Record Retention, 38559-38564 [E9-18489]

Download as PDF 38559 Proposed Rules Federal Register Vol. 74, No. 148 Tuesday, August 4, 2009 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. FEDERAL HOUSING FINANCE BOARD 12 CFR Part 914 FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1235 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of Federal Housing Enterprise Oversight 12 CFR Part 1732 RIN 2590–AA10 Record Retention rmajette on DSK29S0YB1PROD with PROPOSALS AGENCIES: Federal Housing Finance Board; Federal Housing Finance Agency; Office of Federal Housing Enterprise Oversight. ACTION: Notice of proposed rulemaking; request for comments. SUMMARY: The Federal Housing Finance Agency (FHFA) is proposing a Record Retention regulation. The proposed regulation would set forth record retention requirements with respect to the record management programs of the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Home Loan Banks, and the Office of Finance consistent with the safety and soundness authority of FHFA under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended. DATES: Comments on the proposed regulation must be received in writing on or before October 5, 2009. For additional information, see SUPPLEMENTARY INFORMATION. ADDRESSES: You may submit your comments on the proposed regulation, identified by regulatory information number (RIN) 2590–AA10, by any one of the following methods: • U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: VerDate Nov<24>2008 15:42 Aug 03, 2009 Jkt 217001 The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590–AA10, 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, Attention: Comments/ RIN 2590–AA10, 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 may be sent by e-mail to RegComments@fhfa.gov. Please include ‘‘RIN 2590–AA10’’ in the subject line of the message. • Federal eRulemaking: http:// www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by e-mail to FHFA at RegComments@fhfa.gov to ensure timely receipt by the Agency. Please include ‘‘RIN 2590–AA10’’ in the subject line of the message. FOR FURTHER INFORMATION CONTACT: Andra Grossman, Senior Counsel, telephone (202) 343–1313 (not a toll-free number); 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 FHFA invites comments on all aspects of the proposed regulation, and will take all comments into consideration before issuing the final regulation. Copies of all comments will be posted without change, including any personal information you provide, such as your name and address, on the FHFA Web site at http://www.fhfa.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 at (202) 414–6924. PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 II. Background A. Establishment of the Federal Housing Finance Agency 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.) (Safety and Soundness Act), and the Federal Home Loan Bank Act (12 U.S.C. 1421–1449) 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) 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 Safety and Soundness Act and rules, regulations, guidelines and orders issued by the Director of FHFA (Director), and the respective authorizing statutes of the regulated entities; and carry out their missions through activities authorized and consistent with the Safety and Soundness Act and their authorizing statutes; and, that the activities and operations of the regulated entities are consistent with the public interest. FHFA also has regulatory authority over the Office of Finance under section 1311(b)(2) of the Safety and Soundness Act (12 U.S.C. 4511). The Office of Finance is a joint office of the Banks that was established by a predecessor to FHFA. The Office of Finance is governed by a three-person board of directors consisting of two Bank presidents and one independent member. Under the regulations of the Federal Housing Finance Board (FHFB), the Office of Finance is subject to the same regulatory oversight authority and enforcement powers as are the Banks and their respective directors, officers, and employees.2 The Office of Finance also is subject to the cease-and-desist authority of FHFA and its directors, officers and management are subject to 1 See Division A, titled the ‘‘Federal Housing Finance Regulatory Reform Act of 2008,’’ Title I, section 1101 of HERA. 2 12 CFR 985.4 and 985.7. E:\FR\FM\04AUP1.SGM 04AUP1 38560 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Proposed Rules rmajette on DSK29S0YB1PROD with PROPOSALS the removal and prohibition authority of FHFA.3 Although the Office of Finance is not directly covered by the Safety and Soundness Act, it is subject to the Director’s ‘‘general regulatory authority’’ under section 1311(b)(2) of the Safety and Soundness Act (12 U.S.C. 4511(b)(2)), as amended by HERA. The Director is required to exercise that authority as necessary to ensure that the purposes of the Safety and Soundness Act, the authorizing statutes, and other applicable law are carried out. Based on its general regulatory authority over the Office of Finance, FHFA is proposing that this regulation apply to the Office of Finance. The Office of Federal Housing Enterprise Oversight (OFHEO) and the FHFB will be abolished one year after enactment of the HERA. However, the regulated entities and the Office of Finance continue to operate under regulations promulgated by OFHEO and FHFB; and such regulations are enforceable by the Director of FHFA until such regulations are modified, terminated, set aside, or superseded by the Director of FHFA.4 B. Record Retention and Prudential Management and Operation Standards The Safety and Soundness Act provides that the Director is to establish standards for each regulated entity and the Office of Finance to maintain adequate records, in accordance with consistent accounting policies and practices that enable the Director to evaluate the financial condition of each regulated entity and the Office of Finance and such other operational and management standards as the Director determines to be appropriate.5 The Safety and Soundness Act further provides the Director with general supervisory and regulatory authority over the regulated entities and the Office of Finance, and requires the Director to ensure that they operate in a safe and sound manner.6 Accordingly, this proposed regulation would address the record retention requirements of each regulated entity and the Office of Finance. The proposed regulation, when published in its final form, would supersede 12 CFR 914.3 (FHFB Access to Books and Records) and 12 CFR part 1732 (OFHEO Record Retention). The proposed regulation would require the regulated entities and the Office of Finance to establish and maintain a record retention program to ensure that records are readily 3 12 U.S.C.4631(a) and 4636a(a). 4 See sections 1302 and 1312 of HERA. 5 12 U.S.C. 4513b(a)(10) and (11). 6 12 U.S.C. 4511(b), 4513(a). VerDate Nov<24>2008 15:42 Aug 03, 2009 Jkt 217001 accessible for examination and other supervisory purposes. FHFA recognizes that the effectiveness of the examination process is dependent upon the prompt production of complete and accurate records. FHFA, through the supervisory process, must have access to the records of a regulated entity and the Office of Finance that are necessary to determine the financial condition of the regulated entity and the Office of Finance or the details or the purpose of any transaction that may have a material effect on the financial condition of the regulated entity and the Office of Finance. Retention of such records not only facilitates the examination process, but also allows a regulated entity and the Office of Finance to manage more effectively its business and detect improper behavior that might cause financial damage. Additionally, such records serve as documentation for a regulated entity and the Office of Finance in any controversy over its business activities or transactions. The importance of sound record retention policies and procedures by regulated institutions also has been recognized by Congress and other federal regulators. Adequate record retention by the institutions has been determined to have a high degree of usefulness in criminal, tax, and regulatory investigations or proceedings, and has been identified as a requisite component of an institution’s operation and management on a safety and soundness basis.7 In addition to facilitating the oversight and enforcement of federal banking laws, adequate record retention has been recognized by Congress as being essential to the oversight and enforcement of the federal securities laws. For example, as mandated by section 802 of the Sarbanes-Oxley Act,8 the U.S. Securities and Exchange Commission adopted rules requiring accounting firms to retain for seven years certain records relevant to their audits and reviews of issuers’ financial statements. Records to be retained include an accounting firm’s workpapers and certain other documents that contain conclusions, opinions, analyses, or financial data related to the audit or review.9 The proposed requirements would have no effect on the policies, rules, or guidance of other federal agencies that may require record retention terms or 7 See, e.g., 12 U.S.C. 1829b, and the Guidelines and Interagency Standards for Safety and Soundness at 12 CFR part 30, Appendix A, II, B. 8 Public Law 107–204, 116 Stat. 745 (2002). 