Golden Parachute Payments and Indemnification Payments, 53356-53359 [E8-21650]
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53356
Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Rules and Regulations
submitted by 30 entities during the
comment period from October 4, 2007,
to November 5, 2007. The comments
were submitted by 25 importers, 3
associations, 1 transport company, and
1 foreign government entity. Most of the
comments from importers favored a 5
year suspension, citing market
conditions as the primary reason for the
suspension. Other importers opposed
the suspension, or favored a 1 year
suspension of the provisions.
Arguments against the proposed 5 year
suspension included that market
conditions over the next 5 years could
not be predicted and, therefore, should
not be used as a justification for the
suspension.
Two associations favored the
proposed suspension, while a third
association opposed it. The transport
company supported the proposed 5 year
suspension. The foreign government
entity recommended combining
different quotas for specific types of
cheeses to maximize quota filled rates
for the more popular types of cheeses.
Conclusion: Quota-filled rates for
Swiss, Gruyere and low fat type cheeses
have remained low even after transfer to
the lottery, although this fact by itself
does not provide justification for a
suspension of the historical license
reduction provisions. Market conditions
are always subject to fluctuation and
change, and it is incumbent upon all
license holders to adjust to these
changing conditions. Nonetheless, to
allow additional time to adjust to
changes in EU’s supply and demand,
due to its long-term dairy policy
changes, the Department will
temporarily suspend the historical
license reduction provisions for a period
of 2 years, commencing in 2009.
Historical license reductions will again
be implemented beginning 2011, rather
than in 2012 or 2014, as in the proposed
rule. In 2011, historical license
reductions will be based on import data
from years 2006 through 2010. Because
there will already be 5 years of
historical import data, the 3-years-in-arow provision is unnecessary, which
was not the case when the regulation
was originally promulgated in 1996, and
is therefore being eliminated.
ebenthall on PROD1PC60 with RULES
List of Subjects in 7 CFR Part 6
Agricultural commodities, Cheese,
Dairy products, and Imports.
For the reasons described in the
conclusion, The Department of
Agriculture amends 7 CFR part 6 as
follows:
■
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14:22 Sep 15, 2008
Jkt 214001
PART 6—IMPORT QUOTAS AND FEES
1. The authority citation for part 6
continues to read as follows:
■
Authority: Additional U.S. Notes 6, 7, 8,
12, 14, 16–23, and 25 to Chapter 4 and
General Note 15 of the Harmonized Tariff
Schedule of the United States (19 U.S.C.
1202), Pub. L. 97 258, 96 Stat. 1051, as
amended (31 U.S.C. 9701), and sections 103
and 404, Pub. L. 103–465, 108 Stat. 4819 (19
U.S.C. 3513 and 3601).
2. In § 6.25 revise paragraph (b) to
read as follows:
■
§ 6.25
Allocation of Licenses.
*
*
*
*
*
(b) Historical licenses for the 2009
and subsequent quota years (Appendix
1). (1) A person issued a historical
license for the 2008 quota year will be
issued a historical license in the same
amount for the same article from the
same country for the 2009 quota year
and for each subsequent quota year
except that:
(i) Beginning with the 2011 quota
year, a person who has surrendered
more than 50 percent of such historical
license in at least three of the prior five
quota years will thereafter be issued a
license in an amount equal to the
average annual quantity entered during
those five quota years.
(ii) [Reserved]
*
*
*
*
*
Issued at Washington, DC the 21st day of
August 2008.
Ronald Lord,
Licensing Authority.
[FR Doc. E8–21467 Filed 9–15–08; 8:45 am]
BILLING CODE 3410–10–M
FEDERAL HOUSING FINANCE
AGENCY
12 CFR Part 1231
RIN 2590–AA08
Golden Parachute Payments and
Indemnification Payments
Federal Housing Finance
Agency.
ACTION: Interim Final Regulation with
Request for Comments.
AGENCY:
SUMMARY: The Federal Housing Finance
Agency (FHFA) is issuing an interim
final regulation, with a request for
comments, setting forth factors to be
considered by the Director of FHFA in
acting upon the Director’s authority to
limit golden parachute payments to
entity-affiliated parties in connection
with the Federal National Mortgage
Association, the Federal Home Loan
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Mortgage Corporation, and the Federal
Home Loan Banks.
DATES: Effective date: September 16,
2008.
Comment date: Comments on the
Interim Final Regulation must be
received on or before October 31, 2008.
For additional information, see
SUPPLEMENTARY INFORMATION.
ADDRESSES: You may submit your
comments on the interim final
regulation, identified by regulatory
information number ‘‘RIN 2590–AA08,’’
by any of the following methods:
• U.S. Mail, United Parcel Post,
Federal Express, or Other Mail Service:
The mailing address for comments is:
Alfred M. Pollard, General Counsel
(Office of Federal Housing Enterprise
Oversight (OFHEO)) and Christopher
Curtis, General Counsel (Federal
Housing Finance Board (FHFB)),
Attention: Comments/RIN 2590–AA08,
Federal Housing Finance Agency,
Fourth Floor, 1700 G Street, NW.,
Washington, DC 20552.
