2. Add a new Sec. 627.2726 to read as follows:
Sec. 627.2726 Treatment by the conservator or receiver of financial
assets transferred in connection with a securitization or
participation.
(a) Definitions.
Beneficial interest means debt or equity (or mixed) interests or
obligations of any type issued by a special purpose entity that entitle
their holders to receive payments that depend primarily on the cash
flow from financial assets owned by the special purpose entity.
Financial asset means cash or a contract or instrument that conveys
to one entity a contractual right to receive cash or another financial
instrument from another entity.
Participation means the transfer or assignment of an undivided
interest in all or part of a loan or a lease from a seller, known as
the ``lead'', to a buyer, known as the ``participant'', without
recourse to the lead, pursuant to an agreement between the lead and the
participant. Without recourse means that the participation is not
subject to any agreement that requires the lead to repurchase the
participant's interest or to otherwise compensate the participant due
to a default on the underlying obligation.
Securitization means the issuance by a special purpose entity of
beneficial interests:
(1) The most senior class of which at the time of issuance is rated
in one of the four highest categories assigned to long-term debt or in
an equivalent short-term category (within either of which there may be
sub-categories or gradations indicating relative standing) by one or
more nationally recognized statistical rating organizations, or
(2) Which are sold in transactions by an issuer not involving any
public offering for purposes of section 4 of the Securities Act of 1933
(15 U.S.C. 77d), as amended, or in transactions exempt from
registration under such Act pursuant to Regulation S thereunder (or any
successor regulation).
Special purpose entity means a trust, corporation, or other entity
demonstrably distinct from the Farm Credit institution that is
primarily engaged in acquiring and holding (or transferring to another
special purpose entity) financial assets, and in activities related or
incidental thereto, in connection with the issuance by such special
purpose entity (or by another special purpose entity that acquires
financial assets directly or indirectly from such special purpose
entity) of beneficial interests.
(b) The receiver shall not, by exercise of its authority to
repudiate contracts under Sec. 627.2725(b)(2) and (b)(14), reclaim,
recover, or recharacterize as property of the institution or the
receivership any financial assets transferred by a Farm Credit
institution in connection with a securitization or participation,
provided that such transfer meets all conditions for sale accounting
treatment under generally accepted accounting principles, other than
the ``legal isolation'' condition as it applies to institutions for
which the FCSIC may be appointed as receiver which is addressed by this
section.
(c) Paragraph (b) of this section shall not apply unless the Farm
Credit institution received adequate consideration for the transfer of
financial assets at the time of the transfer, and the documentation
effecting the transfer of financial assets reflects the intent of the
parties to treat the transaction as a sale, and not as a secured
borrowing, for accounting purposes.
(d) Paragraph (b) of this section shall not be construed as
waiving, limiting, or otherwise affecting the power of the receiver to
disaffirm or repudiate any agreement imposing continuing obligations or
duties upon the insured depository institution in receivership.
(e) Paragraph (b) of this section shall not be construed as
waiving, limiting or otherwise affecting the rights or powers of the
receiver to take any action or to exercise any power not specifically
limited by this section, including, but not limited to, any rights,
powers or remedies of the receiver regarding transfers taken in
contemplation of the institution's insolvency or with the intent to
hinder, delay, or defraud the institution or the creditors of such
institution, or that is a fraudulent transfer under applicable law.
(f) The receiver shall not seek to avoid an otherwise legally
enforceable securitization agreement or participation agreement
executed by a
[[Page 21688]]
Farm Credit institution solely because such agreement does not meet the
``contemporaneous'' requirement of section 5.61(d) of the Act.
(g) This section may be repealed or amended by the Farm Credit
Administration, but any such repeal or amendment shall not apply to any
transfers of financial assets made in connection with a securitization
or participation that was in effect before such repeal or modification.
Subpart C--Conservators and Conservatorships
3. Amend Sec. 627.2780(b) by adding a second sentence to read as
follows:
Sec. 627.2780 Powers and duties of conservators.
* * * * *
(b) * * * The provisions of Sec. 627.2726 shall also apply to the
conservator of a Farm Credit institution.* * *
* * * * *
Dated: April 20, 2005.
Jeanette C. Brinkley,
Secretary, Farm Credit Administration Board.
[FR Doc. 05-8237 Filed 4-26-05; 8:45 am]
BILLING CODE 6705-01-P