9 17 CFR part 210. PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 practices different from those set forth in the proposal. Section 1313(f) of the Safety and Soundness 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 proposed regulation, 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 of the proposed amendment as it relates to the Banks. III. Section-by-Section Analysis Section 1235.1 Purpose and Scope This proposed section provides the purpose of the regulation is to set forth minimum requirements in connection with the record retention program of each regulated entity and the Office of Finance. Such requirements would be intended to ensure that complete and accurate records of each regulated entity and the Office of Finance are readily accessible by FHFA for examination and other supervisory purposes. Section 1235.2 Definitions This proposed section would provide definitions for the terms contained in the proposed regulation. Active record would be defined as a record that is necessary to conduct the current business of an office or business unit of a regulated entity or the Office of Finance, and therefore, readily available for consultation and reference. Director would be defined as the Director of FHFA, or his or her designee. Electronic record would be defined as a record created, generated, communicated, or stored by electronic means. E-mail would be defined as electronic mail, which is a method of communication in which— (1) Usually, text is transmitted (but sometimes also graphics and/or audio information); (2) Operations include sending, storing, processing, and receiving information; (3) Users are allowed to communicate under specified conditions; and (4) Messages are held in storage until called for by the addressee, including E:\FR\FM\04AUP1.SGM 04AUP1 rmajette on DSK29S0YB1PROD with PROPOSALS Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Proposed Rules any attachment of separate electronic files. Employee would be defined as any officer or employee of a regulated entity and the Office of Finance or any conservator appointed by FHFA. Federal Home Loan Bank or Bank would be defined as a Bank established under the Federal Home Loan Bank Act; the term ‘‘Federal Home Loan Banks’’ or ‘‘Banks’’ would be defined to mean, collectively, all the Federal Home Loan Banks. FHFA would be defined as the Federal Housing Finance Agency. Financing Corporation (FICO) would mean the entity established by the Competitive Equality Banking Act of 1987, as a mixed-ownership government corporation whose purpose is to function as a financing vehicle for the Federal Savings & Loan Insurance Corporation. FICO has a board of directors consisting of the managing director of the Office of Finance and two Bank presidents. Inactive record would be defined as a record that is seldom used but must be retained by a regulated entity and the Office of Finance for fiscal, legal, historical, or vital records purposes. Office of Finance would be defined as the Office of Finance of the Federal Home Loan Bank System. Record would be defined as any information, whether generated internally or received from outside sources by a regulated entity or the Office of Finance or employee, maintained in connection with a regulated entity or Office of Finance business (which business, in the case of the Office of Finance, shall include any functions performed with respect to the FICO), regardless of the following— (1) Form or format, including hard copy documents (e.g., files, logs, and reports) and electronic documents (e.g., e-mail, databases, spreadsheets, PowerPoint presentations, electronic reporting systems, electronic tapes and back-up tapes, optical discs, CD–ROMS, and DVDs), and voicemail records; (2) Where the information is stored or located, including network servers, desktop or laptop computers and handheld computers, other wireless devices with text messaging capabilities, and on-site or off-site at a storage facility; (3) Whether the information is maintained or used on regulated entityowned or Office of Finance equipment, or personal or home computer systems of an employee; or (4) Whether the information is active or inactive. Record hold would be defined as a requirement, an order, or a directive VerDate Nov<24>2008 15:42 Aug 03, 2009 Jkt 217001 from a regulated entity, the Office of Finance or FHFA that the regulated entity or the Office of Finance is to retain records relating to a particular issue in connection with an actual or a potential FHFA examination, investigation, enforcement proceeding, or litigation of which the regulated entity and the Office of Finance has received notice from FHFA. Record retention schedule would be defined as a schedule that details the categories of records a regulated entity or the Office of Finance is required to retain and the corresponding retention periods. The record retention schedule includes all media, such as microfilm and machine-readable computer records, for each record category. Reproductions are also included for each record category if the original of the official record is not available. Regulated entity would be defined as 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’’ would be defined to mean, collectively, the Federal National Mortgage Association and any affiliate thereof, the Federal Home Loan Mortgage Corporation and any affiliate thereof, and the Federal Home Loan Banks. Retention period would be defined as the length of time that records must be kept before they are destroyed. Records not authorized for destruction have a retention period of ‘‘permanent.’’ Safety and Soundness Act would be defined as the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.), as amended by the Housing and Economic Recovery Act of 2008, Public Law No. 110–289, 122 Stat. 2654 (2008). Vital records would be defined as records that are needed to meet operational responsibilities of a regulated entity or the Office of Finance under emergency or disaster conditions (emergency operating records) or to protect the legal and financial rights of a regulated entity or the Office of Finance. Emergency operating records are the type of vital records essential to the continued functioning or reconstitution of a regulated entity or the Office of Finance during and after an emergency. A vital record may be both an emergency operating record and a legal and financial rights record. Section 1235.3 Establishment and Evaluation of Record Retention Program This proposed section would require each regulated entity and the Office of Finance to establish and maintain a PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 38561 written record retention program and provide a copy of such program to the Deputy Director of the Division of Enterprise Regulation and the Deputy Director of the Division of Federal Home Loan Bank Regulation, or his or her designee (Deputy Director), as appropriate, within 120 days of the effective date of this part, and annually thereafter, and whenever a significant revision to the program has been made. It would also require management of the regulated entity and the Office of Finance to evaluate in writing the adequacy and effectiveness of the record retention program at least every three years and provide a copy of the evaluation to the board of directors and the appropriate Deputy Director. Section 1235.4 Minimum Requirements of Record Retention Program This proposed section would provide the minimum requirements for the record retention program of each regulated entity and the Office of Finance, including requirements relating to a record retention schedule. Section 1235.5 Record Hold This proposed section would address record retention methods, record access and retrieval policies, and notification procedures for employees. Moreover, the section would require a regulated entity’s or the Office of Finance’s employee who is aware of a potential FHFA investigation, enforcement proceeding, or litigation involving the regulated entity or the Office of Finance or an employee to notify immediately the legal department of the regulated entity or the Office of Finance and retain any records that may be relevant to such investigation, enforcement proceeding, or litigation. Section 1235.6 Access to Records This proposed section would set forth the requirement that records must be readily available for inspection within a reasonable period upon request by FHFA, at a location acceptable to FHFA. For requests made during the course of an onsite examination and pursuant to an examination’s scope, a reasonable period is no longer than one business day and for requests for documents made outside of an onsite examination, a reasonable period is presumed to be three business days. Section 1235.7 Supervisory Action This proposed section would provide that failure by a regulated entity or the Office of Finance to comply with the requirements of the proposed regulation may subject the regulated entity or the E:\FR\FM\04AUP1.SGM 04AUP1 38562 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Proposed Rules Office of Finance, or its