• Hand Delivered/Courier: The hand
delivery address is: Alfred M. Pollard,
General Counsel (OFHEO) and
Christopher Curtis, General Counsel
(FHFB), Attention: Comments/RIN
2590–AA08, Federal Housing Finance
Agency, Fourth Floor, 1700 G Street,
NW., Washington, DC 20552. The
package should be logged at the Guard
Desk, First Floor, on business days
between 9 a.m. and 5 p.m.
• E-mail: Comments to Alfred M.
Pollard, General Counsel (OFHEO) and
Christopher Curtis, General Counsel
(FHFB), may be sent by e-mail at
RegComments@FHFA.gov. Please
include ‘‘RIN 2590–AA08’’ in the
subject line of the message.
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
FOR FURTHER INFORMATION CONTACT:
Alfred M. Pollard, General Counsel
(OFHEO), telephone (202) 414–3788 or
Christopher Curtis, General Counsel
(FHFB), telephone (202) 408–2802 (not
toll-free numbers), Federal Housing
Finance Agency, Fourth Floor, 1700 G
Street, NW., Washington, DC 20552. The
telephone number for the
Telecommunications Device for the Deaf
is (800) 877–8339.
SUPPLEMENTARY INFORMATION:
I. Comments
The Federal Housing Finance Agency
(FHFA) invites comments on all aspects
of the interim final regulation, and will
take all comments into consideration
before issuing the final regulation.
FHFA requests that comments
submitted in hard copy also be
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Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Rules and Regulations
accompanied by the electronic version
in Microsoft Word or in portable
document format (PDF) on 3.5″ disk or
CD–ROM.
Copies of all comments will be posted
on the Internet Web site at
www.OFHEO.gov. In addition, copies of
all comments received will be available
for examination by the public on
business days between the hours of 10
a.m. and 3 p.m., at the Federal Housing
Finance Agency, Fourth Floor, 1700 G
Street, NW., Washington, DC 20552. To
make an appointment to inspect
comments, please call the Office of
General Counsel (OFHEO) at (202) 414–
3751.
II. Background
The Housing and Economic Recovery
Act of 2008 (HERA), Public Law No.
110–289, 122 Stat. 2654, amended the
Federal Housing Enterprises Financial
Safety and Soundness Act of 1992 (12
U.S.C. 4501 et seq.) (Act) to establish
FHFA as an independent agency of the
Federal Government.1 FHFA was
established to oversee the prudential
operations of the Federal National
Mortgage Association, the Federal Home
Loan Mortgage Corporation
(collectively, Enterprises), and the
Federal Home Loan Banks (Banks)
(collectively, regulated entities) and to
ensure that they operate in a safe and
sound manner including being
capitalized adequately; foster liquid,
efficient, competitive and resilient
national housing finance markets;
comply with the Act and rules,
regulation, guidelines and orders issued
under the Act, and the respective
authorizing statutes of the regulated
entities; and carry out their missions
through activities authorized and
consistent with the Act and their
authorizing statutes; and, that the
activities and operations of the
regulated entities are consistent with the
public interest.
The Office of Federal Housing
Enterprise Oversight (OFHEO) and the
Federal Housing Finance Board (FHFB)
will be abolished one year after
enactment of the HERA. However, the
regulated entities continue to operate
under regulations promulgated by
OFHEO and FHFB until such
regulations are supplanted by
regulations promulgated by the FHFA.
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II. Interim Final Regulation and
Request for Comments
Section 1114 of HERA amended 12
U.S.C. 4518 to provide additional
1 See Division A, titled the ‘‘Federal Housing
Finance Regulatory Reform Act of 2008,’’ TITLE I,
Section 1101 of HERA.
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14:22 Sep 15, 2008
Jkt 214001
authorities for FHFA in addressing
certain compensation and benefits,
specifically golden parachute payments
and indemnification payments. HERA
added a new paragraph (e) to section
4518 addressing regulation and
prohibition of these benefits. While
paragraphs (e)(1) and (e)(3)–(6) are self
executing, Congress provided that for
paragraph (e)(2) addressing factors to be
taken into account when acting
regarding golden parachutes and
indemnification, FHFA prescribe, by
regulation, factors to be considered. The
factors set forth in (e)(2) are explicit and
provide strong guidance to the Director
in taking an action under the statute.
Therefore, FHFA is promulgating an
interim final rule and requesting
comment on paragraph (2) of section
4518(e). FHFA will consider other
comments regarding section 4518(e) as
part of the public notice and comment
period.
The FHFA is issuing this regulation as
an interim final rule in order to provide
clarity on the standards it will employ
in addressing golden parachutes and
indemnification payments as provided
in statute. Additionally, with payments
at issue for separating employees, an
interim final rule provides clarity for the
standards the agency will employ in
exercising its authority; at the same
time, comments are to be taken
regarding the rule. For these reasons,
FHFA finds that there is good cause,
and that it is in the public interest, to
make the rule effective immediately
upon publication in the Federal
Register and allow for public comment
after publication. See 5 U.S.C. 553(b)
and (d). The language of the rule reflects
congressional intent embodied in the
statute.