board members, officers, or employees to supervisory action by FHFA. The section also would provide that the proposed regulation does not limit the authority of FHFA under its safety and soundness mandate to take other actions such as conducting examinations, requiring reports and disclosures, and enforcing compliance with applicable laws, rules and regulations. Regulatory Impact Paperwork Reduction Act Because the proposed regulation pertains to the regulated entities and the Office of Finance, it does not contain any information collection requirement that requires the approval of the Office of Management and Budget 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 proposed regulation under the Regulatory Flexibility Act. FHFA certifies that the proposed regulation, if adopted, 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 and the Office of Finance, which are not small entities for purposes of the Regulatory Flexibility Act. Authority and Issuance Accordingly, for the reasons stated in the preamble, under the authority of 12 U.S.C. 4513b, FHFA proposes to amend Chapters IX, XII and XVII of title 12 of the Code of Federal Regulations, as set forth below: CHAPTER IX—FEDERAL HOUSING FINANCE BOARD PART 914—DATA AVAILABILITY AND REPORTING 1. The authority citation for part 914 is revised to read as follows: Authority: 12 U.S.C. 1440 and 4526. § 914.3 [Removed and reserved] 2. Remove and reserve § 914.3. CHAPTER XII—FEDERAL HOUSING FINANCE AGENCY SUBCHAPTER B—ENTITY REGULATIONS 3. Add part 1235 to subchapter B to read as follows: PART 1235—RECORD RETENTION Sec. 1235.1 Purpose and scope. 1235.2 Definitions. 1235.3 Establishment and evaluation of record retention program. 1235.4 Minimum requirements of record retention program. 1235.5 Record hold. 1235.6 Access to records. 1235.7 Supervisory action. Authority: 12 U.S.C. 4511(b), 4513(a), 4513b(a)(10) and (11), 4526. § 1235.1 Purpose and scope. The purpose of this part is to set forth minimum requirements in connection with the record retention program of each regulated entity and the Office of Finance. The requirements are intended to ensure that complete and accurate records of each regulated entity and the Office of Finance are readily accessible by FHFA for examination and other supervisory purposes. List of Subjects § 1235.2 12 CFR Part 914 For purposes of this part, the termƒ Active record means a record that is necessary to conduct the current business of an office or business unit of a regulated entity and the Office of Finance, and therefore, is readily available for consultation and reference. Director means the Director of FHFA, or his or her designee. Electronic record means a record created, generated, communicated, or stored by electronic means. E-mail means electronic mail, which is a method of communication in which— Federal home loan banks, Reporting and recordkeeping requirements. rmajette on DSK29S0YB1PROD with PROPOSALS 12 CFR Part 1235 Federal home loan banks, Government-sponsored enterprises, Records, Reporting and recordkeeping requirements. 12 CFR Part 1732 Government-sponsored enterprises, Records, Reporting and recordkeeping requirements. VerDate Nov<24>2008 15:42 Aug 03, 2009 Jkt 217001 PO 00000 Definitions. Frm 00004 Fmt 4702 Sfmt 4702 (1) Usually, text is transmitted (but sometimes also graphics and/or audio information); (2) Operations include sending, storing, processing, and receiving information; (3) Users are allowed to communicate under specified conditions; and (4) Messages are held in storage until called for by the addressee, including any attachment of separate electronic files. Employee means any officer or employee of a regulated entity or the Office of Finance or of any conservator appointed by FHFA. Federal Home Loan Bank or Bank means a Bank established under the Federal Home Loan Bank Act; the term Federal Home Loan Banks or Banks means, collectively, all the Federal Home Loan Banks. FHFA means the Federal Housing Finance Agency. Financing Corporation (FICO) means the entity established by the Competitive Equality Banking Act of 1987, as a mixed-ownership government corporation whose purpose is to function as a financing vehicle for the Federal Savings & Loan Insurance Corporation. FICO has a board of directors consisting of the managing director of the Office of Finance and two Bank presidents. Inactive record means a record that is seldom used but must be retained by a regulated entity or the Office of Finance for fiscal, legal, historical, or vital records purposes. Office of Finance means the Office of Finance of the Federal Home Loan Bank System. Record means any information, whether generated internally or received from outside sources by a regulated entity or the Office of Finance or employee, maintained in connection with a regulated entity or Office of Finance business (which business, in the case of the Office of Finance, shall include any functions performed with respect to the Financing Corporation), regardless of the following— (1) Form or format, including hard copy documents (e.g., files, logs, and reports) and electronic documents (e.g., e-mail, databases, spreadsheets, PowerPoint presentations, electronic reporting systems, electronic tapes and back-up tapes, optical discs, CD–ROMS, and DVDs), and voicemail records; (2) Where the information is stored or located, including network servers, desktop or laptop computers and handheld computers, other wireless devices with text messaging capabilities, and on-site or off-site at a storage facility; E:\FR\FM\04AUP1.SGM 04AUP1 rmajette on DSK29S0YB1PROD with PROPOSALS Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Proposed Rules (3) Whether the information is maintained or used on regulated entityowned or Office of Finance equipment, or personal or home computer systems of an employee; or (4) Whether the information is active or inactive. Record hold means a requirement, an order, or a directive from a regulated entity, the Office of Finance, or FHFA that the regulated entity or the Office of Finance is to retain records relating to a particular issue in connection with an actual or a potential FHFA examination, investigation, enforcement proceeding, or litigation of which the regulated entity or the Office of Finance has received notice from FHFA. Record retention schedule means a schedule that details the categories of records a regulated entity or the Office of Finance is required to retain and the corresponding retention periods. The record retention schedule includes all media, such as microfilm and machinereadable computer records, for each record category. Reproductions are also included for each record category if the original of the official record is not available. 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 the Federal Home Loan Banks. Retention period means the length of time that records must be kept before they are destroyed. Records not authorized for destruction have a retention period of ‘‘permanent.’’ Safety and Soundness Act means the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.), as amended. Vital records means records that are needed to meet operational responsibilities of a regulated entity or the Office of Finance under emergency or disaster conditions (emergency operating records) or to protect the legal and financial rights of a regulated entity or the Office of Finance. Emergency operating records are the type of vital records essential to the continued functioning or reconstitution of a regulated entity or the Office of Finance during and after an emergency. A vital record may be both an emergency operating record and a legal and financial rights record. VerDate Nov<24>2008 15:42 Aug 03, 2009 Jkt 217001 § 1235.3 Establishment and evaluation of record retention program. (a) Establishment. Each regulated entity and the Office of Finance shall establish and maintain a written record retention program and provide a copy of such program to the Deputy Director of the Division of Enterprise Regulation, or his or her designee, or the Deputy Director of the Division of Federal Home Loan Bank Regulation, or his or her designee (Deputy Director), as appropriate, within 120 days of the effective date of this part, and annually thereafter, and whenever a significant revision to the program has been made. (b) Evaluation. Management of each regulated entity and the Office of Finance shall evaluate in writing the adequacy and effectiveness of the record retention program at least every three years and provide a copy of the evaluation to the board of directors and the appropriate Deputy Director. § 1235.4 Minimum requirements of record retention program. (a) Requirements. The record retention program established and maintained by each regulated entity and the Office of Finance under § 1235.3 shall: (1) Be reasonably designed to assure that retained records are complete and accurate; (2) Be reasonably designed to assure that the format of retained records and the retention period— (i) Are adequate to support litigation and the administrative, business, external and internal audit functions of the regulated entity or the Office of Finance; (ii) Comply with requirements of applicable laws and regulations; and (iii) Permit ready access by the regulated entity or the Office of Finance and, upon request, by the examination and other staff of FHFA by reasonable means, consistent with the nature and availability of the records and existing information technology. (3) Assign in writing the authorities and responsibilities for record retention activities; (4) Include policies and procedures concerning record holds, consistent with § 1235.5; (5) Include an accurate, current, and comprehensive record retention schedule that lists records by major categories, subcategories, record type, and retention period, which retention period is appropriate to the specific record and consistent with applicable legal, regulatory, fiscal, and operational and business requirements; (6) Include adequate security and internal controls to protect records from PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 38563 unauthorized access and data alteration; and (7) Provide for adequate back-up and recovery of electronic records. (b) Training. The record retention program shall provide for training of and notice to all employees on a periodic basis on their record retention responsibilities, including instruction regarding penalties provided by law for the unlawful removal or destruction of records. The record retention program also shall provide for training for the agents or independent contractors of a regulated entity or the Office of Finance, as appropriate, consistent with their respective roles and responsibilities to the regulated entity or the Office of Finance. § 1235.5 Record hold. (a) Notification by a regulated entity or the Office of Finance. The record retention program of a regulated entity and the Office of Finance shallƒ (1) Address how employees and, as appropriate, how agents or independent contractors consistent with their respective roles and responsibilities to the regulated entity or the Office of Finance, will receive prompt notification of a record hold; (2) Designate an individual to communicate specific requirements and instructions, including, when necessary, the instruction to cease immediately any otherwise permissible destruction of records; and (3) Provide that any employee and, as appropriate, any agent or independent contractor consistent with his or her respective role and responsibility to the regulated entity, who has received notice of a potential investigation, enforcement proceeding, or litigation by FHFA involving the regulated entity or the Office of Finance or an employee, or otherwise has actual knowledge that an issue is subject to such an investigation, enforcement proceeding or litigation, shall notify immediately the legal department of the regulated entity or the Office of Finance and shall retain any records that may be relevant in any way to such investigation, enforcement proceeding, or litigation. (b) Method of record retention. The record retention program of each regulated entity and the Office of Finance shall address the method by which the regulated entity or the Office of Finance will retain records during a record hold. Specifically, the program shall describe the method for the continued preservation of electronic records, including e-mails, and the conversion of records from paper to electronic format as well as any alternative storage method. E:\FR\FM\04AUP1.SGM 04AUP1 38564 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Proposed Rules (c) Access to and retrieval of records during a record hold. The record retention program of each regulated entity or the Office of Finance shall ensure access to and retrieval of records by the regulated entity or the Office of Finance and access, upon request, by FHFA, during a record hold. Such access shall be by reasonable means, consistent with the nature and availability of the records and existing information technology. FEDERAL HOUSING FINANCE BOARD § 1235.6 AGENCY: Federal Housing Finance Agency; Federal Housing Finance Board. ACTION: Notice of proposed rulemaking; request for comment. Access to records. (a) Access to records. Each regulated entity or the Office of Finance shall make its records readily available for inspection and other supervisory purposes within a reasonable period upon request by FHFA, at a location acceptable to FHFA and by reasonable means, consistent with the nature and availability of the records and existing information technology. (b) Reasonable period. For requests for documents made during the course of an on-site examination and pursuant to the examination’s scope, a reasonable period is presumed to be no longer than one business day. For requests for documents made outside of an on-site examination, a reasonable period is presumed to be three business days. § 1235.7 Supervisory action. (a) Supervisory action. Failure by a regulated entity or the Office of Finance to comply with this part may subject the regulated entity or the Office of Finance or the board members, officers, or employees thereof to supervisory action by FHFA under the Safety and Soundness Act, including but not limited to cease-and-desist proceedings, temporary cease-and-desist proceedings, and civil money penalties. (b) No limitation of authority. This part does not limit or restrict the authority of FHFA to act under its safety and soundness mandate, in accordance with the Safety and Soundness Act. Such authority includes, but is not limited to, conducting examinations, requiring reports and disclosures, and enforcing compliance with applicable laws, rules, and regulations. rmajette on DSK29S0YB1PROD with PROPOSALS CHAPTER XVII—OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PART 1732—[REMOVED] 4. Remove part 1732. Dated: July 28, 2009. James B. Lockhart III, Director, Federal Housing Finance Agency. [FR Doc. E9–18489 Filed 8–3–09; 8:45 am] BILLING CODE P VerDate Nov<24>2008 17:32 Aug 03, 2009 Jkt 217001 12 CFR Parts 985, 989 FEDERAL HOUSING FINANCE AGENCY 12 CFR Parts 1273, 1274 RIN 2590–AA30 Board of Directors of Federal Home Loan Bank System Office of Finance SUMMARY: Governed by the Federal Housing Finance Agency’s (FHFA) regulations, the Federal Home Loan Bank System’s (System) Office of Finance, issues debt (‘‘consolidated obligations’’) on which the Federal Home Loan Banks (Banks) are jointly and severally liable and publishes combined financial reports on the Banks so that investors in the consolidated obligations can assess the strength of the System that stands behind them. The Office of Finance (OF) is governed by a board of directors, the composition and functions of which are determined by FHFA’s regulations. The FHFA’s experience with the System and with the OF’s combined financial reports during the recent period of market stress suggests that the OF and the System could benefit from a reconstituted and strengthened board. This proposed regulation is intended to achieve that. DATES: Comments on the proposed regulation must be received on or before October 5, 2009. For additional information, see SUPPLEMENTARY INFORMATION. ADDRESSES: You may submit your comments on the proposed regulation, identified by regulatory information number (RIN) 2590–AA30 by any of the following methods: • U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590–AA30, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. • Hand Delivery/Courier: The hand delivery address is: Alfred M. Pollard, General Counsel, Attention: Comments/ RIN 2590–AA30, 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. PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 • E-mail: Comments to Alfred M. Pollard, General Counsel may be sent by e-mail at RegComments@FHFA.gov. Please include ‘‘RIN 2590–AA30’’ in the subject line of the message. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. FOR FURTHER INFORMATION CONTACT: Joseph A. McKenzie, 202–408–2845, Division of Federal Home Loan Bank Regulation, Federal Housing Finance Agency, 1625 Eye Street, NW., Washington, DC 20006; or Neil Crowley, Deputy General Counsel, 202–343–1316, or Thomas E. Joseph, Senior AttorneyAdvisor, 202–414–3095, Office of General Counsel, 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 FHFA invites comments on all aspects of the proposed regulation, and will adopt a final regulation with appropriate changes after taking all comments into consideration. Copies of all comments will be posted on the Internet Web site at https:// www.fhfa.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 at (202) 414–6924. II. Background A. Creation of the Federal Housing Finance Agency and Recent Legislation Effective July 30, 2008, the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110–289, 122 Stat. 2654, transferred the supervisory and oversight responsibilities of the Office of Federal Housing Enterprise Oversight (OFHEO) over the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises), the oversight responsibilities of the Federal Housing Finance Board (FHFB or Finance Board) over the Banks and the Office of Finance (OF) (which acts as the Banks’ fiscal agent) and certain functions of the Department of Housing and Urban Development to a new independent executive branch agency, the FHFA. See id. at § 1101, 122 Stat. 2661–62 (amending 12 U.S.C. 4511). The FHFA E:\FR\FM\04AUP1.SGM 04AUP1