The interim final rule provides parties
an opportunity to comment on all
aspects of the regulation and for future
revision, if necessary or appropriate, by
the FHFA. Comments are specifically
requested with respect to the definition
of the term ‘‘troubled condition,’’ with
respect to other factors the Director
should consider in determining whether
golden parachute payments should be
limited or prohibited, and what
payments made pursuant to a bona fide
deferred compensation plan or
arrangement should be determined to be
permissible golden parachute payments.
Section 1313(f) of the Act, as
amended by section 1201 of HERA,
requires the Director, when
promulgating regulations relating to the
Banks, to consider the differences
between the Banks and the Enterprises
with respect to the Banks’ cooperative
ownership structure; mission of
providing liquidity to members;
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53357
affordable housing and community
development mission; capital structure;
and joint and several liability. The
Director may also consider any other
differences that are deemed appropriate.
In preparing the interim final rule, the
Director considered the differences
between the Banks and the Enterprises
as they relate to the above factors. The
Director requests comments from the
public about whether differences related
to these factors should result in a
revision to the interim final rule as they
relate to the Banks.
Regulatory Impacts
Paperwork Reduction Act
The interim final regulation does not
contain any information collection
requirement that requires the approval
of OMB under the Paperwork Reduction
Act (44 U.S.C. 3501 et seq.).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) requires that a
regulation that has a significant
economic impact on a substantial
number of small entities, small
businesses, or small organizations must
include an initial regulatory flexibility
analysis describing the regulation’s
impact on small entities. Such an
analysis need not be undertaken if the
agency has certified that the regulation
will not have a significant economic
impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has
considered the impact of the interim
final regulation under the Regulatory
Flexibility Act. FHFA certifies that the
interim final regulation is not likely to
have a significant economic impact on
a substantial number of small business
entities because the regulation is
applicable only to the regulated entities,
which are not small entities for the
purposes of the Regulatory Flexibility
Act.
List of Subjects in 12 CFR Part 1231
Golden parachutes, Governmentsponsored enterprises, Indemnification.
■ Accordingly, for the reasons stated in
the preamble, FHFA establishes a new
12 CFR Chapter XII, consisting of part
1231, to read as follows:
PART 1231—GOLDEN PARACHUTE
PAYMENTS AND INDEMNIFICATION
PAYMENTS
Sec.
1231.1
1231.2
1231.3
1231.4
1231.5
Purpose.
Definitions.
Golden parachute payments.
Indemnification payments.
Factors to be taken into account.
Authority: 12 U.S.C. 4518(e).
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53358
§ 1231.1
Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Rules and Regulations
Purpose.
The purpose of this part is to
implement section 1318(e) of the Act by
setting forth the standards which the
Director will take into consideration in
determining whether to limit or prohibit
golden parachute payments or
indemnification payments to entityaffiliated parties.
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§ 1231.2
Definitions.
The following definitions apply to the
terms used in this part:
(a) Act means the Federal Housing
Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4501
et seq.), as amended by the Federal
Housing Finance Regulatory Reform Act
of 2008, enacted under Division A of the
HERA.
(b) Director means the Director of
FHFA or his or her designee.
(c) Enterprise means the Federal
National Mortgage Association and the
Federal Home Loan Mortgage
Corporation (collectively, Enterprises)
and, except as provided by the Director,
any affiliate thereof.
(d) Entity-affiliated party means—
(1) Any director, officer, employee, or
controlling stockholder of, or agent for,
a regulated entity;
(2) Any shareholder, affiliate,
consultant, or joint venture partner of a
regulated entity, and any other person,
as determined by the Director (by
regulation or on a case-by-case basis)
that participates in the conduct of the
affairs of a regulated entity, provided
that a member of a Bank shall not be
deemed to have participated in the
affairs of that Bank solely by virtue of
being a shareholder of, and obtaining
advances from, that Bank;
(3) Any independent contractor for a
regulated entity (including any attorney,
appraiser, or accountant), if—
(i) The independent contractor
knowingly or recklessly participates
in—
(A) Any violation of any law or
regulation;
(B) Any breach of fiduciary duty; or
(C) Any unsafe or unsound practice;
and
(ii) Such violation, breach, or practice
caused, or is likely to cause, more than
a minimal financial loss to, or a
significant adverse effect on, the
regulated entity;
(4) Any not-for-profit corporation that
receives its principal funding, on an
ongoing basis, from any regulated entity;
and
(5) The Office of Finance.
(e) Federal Home Loan Bank means a
bank established under the Federal
Home Loan Act; the term ‘‘Federal
Home Loan Banks’’ means, collectively,
all the Federal Home Loan Banks.