Agencies

[Federal Register Volume 74, Number 148 (Tuesday, August 4, 2009)]
[Proposed Rules]
[Pages 38559-38564]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-18489]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / 
Proposed Rules

[[Page 38559]]



FEDERAL HOUSING FINANCE BOARD

12 CFR Part 914

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1235

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of Federal Housing Enterprise Oversight

12 CFR Part 1732

RIN 2590-AA10


Record Retention

AGENCIES: Federal Housing Finance Board; Federal Housing Finance 
Agency; Office of Federal Housing Enterprise Oversight.

ACTION: Notice of proposed rulemaking; request for comments.

-----------------------------------------------------------------------

SUMMARY: The Federal Housing Finance Agency (FHFA) is proposing a 
Record Retention regulation. The proposed regulation would set forth 
record retention requirements with respect to the record management 
programs of the Federal National Mortgage Association, the Federal Home 
Loan Mortgage Corporation, the Federal Home Loan Banks, and the Office 
of Finance consistent with the safety and soundness authority of FHFA 
under the Federal Housing Enterprises Financial Safety and Soundness 
Act of 1992, as amended.

DATES: Comments on the proposed regulation must be received in writing 
on or before October 5, 2009. For additional information, see 
SUPPLEMENTARY INFORMATION.

ADDRESSES: You may submit your comments on the proposed regulation, 
identified by regulatory information number (RIN) 2590-AA10, by any one 
of the following methods:
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA10, 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, Attention: Comments/RIN 2590-AA10, 
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 may be sent by e-mail to 
RegComments@fhfa.gov. Please include ``RIN 2590-AA10'' in the subject 
line of the message.
     Federal eRulemaking: http://www.regulations.gov. Follow 
the instructions for submitting comments. If you submit your comment to 
the Federal eRulemaking Portal, please also send it by e-mail to FHFA 
at RegComments@fhfa.gov to ensure timely receipt by the Agency. Please 
include ``RIN 2590-AA10'' in the subject line of the message.

FOR FURTHER INFORMATION CONTACT: Andra Grossman, Senior Counsel, 
telephone (202) 343-1313 (not a toll-free number); 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

    FHFA invites comments on all aspects of the proposed regulation, 
and will take all comments into consideration before issuing the final 
regulation. Copies of all comments will be posted without change, 
including any personal information you provide, such as your name and 
address, on the FHFA Web site at http://www.fhfa.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 at (202) 414-6924.

II. Background

A. Establishment of the Federal Housing Finance Agency

    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.) 
(Safety and Soundness Act), and the Federal Home Loan Bank Act (12 
U.S.C. 1421-1449) 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) 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 Safety and 
Soundness Act and rules, regulations, guidelines and orders issued by 
the Director of FHFA (Director), and the respective authorizing 
statutes of the regulated entities; and carry out their missions 
through activities authorized and consistent with the Safety and 
Soundness Act and their authorizing statutes; and, that the activities 
and operations of the regulated entities are consistent with the public 
interest. FHFA also has regulatory authority over the Office of Finance 
under section 1311(b)(2) of the Safety and Soundness Act (12 U.S.C. 
4511).
---------------------------------------------------------------------------

    \1\ See Division A, titled the ``Federal Housing Finance 
Regulatory Reform Act of 2008,'' Title I, section 1101 of HERA.
---------------------------------------------------------------------------

    The Office of Finance is a joint office of the Banks that was 
established by a predecessor to FHFA. The Office of Finance is governed 
by a three-person board of directors consisting of two Bank presidents 
and one independent member. Under the regulations of the Federal 
Housing Finance Board (FHFB), the Office of Finance is subject to the 
same regulatory oversight authority and enforcement powers as are the 
Banks and their respective directors, officers, and employees.\2\ The 
Office of Finance also is subject to the cease-and-desist authority of 
FHFA and its directors, officers and management are subject to

[[Page 38560]]

the removal and prohibition authority of FHFA.\3\ Although the Office 
of Finance is not directly covered by the Safety and Soundness Act, it 
is subject to the Director's ``general regulatory authority'' under 
section 1311(b)(2) of the Safety and Soundness Act (12 U.S.C. 
4511(b)(2)), as amended by HERA. The Director is required to exercise 
that authority as necessary to ensure that the purposes of the Safety 
and Soundness Act, the authorizing statutes, and other applicable law 
are carried out. Based on its general regulatory authority over the 
Office of Finance, FHFA is proposing that this regulation apply to the 
Office of Finance.
---------------------------------------------------------------------------

    \2\ 12 CFR 985.4 and 985.7.
    \3\ 12 U.S.C.4631(a) and 4636a(a).
---------------------------------------------------------------------------

    The Office of Federal Housing Enterprise Oversight (OFHEO) and the 
FHFB will be abolished one year after enactment of the HERA. However, 
the regulated entities and the Office of Finance continue to operate 
under regulations promulgated by OFHEO and FHFB; and such regulations 
are enforceable by the Director of FHFA until such regulations are 
modified, terminated, set aside, or superseded by the Director of 
FHFA.\4\
---------------------------------------------------------------------------

    \4\ See sections 1302 and 1312 of HERA.
---------------------------------------------------------------------------

B. Record Retention and Prudential Management and Operation Standards

    The Safety and Soundness Act provides that the Director is to 
establish standards for each regulated entity and the Office of Finance 
to maintain adequate records, in accordance with consistent accounting 
policies and practices that enable the Director to evaluate the 
financial condition of each regulated entity and the Office of Finance 
and such other operational and management standards as the Director 
determines to be appropriate.\5\ The Safety and Soundness Act further 
provides the Director with general supervisory and regulatory authority 
over the regulated entities and the Office of Finance, and requires the 
Director to ensure that they operate in a safe and sound manner.\6\ 
Accordingly, this proposed regulation would address the record 
retention requirements of each regulated entity and the Office of 
Finance. The proposed regulation, when published in its final form, 
would supersede 12 CFR 914.3 (FHFB Access to Books and Records) and 12 
CFR part 1732 (OFHEO Record Retention).
---------------------------------------------------------------------------

    \5\ 12 U.S.C. 4513b(a)(10) and (11).
    \6\ 12 U.S.C. 4511(b), 4513(a).
---------------------------------------------------------------------------