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14:22 Sep 15, 2008
Jkt 214001
(f)(1) Golden parachute payment
means any payment (or any agreement
to make any payment) in the nature of
compensation by any regulated entity
for the benefit of any current entityaffiliated party pursuant to an obligation
of such regulated entity that—
(i) Is contingent on, or by its terms is
payable on or after, the termination of
such party’s primary employment or
affiliation with the regulated entity; and
(ii) Is received on or after the date on
which—
(A) The regulated entity became
insolvent;
(B) Any conservator or receiver is
appointed for such regulated entity; or
(C) The Director determines that the
regulated entity is in a troubled
condition.
(2) The term ‘‘golden parachute
payment’’ shall not include:
(i) Any payment made pursuant to a
pension or retirement plan which is
qualified (or is intended within a
reasonable period of time to be
qualified) under section 401 of the
Internal Revenue Code of 1986 (26
U.S.C. 401) or pursuant to a pension or
other retirement plan which is governed
by the laws of any foreign country;
(ii) Any payment made pursuant to a
bona fide deferred compensation plan or
arrangement which the Director
determines, by regulation or order, to be
permissible; or
(iii) Any payment made by reason of
death or by reason of termination
caused by the disability of an entityaffiliated party.
(3) Any payment which would be a
golden parachute payment but for the
fact that such payment was made before
the date referred to in paragraph (f)(1)(ii)
shall be treated as a golden parachute
payment if the payment was made in
contemplation of the occurrence of an
event described that paragraph.
(g) FHFA means the Federal Housing
Finance Agency.
(h) HERA means the Housing and
Economic Recovery Act of 2008, Public
Law No. 110–289, 122 Stat. 2654 (July
30, 2008).
(i) Office of Finance means the Office
of Finance of the Federal Home Loan
Bank System (or any successor thereto).
(j) Regulated entity means the Federal
National Mortgage Association and any
affiliate thereof; the Federal Home Loan
Mortgage Corporation and any affiliate
thereof; or any Federal Home Loan
Bank; the term ‘‘regulated entities’’
means, collectively, the Federal
National Mortgage Association and any
affiliate thereof; the Federal Home Loan
Mortgage Corporation and any affiliate
thereof; and any Federal Home Loan
Bank.
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(k) Troubled condition means a
regulated entity that—
(1) Is subject to a cease-and-desist
order or written agreement issued by the
FHFA that requires action to improve
the financial condition of the regulated
entity or is subject to a proceeding
initiated by the Director, which
contemplates the issuance of an order
that requires action to improve the
financial condition of the regulated
entity, unless otherwise informed in
writing by the FHFA; or
(2) Is informed in writing by the
Director that it is in a troubled condition
for purposes of the requirements of this
part on the basis of the regulated entity’s
most recent report of examination or
other information available to the
FHFA.
(l)–(n) [Reserved]
§ 1231.3
Golden parachute payments.
No regulated entity shall make or
agree to make any golden parachute
payment except with the concurrence of
the Director.
§ 1231.4
Indemnification payments.
No regulated entity shall make or
agree to make any indemnification
payment except with the concurrence of
the Director.
§ 1231.5
Factors to be taken into account.
In determining whether to prohibit or
limit any golden parachute payment or
indemnification payment, the Director
shall consider the following factors—
(a) Whether there is a reasonable basis
to believe that the entity-affiliated party
has committed any fraudulent act or
omission, breach of trust or fiduciary
duty, or insider abuse with regard to the
regulated entity that has had a material
effect on the financial condition of the
regulated entity;
(b) Whether there is a reasonable basis
to believe that the entity-affiliated party
is substantially responsible for the
insolvency of the regulated entity, the
appointment of a conservator or receiver
for the regulated entity, or the troubled
condition of the regulated entity (as
defined in regulations prescribed by the
Director);
(c) Whether there is a reasonable basis
to believe that the entity-affiliated party
has materially violated any applicable
provision of Federal or State law or
regulation that has had a material effect
on the financial condition of the
regulated entity;
(d) Whether the entity-affiliated party
was in a position of managerial or
fiduciary responsibility;
(e) The length of time that the party
was affiliated with the regulated entity,
and the degree to which the payment
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Federal Register / Vol. 73, No. 180 / Tuesday, September 16, 2008 / Rules and Regulations
reasonably reflects compensation earned
over the period of employment and the
compensation involved represents a
reasonable payment for services
rendered; and
(f) Any other factor the Director
determines relevant to the facts and
circumstances surrounding the golden
parachute or indemnification payment,
including but not limited to negligence,
gross negligence, neglect, willful
misconduct, breach of fiduciary duty,
and malfeasance on the part of an
entity-affiliated party.
Dated: September 11, 2008.
James B. Lockhart, III,
Director, Federal Housing Finance Agency.
[FR Doc. E8–21650 Filed 9–12–08; 11:15 am]
BILLING CODE 8070–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 73
[Docket No. FAA–2008–0939; Airspace
Docket No. 08–ASW–7]
RIN 2120–AA66
Change of Using Agency for Restricted
Area R–3807, Glencoe, LA
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
ebenthall on PROD1PC60 with RULES
SUMMARY: This action changes the using
agency of R–3807, Glencoe, LA, from
‘‘USAF, Southeast Air Defense Sector,
Tyndall AFB, FL,’’ to ‘‘Western Air
Defense Sector (WADS), McChord AFB,
WA.’’ The FAA is taking this action in
response to a request from the United
States Air Force (USAF) to reflect an
administrative change of responsibility
for the restricted area. There are no
changes to the boundaries; designated
altitudes; time of designation; or
activities conducted within the affected
restricted area.
DATES: Effective Dates: 0901 UTC,
November 20, 2008.
FOR FURTHER INFORMATION CONTACT:
Colby Abbott, Airspace and Rules
Group, Office of System Operations
Airspace and AIM, Federal Aviation
Administration, 800 Independence
Avenue, SW., Washington, DC 20591;
telephone: (202) 267–8783.
SUPPLEMENTARY INFORMATION:
History
On March 13, 2008, the USAF
requested that the FAA change the using
agency for R–3807 from, ‘‘USAF,
Southeast Air Defense Sector, Tyndall
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14:22 Sep 15, 2008
Jkt 214001
AFB, FL,’’ to ‘‘Western Air Defense
Sector (WADS), McChord AFB, WA.’’
The USAF request was based on the
Southeast Air Defense Sector (SEADS)
transitioning to a new mission and the
WADS unit assuming responsibility for
the SEADS area of responsibility,
including all special use airspace within
that area. Coordination between the two
air defense sector airspace management
offices, as well as Houston Air Route
Traffic Control Center, was effected
prior to this using agency change
request being submitted by the USAF.
Section 73.63 of Title 14 CFR part 73
was republished in FAA Order 7400.8P,
effective February 16, 2008.
The Rule
This action amends Title 14 Code of
Federal Regulations (14 CFR) part 73 by
revising the using agency listed for R–
3807, Glencoe, LA; transferring using
agency responsibility for R–3807 from
‘‘USAF, Southeast Air Defense Sector,
Tyndall AFB, FL’’ to ‘‘Western Air
Defense Sector (WADS), McChord AFB,
WA.’’ This is an administrative change
and does not affect the boundaries,
designated altitudes, or activities
conducted within the restricted area;
therefore, notice and public procedures
under 5 U.S.C. 553(b) are unnecessary.
The FAA has determined that this
regulation only involves an established
body of technical regulations for which
frequent and routine amendments are
necessary to keep them operationally
current. Therefore, this regulation: (1) Is
not a ‘‘significant regulatory action’’
under Executive Order 12866; (2) is not
a ‘‘significant rule’’ under Department of
Transportation (DOT) Regulatory
Policies and Procedures (44 FR 11034;
February 26, 1979); and (3) does not
warrant preparation of a regulatory
evaluation as the anticipated impact is
so minimal. Since this is a routine
matter that will only affect air traffic
procedures and air navigation, it is
certified that this rule, when
promulgated, will not have a significant
economic impact on a substantial
number of small entities under the
criteria of the Regulatory Flexibility Act.
This rulemaking is promulgated
under the authority described in
Subtitle VII, Part A, Subpart I, Section
40103. Under that section, the FAA is
charged with prescribing regulations to
assign the use of the airspace necessary
to ensure the safety of aircraft and the
efficient use of airspace. This regulation
is within the scope of that authority as
it is amending the using agency for R–
3807, Glencoe, LA.
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53359
Environmental Review
The FAA has determined that this
action qualifies for a categorical
exclusion under the National
Environmental Policy Act in accordance
with 311d., FAA Order 1050.1E,
‘‘Environmental Impacts: Policies and
Procedures.’’ There are no extraordinary
circumstances that would require
additional environmental analysis.
List of Subjects in 14 CFR Part 73
Airspace, Prohibited areas, Restricted
areas.
Adoption of the Amendment
In consideration of the foregoing, the
Federal Aviation Administration
amends 14 CFR part 73 as follows:
■
PART 73—SPECIAL USE AIRSPACE
1. The authority citation for part 73
continues to read as follows:
■
Authority: 49 U.S.C. 106(g), 40103, 40113,
40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–
1963 Comp., p. 389.
§ 73.38
[Amended]
2. Section 73.38 is amended as
follows:
*
*
*
*
*
■
R–3807 Glencoe, LA [Amended]
Under using agency, remove ‘‘USAF,
Southeast Air Defense Sector, Tyndall AFB,
FL’’ and insert the words ‘‘Western Air
Defense Sector (WADS), McChord AFB,
WA.’’
*
*
*
*
*
Issued in Washington, DC, on September 4,
2008.
Edith V. Parish,
Manager, Airspace and Rules Group.