    The proposed regulation would require the regulated entities and 
the Office of Finance to establish and maintain a record retention 
program to ensure that records are readily accessible for examination 
and other supervisory purposes. FHFA recognizes that the effectiveness 
of the examination process is dependent upon the prompt production of 
complete and accurate records. FHFA, through the supervisory process, 
must have access to the records of a regulated entity and the Office of 
Finance that are necessary to determine the financial condition of the 
regulated entity and the Office of Finance or the details or the 
purpose of any transaction that may have a material effect on the 
financial condition of the regulated entity and the Office of Finance.
    Retention of such records not only facilitates the examination 
process, but also allows a regulated entity and the Office of Finance 
to manage more effectively its business and detect improper behavior 
that might cause financial damage. Additionally, such records serve as 
documentation for a regulated entity and the Office of Finance in any 
controversy over its business activities or transactions.
    The importance of sound record retention policies and procedures by 
regulated institutions also has been recognized by Congress and other 
federal regulators. Adequate record retention by the institutions has 
been determined to have a high degree of usefulness in criminal, tax, 
and regulatory investigations or proceedings, and has been identified 
as a requisite component of an institution's operation and management 
on a safety and soundness basis.\7\
---------------------------------------------------------------------------

    \7\ See, e.g., 12 U.S.C. 1829b, and the Guidelines and 
Interagency Standards for Safety and Soundness at 12 CFR part 30, 
Appendix A, II, B.
---------------------------------------------------------------------------

    In addition to facilitating the oversight and enforcement of 
federal banking laws, adequate record retention has been recognized by 
Congress as being essential to the oversight and enforcement of the 
federal securities laws. For example, as mandated by section 802 of the 
Sarbanes-Oxley Act,\8\ the U.S. Securities and Exchange Commission 
adopted rules requiring accounting firms to retain for seven years 
certain records relevant to their audits and reviews of issuers' 
financial statements. Records to be retained include an accounting 
firm's workpapers and certain other documents that contain conclusions, 
opinions, analyses, or financial data related to the audit or 
review.\9\ The proposed requirements would have no effect on the 
policies, rules, or guidance of other federal agencies that may require 
record retention terms or practices different from those set forth in 
the proposal.
---------------------------------------------------------------------------

    \8\ Public Law 107-204, 116 Stat. 745 (2002).
    \9\ 17 CFR part 210.
---------------------------------------------------------------------------

    Section 1313(f) of the Safety and Soundness 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 proposed regulation, 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 of the proposed amendment as it relates to the Banks.

III. Section-by-Section Analysis

Section 1235.1 Purpose and Scope

    This proposed section provides the purpose of the regulation is to 
set forth minimum requirements in connection with the record retention 
program of each regulated entity and the Office of Finance. Such 
requirements would be intended to ensure that complete and accurate 
records of each regulated entity and the Office of Finance are readily 
accessible by FHFA for examination and other supervisory purposes.

Section 1235.2 Definitions

    This proposed section would provide definitions for the terms 
contained in the proposed regulation.
    Active record would be defined as a record that is necessary to 
conduct the current business of an office or business unit of a 
regulated entity or the Office of Finance, and therefore, readily 
available for consultation and reference.
    Director would be defined as the Director of FHFA, or his or her 
designee.
    Electronic record would be defined as a record created, generated, 
communicated, or stored by electronic means.
    E-mail would be defined as electronic mail, which is a method of 
communication in which--
    (1) Usually, text is transmitted (but sometimes also graphics and/
or audio information);
    (2) Operations include sending, storing, processing, and receiving 
information;
    (3) Users are allowed to communicate under specified conditions; 
and
    (4) Messages are held in storage until called for by the addressee, 
including

[[Page 38561]]

any attachment of separate electronic files.
    Employee would be defined as any officer or employee of a regulated 
entity and the Office of Finance or any conservator appointed by FHFA.
    Federal Home Loan Bank or Bank would be defined as a Bank 
established under the Federal Home Loan Bank Act; the term ``Federal 
Home Loan Banks'' or ``Banks'' would be defined to mean, collectively, 
all the Federal Home Loan Banks.
    FHFA would be defined as the Federal Housing Finance Agency.
    Financing Corporation (FICO) would mean the entity established by 
the Competitive Equality Banking Act of 1987, as a mixed-ownership 
government corporation whose purpose is to function as a financing 
vehicle for the Federal Savings & Loan Insurance Corporation. FICO has 
a board of directors consisting of the managing director of the Office 
of Finance and two Bank presidents.
    Inactive record would be defined as a record that is seldom used 
but must be retained by a regulated entity and the Office of Finance 
for fiscal, legal, historical, or vital records purposes.
    Office of Finance would be defined as the Office of Finance of the 
Federal Home Loan Bank System.
    Record would be defined as any information, whether generated 
internally or received from outside sources by a regulated entity or 
the Office of Finance or employee, maintained in connection with a 
regulated entity or Office of Finance business (which business, in the 
case of the Office of Finance, shall include any functions performed 
with respect to the FICO), regardless of the following--
    (1) Form or format, including hard copy documents (e.g., files, 
logs, and reports) and electronic documents (e.g., e-mail, databases, 
spreadsheets, PowerPoint presentations, electronic reporting systems, 
electronic tapes and back-up tapes, optical discs, CD-ROMS, and DVDs), 
and voicemail records;
    (2) Where the information is stored or located, including network 
servers, desktop or laptop computers and handheld computers, other 
wireless devices with text messaging capabilities, and on-site or off-
site at a storage facility;
    (3) Whether the information is maintained or used on regulated 
entity-owned or Office of Finance equipment, or personal or home 
computer systems of an employee; or
    (4) Whether the information is active or inactive.
    Record hold would be defined as a requirement, an order, or a 
directive from a regulated entity, the Office of Finance or FHFA that 
the regulated entity or the Office of Finance is to retain records 
relating to a particular issue in connection with an actual or a 
potential FHFA examination, investigation, enforcement proceeding, or 
litigation of which the regulated entity and the Office of Finance has 
received notice from FHFA.
    Record retention schedule would be defined as a schedule that 
details the categories of records a regulated entity or the Office of 
Finance is required to retain and the corresponding retention periods. 
The record retention schedule includes all media, such as microfilm and 
machine-readable computer records, for each record category. 
Reproductions are also included for each record category if the 
original of the official record is not available.
    Regulated entity would be defined as 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'' would be defined to mean, collectively, 
the Federal National Mortgage Association and any affiliate thereof, 
the Federal Home Loan Mortgage Corporation and any affiliate thereof, 
and the Federal Home Loan Banks.
    Retention period would be defined as the length of time that 
records must be kept before they are destroyed. Records not authorized 
for destruction have a retention period of ``permanent.''
    Safety and Soundness Act would be defined as the Federal Housing 
Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 
et seq.), as amended by the Housing and Economic Recovery Act of 2008, 
Public Law No. 110-289, 122 Stat. 2654 (2008).
    Vital records would be defined as records that are needed to meet 
operational responsibilities of a regulated entity or the Office of 
Finance under emergency or disaster conditions (emergency operating 
records) or to protect the legal and financial rights of a regulated 
entity or the Office of Finance. Emergency operating records are the 
type of vital records essential to the continued functioning or 
reconstitution of a regulated entity or the Office of Finance during 
and after an emergency. A vital record may be both an emergency 
operating record and a legal and financial rights record.

Section 1235.3 Establishment and Evaluation of Record Retention Program

    This proposed section would require each regulated entity and the 
Office of Finance to establish and maintain a written record retention 
program and provide a copy of such program to the Deputy Director of 
the Division of Enterprise Regulation and the Deputy Director of the 
Division of Federal Home Loan Bank Regulation, or his or her designee 
(Deputy Director), as appropriate, within 120 days of the effective 
date of this part, and annually thereafter, and whenever a significant 
revision to the program has been made.
    It would also require management of the regulated entity and the 
Office of Finance to evaluate in writing the adequacy and effectiveness 
of the record retention program at least every three years and provide 
a copy of the evaluation to the board of directors and the appropriate 
Deputy Director.

Section 1235.4 Minimum Requirements of Record Retention Program

    This proposed section would provide the minimum requirements for 
the record retention program of each regulated entity and the Office of 
Finance, including requirements relating to a record retention 
schedule.

Section 1235.5 Record Hold

    This proposed section would address record retention methods, 
record access and retrieval policies, and notification procedures for 
employees. Moreover, the section would require a regulated entity's or 
the Office of Finance's employee who is aware of a potential FHFA 
investigation, enforcement proceeding, or litigation involving the 
regulated entity or the Office of Finance or an employee to notify 
immediately the legal department of the regulated entity or the Office 
of Finance and retain any records that may be relevant to such 
investigation, enforcement proceeding, or litigation.

Section 1235.6 Access to Records

    This proposed section would set forth the requirement that records 
must be readily available for inspection within a reasonable period 
upon request by FHFA, at a location acceptable to FHFA. For requests 
made during the course of an onsite examination and pursuant to an 
examination's scope, a reasonable period is no longer than one business 
day and for requests for documents made outside of an onsite 
examination, a reasonable period is presumed to be three business days.

Section 1235.7 Supervisory Action

    This proposed section would provide that failure by a regulated 
entity or the Office of Finance to comply with the requirements of the 
proposed regulation may subject the regulated entity or the

[[Page 38562]]

Office of Finance, or its board members, officers, or employees to 
supervisory action by FHFA. The section also would provide that the 
proposed regulation does not limit the authority of FHFA under its 
safety and soundness mandate to take other actions such as conducting 
examinations, requiring reports and disclosures, and enforcing 
compliance with applicable laws, rules and regulations.

Regulatory Impact

Paperwork Reduction Act

    Because the proposed regulation pertains to the regulated entities 
and the Office of Finance, it does not contain any information 
collection requirement that requires the approval of the Office of 
Management and Budget 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 
proposed regulation under the Regulatory Flexibility Act. FHFA 
certifies that the proposed regulation, if adopted, 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 and the Office of Finance, which are not small 
entities for purposes of the Regulatory Flexibility Act.

List of Subjects

12 CFR Part 914

    Federal home loan banks, Reporting and recordkeeping requirements.

12 CFR Part 1235

    Federal home loan banks, Government-sponsored enterprises, Records, 
Reporting and recordkeeping requirements.

12 CFR Part 1732

    Government-sponsored enterprises, Records, Reporting and 
recordkeeping requirements.

Authority and Issuance

    Accordingly, for the reasons stated in the preamble, under the 
authority of 12 U.S.C. 4513b, FHFA proposes to amend Chapters IX, XII 
and XVII of title 12 of the Code of Federal Regulations, as set forth 
below:

CHAPTER IX--FEDERAL HOUSING FINANCE BOARD

PART 914--DATA AVAILABILITY AND REPORTING

    1. The authority citation for part 914 is revised to read as 
follows:

    Authority: 12 U.S.C. 1440 and 4526.


Sec.  914.3  [Removed and reserved]

    2. Remove and reserve Sec.  914.3.

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER B--ENTITY REGULATIONS

    3. Add part 1235 to subchapter B to read as follows:

PART 1235--RECORD RETENTION

Sec.
1235.1 Purpose and scope.
1235.2 Definitions.
1235.3 Establishment and evaluation of record retention program.
1235.4 Minimum requirements of record retention program.
1235.5 Record hold.
1235.6 Access to records.
1235.7 Supervisory action.

    Authority: 12 U.S.C. 4511(b), 4513(a), 4513b(a)(10) and (11), 
4526.


Sec.  1235.1  Purpose and scope.

    The purpose of this part is to set forth minimum requirements in 
connection with the record retention program of each regulated entity 
and the Office of Finance. The requirements are intended to ensure that 
complete and accurate records of each regulated entity and the Office 
of Finance are readily accessible by FHFA for examination and other 
supervisory purposes.


Sec.  1235.2  Definitions.

    For purposes of this part, the term[boxh]
    Active record means a record that is necessary to conduct the 
current business of an office or business unit of a regulated entity 
and the Office of Finance, and therefore, is readily available for 
consultation and reference.
    Director means the Director of FHFA, or his or her designee.
    Electronic record means a record created, generated, communicated, 
or stored by electronic means.
    E-mail means electronic mail, which is a method of communication in 
which--
    (1) Usually, text is transmitted (but sometimes also graphics and/
or audio information);
    (2) Operations include sending, storing, processing, and receiving 
information;
    (3) Users are allowed to communicate under specified conditions; 
and
    (4) Messages are held in storage until called for by the addressee, 
including any attachment of separate electronic files.
    Employee means any officer or employee of a regulated entity or the 
Office of Finance or of any conservator appointed by FHFA.
    Federal Home Loan Bank or Bank means a Bank established under the 
Federal Home Loan Bank Act; the term Federal Home Loan Banks or Banks 
means, collectively, all the Federal Home Loan Banks.
    FHFA means the Federal Housing Finance Agency.
    Financing Corporation (FICO) means the entity established by the 
Competitive Equality Banking Act of 1987, as a mixed-ownership 
government corporation whose purpose is to function as a financing 
vehicle for the Federal Savings & Loan Insurance Corporation. FICO has 
a board of directors consisting of the managing director of the Office 
of Finance and two Bank presidents.
    Inactive record means a record that is seldom used but must be 
retained by a regulated entity or the Office of Finance for fiscal, 
legal, historical, or vital records purposes.
    Office of Finance means the Office of Finance of the Federal Home 
Loan Bank System.
    Record means any information, whether generated internally or 
received from outside sources by a regulated entity or the Office of 
Finance or employee, maintained in connection with a regulated entity 
or Office of Finance business (which business, in the case of the 
Office of Finance, shall include any functions performed with respect 
to the Financing Corporation), regardless of the following--
    (1) Form or format, including hard copy documents (e.g., files, 
logs, and reports) and electronic documents (e.g., e-mail, databases, 
spreadsheets, PowerPoint presentations, electronic reporting systems, 
electronic tapes and back-up tapes, optical discs, CD-ROMS, and DVDs), 
and voicemail records;
    (2) Where the information is stored or located, including network 
servers, desktop or laptop computers and handheld computers, other 
wireless devices with text messaging capabilities, and on-site or off-
site at a storage facility;

[[Page 38563]]