[FR Doc. E8–21522 Filed 9–15–08; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF THE TREASURY
31 CFR Part 50
RIN 1505–AB93
Terrorism Risk Insurance Program;
Terrorism Risk Insurance Program
Reauthorization Act Implementation
Departmental Offices, Treasury.
Interim final rule with request
for comments.
AGENCY:
ACTION:
SUMMARY: The Department of the
Treasury (Treasury) is issuing this
interim final rule as part of its
implementation of amendments made
by the Terrorism Risk Insurance
Program Reauthorization Act of 2007
(Reauthorization Act) to Title I of the
Terrorism Risk Insurance Act of 2002
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16SER1
Agencies
[Federal Register Volume 73, Number 180 (Tuesday, September 16, 2008)]
[Rules and Regulations]
[Pages 53356-53359]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-21650]
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FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1231
RIN 2590-AA08
Golden Parachute Payments and Indemnification Payments
AGENCY: Federal Housing Finance Agency.
ACTION: Interim Final Regulation with Request for Comments.
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SUMMARY: The Federal Housing Finance Agency (FHFA) is issuing an
interim final regulation, with a request for comments, setting forth
factors to be considered by the Director of FHFA in acting upon the
Director's authority to limit golden parachute payments to entity-
affiliated parties in connection with the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, and the
Federal Home Loan Banks.
DATES: Effective date: September 16, 2008.
Comment date: Comments on the Interim Final Regulation must be
received on or before October 31, 2008. For additional information, see
SUPPLEMENTARY INFORMATION.
ADDRESSES: You may submit your comments on the interim final
regulation, identified by regulatory information number ``RIN 2590-
AA08,'' by any of the following methods:
U.S. Mail, United Parcel Post, Federal Express, or Other
Mail Service: The mailing address for comments is: Alfred M. Pollard,
General Counsel (Office of Federal Housing Enterprise Oversight
(OFHEO)) and Christopher Curtis, General Counsel (Federal Housing
Finance Board (FHFB)), Attention: Comments/RIN 2590-AA08, Federal
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington,
DC 20552.
Hand Delivered/Courier: The hand delivery address is:
Alfred M. Pollard, General Counsel (OFHEO) and Christopher Curtis,
General Counsel (FHFB), Attention: Comments/RIN 2590-AA08, Federal
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington,
DC 20552. The package should be logged at the Guard Desk, First Floor,
on business days between 9 a.m. and 5 p.m.
E-mail: Comments to Alfred M. Pollard, General Counsel
(OFHEO) and Christopher Curtis, General Counsel (FHFB), may be sent by
e-mail at RegComments@FHFA.gov. Please include ``RIN 2590-AA08'' in the
subject line of the message.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
FOR FURTHER INFORMATION CONTACT: Alfred M. Pollard, General Counsel
(OFHEO), telephone (202) 414-3788 or Christopher Curtis, General
Counsel (FHFB), telephone (202) 408-2802 (not toll-free numbers),
Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW.,
Washington, DC 20552. The telephone number for the Telecommunications
Device for the Deaf is (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Comments
The Federal Housing Finance Agency (FHFA) invites comments on all
aspects of the interim final regulation, and will take all comments
into consideration before issuing the final regulation. FHFA requests
that comments submitted in hard copy also be
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accompanied by the electronic version in Microsoft[supreg] Word or in
portable document format (PDF) on 3.5'' disk or CD-ROM.
Copies of all comments will be posted on the Internet Web site at
www.OFHEO.gov. In addition, copies of all comments received will be
available for examination by the public on business days between the
hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency,
Fourth Floor, 1700 G Street, NW., Washington, DC 20552. To make an
appointment to inspect comments, please call the Office of General
Counsel (OFHEO) at (202) 414-3751.
II. Background
The Housing and Economic Recovery Act of 2008 (HERA), Public Law
No. 110-289, 122 Stat. 2654, amended the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.)
(Act) to establish FHFA as an independent agency of the Federal
Government.\1\ FHFA was established to oversee the prudential
operations of the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation (collectively, Enterprises), and the
Federal Home Loan Banks (Banks) (collectively, regulated entities) and
to ensure that they operate in a safe and sound manner including being
capitalized adequately; foster liquid, efficient, competitive and
resilient national housing finance markets; comply with the Act and
rules, regulation, guidelines and orders issued under the Act, and the
respective authorizing statutes of the regulated entities; and carry
out their missions through activities authorized and consistent with
the Act and their authorizing statutes; and, that the activities and
operations of the regulated entities are consistent with the public
interest.
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\1\ See Division A, titled the ``Federal Housing Finance
Regulatory Reform Act of 2008,'' TITLE I, Section 1101 of HERA.
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The Office of Federal Housing Enterprise Oversight (OFHEO) and the
Federal Housing Finance Board (FHFB) will be abolished one year after
enactment of the HERA. However, the regulated entities continue to
operate under regulations promulgated by OFHEO and FHFB until such
regulations are supplanted by regulations promulgated by the FHFA.