    (3) Whether the information is maintained or used on regulated 
entity-owned or Office of Finance equipment, or personal or home 
computer systems of an employee; or
    (4) Whether the information is active or inactive.
    Record hold means a requirement, an order, or a directive from a 
regulated entity, the Office of Finance, or FHFA that the regulated 
entity or the Office of Finance is to retain records relating to a 
particular issue in connection with an actual or a potential FHFA 
examination, investigation, enforcement proceeding, or litigation of 
which the regulated entity or the Office of Finance has received notice 
from FHFA.
    Record retention schedule means a schedule that details the 
categories of records a regulated entity or the Office of Finance is 
required to retain and the corresponding retention periods. The record 
retention schedule includes all media, such as microfilm and machine-
readable computer records, for each record category. Reproductions are 
also included for each record category if the original of the official 
record is not available.
    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 the Federal Home 
Loan Banks.
    Retention period means the length of time that records must be kept 
before they are destroyed. Records not authorized for destruction have 
a retention period of ``permanent.''
    Safety and Soundness Act means the Federal Housing Enterprises 
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.), as 
amended.
    Vital records means records that are needed to meet operational 
responsibilities of a regulated entity or the Office of Finance under 
emergency or disaster conditions (emergency operating records) or to 
protect the legal and financial rights of a regulated entity or the 
Office of Finance. Emergency operating records are the type of vital 
records essential to the continued functioning or reconstitution of a 
regulated entity or the Office of Finance during and after an 
emergency. A vital record may be both an emergency operating record and 
a legal and financial rights record.


Sec.  1235.3  Establishment and evaluation of record retention program.

    (a) Establishment. Each regulated entity and the Office of Finance 
shall establish and maintain a written record retention program and 
provide a copy of such program to the Deputy Director of the Division 
of Enterprise Regulation, or his or her designee, or the Deputy 
Director of the Division of Federal Home Loan Bank Regulation, or his 
or her designee (Deputy Director), as appropriate, within 120 days of 
the effective date of this part, and annually thereafter, and whenever 
a significant revision to the program has been made.
    (b) Evaluation. Management of each regulated entity and the Office 
of Finance shall evaluate in writing the adequacy and effectiveness of 
the record retention program at least every three years and provide a 
copy of the evaluation to the board of directors and the appropriate 
Deputy Director.


Sec.  1235.4  Minimum requirements of record retention program.

    (a) Requirements. The record retention program established and 
maintained by each regulated entity and the Office of Finance under 
Sec.  1235.3 shall:
    (1) Be reasonably designed to assure that retained records are 
complete and accurate;
    (2) Be reasonably designed to assure that the format of retained 
records and the retention period--
    (i) Are adequate to support litigation and the administrative, 
business, external and internal audit functions of the regulated entity 
or the Office of Finance;
    (ii) Comply with requirements of applicable laws and regulations; 
and
    (iii) Permit ready access by the regulated entity or the Office of 
Finance and, upon request, by the examination and other staff of FHFA 
by reasonable means, consistent with the nature and availability of the 
records and existing information technology.
    (3) Assign in writing the authorities and responsibilities for 
record retention activities;
    (4) Include policies and procedures concerning record holds, 
consistent with Sec.  1235.5;
    (5) Include an accurate, current, and comprehensive record 
retention schedule that lists records by major categories, 
subcategories, record type, and retention period, which retention 
period is appropriate to the specific record and consistent with 
applicable legal, regulatory, fiscal, and operational and business 
requirements;
    (6) Include adequate security and internal controls to protect 
records from unauthorized access and data alteration; and
    (7) Provide for adequate back-up and recovery of electronic 
records.
    (b) Training. The record retention program shall provide for 
training of and notice to all employees on a periodic basis on their 
record retention responsibilities, including instruction regarding 
penalties provided by law for the unlawful removal or destruction of 
records. The record retention program also shall provide for training 
for the agents or independent contractors of a regulated entity or the 
Office of Finance, as appropriate, consistent with their respective 
roles and responsibilities to the regulated entity or the Office of 
Finance.


Sec.  1235.5  Record hold.

    (a) Notification by a regulated entity or the Office of Finance. 
The record retention program of a regulated entity and the Office of 
Finance shall[boxh]
    (1) Address how employees and, as appropriate, how agents or 
independent contractors consistent with their respective roles and 
responsibilities to the regulated entity or the Office of Finance, will 
receive prompt notification of a record hold;
    (2) Designate an individual to communicate specific requirements 
and instructions, including, when necessary, the instruction to cease 
immediately any otherwise permissible destruction of records; and
    (3) Provide that any employee and, as appropriate, any agent or 
independent contractor consistent with his or her respective role and 
responsibility to the regulated entity, who has received notice of a 
potential investigation, enforcement proceeding, or litigation by FHFA 
involving the regulated entity or the Office of Finance or an employee, 
or otherwise has actual knowledge that an issue is subject to such an 
investigation, enforcement proceeding or litigation, shall notify 
immediately the legal department of the regulated entity or the Office 
of Finance and shall retain any records that may be relevant in any way 
to such investigation, enforcement proceeding, or litigation.
    (b) Method of record retention. The record retention program of 
each regulated entity and the Office of Finance shall address the 
method by which the regulated entity or the Office of Finance will 
retain records during a record hold. Specifically, the program shall 
describe the method for the continued preservation of electronic 
records, including e-mails, and the conversion of records from paper to 
electronic format as well as any alternative storage method.

[[Page 38564]]

    (c) Access to and retrieval of records during a record hold. The 
record retention program of each regulated entity or the Office of 
Finance shall ensure access to and retrieval of records by the 
regulated entity or the Office of Finance and access, upon request, by 
FHFA, during a record hold. Such access shall be by reasonable means, 
consistent with the nature and availability of the records and existing 
information technology.


Sec.  1235.6  Access to records.

    (a) Access to records. Each regulated entity or the Office of 
Finance shall make its records readily available for inspection and 
other supervisory purposes within a reasonable period upon request by 
FHFA, at a location acceptable to FHFA and by reasonable means, 
consistent with the nature and availability of the records and existing 
information technology.
    (b) Reasonable period. For requests for documents made during the 
course of an on-site examination and pursuant to the examination's 
scope, a reasonable period is presumed to be no longer than one 
business day. For requests for documents made outside of an on-site 
examination, a reasonable period is presumed to be three business days.


Sec.  1235.7  Supervisory action.

    (a) Supervisory action. Failure by a regulated entity or the Office 
of Finance to comply with this part may subject the regulated entity or 
the Office of Finance or the board members, officers, or employees 
thereof to supervisory action by FHFA under the Safety and Soundness 
Act, including but not limited to cease-and-desist proceedings, 
temporary cease-and-desist proceedings, and civil money penalties.
    (b) No limitation of authority. This part does not limit or 
restrict the authority of FHFA to act under its safety and soundness 
mandate, in accordance with the Safety and Soundness Act. Such 
authority includes, but is not limited to, conducting examinations, 
requiring reports and disclosures, and enforcing compliance with 
applicable laws, rules, and regulations.

CHAPTER XVII--OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT, 
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

PART 1732--[REMOVED]

    4. Remove part 1732.

    Dated: July 28, 2009.
James B. Lockhart III,
Director, Federal Housing Finance Agency.
[FR Doc. E9-18489 Filed 8-3-09; 8:45 am]
BILLING CODE P