II. Interim Final Regulation and Request for Comments
Section 1114 of HERA amended 12 U.S.C. 4518 to provide additional
authorities for FHFA in addressing certain compensation and benefits,
specifically golden parachute payments and indemnification payments.
HERA added a new paragraph (e) to section 4518 addressing regulation
and prohibition of these benefits. While paragraphs (e)(1) and (e)(3)-
(6) are self executing, Congress provided that for paragraph (e)(2)
addressing factors to be taken into account when acting regarding
golden parachutes and indemnification, FHFA prescribe, by regulation,
factors to be considered. The factors set forth in (e)(2) are explicit
and provide strong guidance to the Director in taking an action under
the statute. Therefore, FHFA is promulgating an interim final rule and
requesting comment on paragraph (2) of section 4518(e). FHFA will
consider other comments regarding section 4518(e) as part of the public
notice and comment period.
The FHFA is issuing this regulation as an interim final rule in
order to provide clarity on the standards it will employ in addressing
golden parachutes and indemnification payments as provided in statute.
Additionally, with payments at issue for separating employees, an
interim final rule provides clarity for the standards the agency will
employ in exercising its authority; at the same time, comments are to
be taken regarding the rule. For these reasons, FHFA finds that there
is good cause, and that it is in the public interest, to make the rule
effective immediately upon publication in the Federal Register and
allow for public comment after publication. See 5 U.S.C. 553(b) and
(d). The language of the rule reflects congressional intent embodied in
the statute.
The interim final rule provides parties an opportunity to comment
on all aspects of the regulation and for future revision, if necessary
or appropriate, by the FHFA. Comments are specifically requested with
respect to the definition of the term ``troubled condition,'' with
respect to other factors the Director should consider in determining
whether golden parachute payments should be limited or prohibited, and
what payments made pursuant to a bona fide deferred compensation plan
or arrangement should be determined to be permissible golden parachute
payments.
Section 1313(f) of the Act, as amended by section 1201 of HERA,
requires the Director, when promulgating regulations relating to the
Banks, to consider the differences between the Banks and the
Enterprises with respect to the Banks' cooperative ownership structure;
mission of providing liquidity to members; affordable housing and
community development mission; capital structure; and joint and several
liability. The Director may also consider any other differences that
are deemed appropriate. In preparing the interim final rule, the
Director considered the differences between the Banks and the
Enterprises as they relate to the above factors. The Director requests
comments from the public about whether differences related to these
factors should result in a revision to the interim final rule as they
relate to the Banks.
Regulatory Impacts
Paperwork Reduction Act
The interim final regulation does not contain any information
collection requirement that requires the approval of OMB under the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). FHFA has considered the impact of the
interim final regulation under the Regulatory Flexibility Act. FHFA
certifies that the interim final regulation is not likely to have a
significant economic impact on a substantial number of small business
entities because the regulation is applicable only to the regulated
entities, which are not small entities for the purposes of the
Regulatory Flexibility Act.
List of Subjects in 12 CFR Part 1231
Golden parachutes, Government-sponsored enterprises,
Indemnification.
0
Accordingly, for the reasons stated in the preamble, FHFA establishes a
new 12 CFR Chapter XII, consisting of part 1231, to read as follows:
PART 1231--GOLDEN PARACHUTE PAYMENTS AND INDEMNIFICATION PAYMENTS
Sec.
1231.1 Purpose.
1231.2 Definitions.
1231.3 Golden parachute payments.
1231.4 Indemnification payments.
1231.5 Factors to be taken into account.
Authority: 12 U.S.C. 4518(e).
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Sec. 1231.1 Purpose.
The purpose of this part is to implement section 1318(e) of the Act
by setting forth the standards which the Director will take into
consideration in determining whether to limit or prohibit golden
parachute payments or indemnification payments to entity-affiliated
parties.
Sec. 1231.2 Definitions.
The following definitions apply to the terms used in this part:
(a) Act means the Federal Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4501 et seq.), as amended by the
Federal Housing Finance Regulatory Reform Act of 2008, enacted under
Division A of the HERA.
(b) Director means the Director of FHFA or his or her designee.
(c) Enterprise means the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation (collectively, Enterprises)
and, except as provided by the Director, any affiliate thereof.
(d) Entity-affiliated party means--
(1) Any director, officer, employee, or controlling stockholder of,
or agent for, a regulated entity;
(2) Any shareholder, affiliate, consultant, or joint venture
partner of a regulated entity, and any other person, as determined by
the Director (by regulation or on a case-by-case basis) that
participates in the conduct of the affairs of a regulated entity,
provided that a member of a Bank shall not be deemed to have
participated in the affairs of that Bank solely by virtue of being a
shareholder of, and obtaining advances from, that Bank;
(3) Any independent contractor for a regulated entity (including
any attorney, appraiser, or accountant), if--
(i) The independent contractor knowingly or recklessly participates
in--
(A) Any violation of any law or regulation;
(B) Any breach of fiduciary duty; or
(C) Any unsafe or unsound practice; and
(ii) Such violation, breach, or practice caused, or is likely to
cause, more than a minimal financial loss to, or a significant adverse
effect on, the regulated entity;
(4) Any not-for-profit corporation that receives its principal
funding, on an ongoing basis, from any regulated entity; and
(5) The Office of Finance.
(e) Federal Home Loan Bank means a bank established under the
Federal Home Loan Act; the term ``Federal Home Loan Banks'' means,
collectively, all the Federal Home Loan Banks.
(f)(1) Golden parachute payment means any payment (or any agreement
to make any payment) in the nature of compensation by any regulated
entity for the benefit of any current entity-affiliated party pursuant
to an obligation of such regulated entity that--
(i) Is contingent on, or by its terms is payable on or after, the
termination of such party's primary employment or affiliation with the
regulated entity; and
(ii) Is received on or after the date on which--
(A) The regulated entity became insolvent;
(B) Any conservator or receiver is appointed for such regulated
entity; or
(C) The Director determines that the regulated entity is in a
troubled condition.
(2) The term ``golden parachute payment'' shall not include:
(i) Any payment made pursuant to a pension or retirement plan which
is qualified (or is intended within a reasonable period of time to be
qualified) under section 401 of the Internal Revenue Code of 1986 (26
U.S.C. 401) or pursuant to a pension or other retirement plan which is
governed by the laws of any foreign country;
(ii) Any payment made pursuant to a bona fide deferred compensation
plan or arrangement which the Director determines, by regulation or
order, to be permissible; or
(iii) Any payment made by reason of death or by reason of
termination caused by the disability of an entity-affiliated party.
(3) Any payment which would be a golden parachute payment but for
the fact that such payment was made before the date referred to in
paragraph (f)(1)(ii) shall be treated as a golden parachute payment if
the payment was made in contemplation of the occurrence of an event
described that paragraph.
(g) FHFA means the Federal Housing Finance Agency.
(h) HERA means the Housing and Economic Recovery Act of 2008,
Public Law No. 110-289, 122 Stat. 2654 (July 30, 2008).
(i) Office of Finance means the Office of Finance of the Federal
Home Loan Bank System (or any successor thereto).
(j) Regulated entity means the Federal National Mortgage
Association and any affiliate thereof; the Federal Home Loan Mortgage
Corporation and any affiliate thereof; or any Federal Home Loan Bank;
the term ``regulated entities'' means, collectively, the Federal
National Mortgage Association and any affiliate thereof; the Federal
Home Loan Mortgage Corporation and any affiliate thereof; and any
Federal Home Loan Bank.
(k) Troubled condition means a regulated entity that--
(1) Is subject to a cease-and-desist order or written agreement
issued by the FHFA that requires action to improve the financial
condition of the regulated entity or is subject to a proceeding
initiated by the Director, which contemplates the issuance of an order
that requires action to improve the financial condition of the
regulated entity, unless otherwise informed in writing by the FHFA; or
(2) Is informed in writing by the Director that it is in a troubled
condition for purposes of the requirements of this part on the basis of
the regulated entity's most recent report of examination or other
information available to the FHFA.
(l)-(n) [Reserved]
Sec. 1231.3 Golden parachute payments.
No regulated entity shall make or agree to make any golden
parachute payment except with the concurrence of the Director.
Sec. 1231.4 Indemnification payments.
No regulated entity shall make or agree to make any indemnification
payment except with the concurrence of the Director.
Sec. 1231.5 Factors to be taken into account.
In determining whether to prohibit or limit any golden parachute
payment or indemnification payment, the Director shall consider the
following factors--
(a) Whether there is a reasonable basis to believe that the entity-
affiliated party has committed any fraudulent act or omission, breach
of trust or fiduciary duty, or insider abuse with regard to the
regulated entity that has had a material effect on the financial
condition of the regulated entity;
(b) Whether there is a reasonable basis to believe that the entity-
affiliated party is substantially responsible for the insolvency of the
regulated entity, the appointment of a conservator or receiver for the
regulated entity, or the troubled condition of the regulated entity (as
defined in regulations prescribed by the Director);
(c) Whether there is a reasonable basis to believe that the entity-
affiliated party has materially violated any applicable provision of
Federal or State law or regulation that has had a material effect on
the financial condition of the regulated entity;
(d) Whether the entity-affiliated party was in a position of
managerial or fiduciary responsibility;
(e) The length of time that the party was affiliated with the
regulated entity, and the degree to which the payment
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reasonably reflects compensation earned over the period of employment
and the compensation involved represents a reasonable payment for
services rendered; and
(f) Any other factor the Director determines relevant to the facts
and circumstances surrounding the golden parachute or indemnification
payment, including but not limited to negligence, gross negligence,
neglect, willful misconduct, breach of fiduciary duty, and malfeasance
on the part of an entity-affiliated party.
Dated: September 11, 2008.
James B. Lockhart, III,
Director, Federal Housing Finance Agency.
[FR Doc. E8-21650 Filed 9-12-08; 11:15 am]
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