Record Retention for Regulated Entities and Office of Finance, 33121-33128 [2011-14055]

Download as PDF 33121 Rules and Regulations Federal Register Vol. 76, No. 110 Wednesday, June 8, 2011 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. add the Holtec HI–STORM Flood/Wind cask system to the ‘‘List of Approved Spent Fuel Storage Casks’’ as Certificate of Compliance Number 1032. In the direct final rule, the NRC stated that if no significant adverse comments were received, the direct final rule would become final on June 13, 2011. The NRC did not receive any comments on the direct final rule. Therefore, this rule will become effective as scheduled. Dated at Rockville, Maryland, this 3rd day of June, 2011. For the Nuclear Regulatory Commission. Leslie S. Terry, Acting Chief, Rules, Announcements, and Directives Branch, Division of Administrative Services, Office of Administration. NUCLEAR REGULATORY COMMISSION 10 CFR Part 72 [NRC–2011–0007] RIN 3150–AI90 [FR Doc. 2011–14061 Filed 6–7–11; 8:45 am] List of Approved Spent Fuel Storage Casks: HI–STORM Flood/Wind Addition BILLING CODE 7590–01–P Nuclear Regulatory Commission. ACTION: Direct final rule; confirmation of effective date. FEDERAL HOUSING FINANCE BOARD AGENCY: The U.S. Nuclear Regulatory Commission (NRC) is confirming the effective date of June 13, 2011, for the direct final rule that was published in the Federal Register on March 28, 2011 (76 FR 17019). This direct final rule amended the NRC’s spent fuel storage regulations to add the Holtec HI– STORM Flood/Wind cask system to the ‘‘List of Approved Spent Fuel Storage Casks’’ as Certificate of Compliance Number 1032. DATES: Effective Date: The effective date of June 13, 2011, is confirmed for this direct final rule. ADDRESSES: Documents related to this rulemaking, including any comments received, may be examined at the NRC Public Document Room, Room O–1F23, 11555 Rockville Pike, Rockville, MD 20852. SUMMARY: srobinson on DSK4SPTVN1PROD with RULES Gregory Trussell, Office of Federal and State Materials and Environmental Management Programs, U.S. Nuclear Regulatory Commission, Washington, DC 20555; telephone: 301–415–6445, e-mail: Gregory.Trussell@nrc.gov. SUPPLEMENTARY INFORMATION: On March 28, 2011 (76 FR 17019), the NRC published a direct final rule amending its regulations at Title 10 of the Code of Federal Regulations Section 72.214 to 20:41 Jun 07, 2011 Jkt 223001 FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1235 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of Federal Housing Enterprise Oversight I. Background The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501 et seq.), as amended (Safety and Soundness Act) provides that the Director is to establish standards for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Federal Home Loan Banks (collectively ‘‘regulated entities’’) 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.1 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 and in compliance with applicable laws, regulations, and supervisory guidance and directives.2 12 CFR Part 1732 II. Discussion of Comments RIN 2590–AA10 On August 4, 2009, the Federal Housing Finance Agency (FHFA) published for comment a proposed regulation setting forth proposed requirements for 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.3 FHFA received comments from the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, ten Federal Home Loan Banks, the Office of Finance, and ARMA International, a professional association of record and information managers. All comments are posted to the FHFA Web site at http://www.fhfa.gov and have been Record Retention for Regulated Entities and Office of Finance Federal Housing Finance Board; Federal Housing Finance Agency; Office of Federal Housing Enterprise Oversight. ACTION: Final regulation. AGENCY: The Federal Housing Finance Agency is issuing a final regulation to set forth record retention requirements for the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Home Loan Banks, and the Office of Finance. SUMMARY: FOR FURTHER INFORMATION CONTACT: VerDate Mar<15>2010 12 CFR Part 914 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: DATES: Effective Date: July 8, 2011. FOR FURTHER INFORMATION CONTACT: Andra Grossman, Senior Counsel, telephone (202) 343–1313 (not a toll-free PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 1 12 U.S.C. 4513b(a)(10) and (11). U.S.C. 4511(b) and 4513(a). 3 74 FR 38559. 2 12 E:\FR\FM\08JNR1.SGM 08JNR1 33122 Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Rules and Regulations taken into consideration in issuing the final regulation. A discussion of the comments as they relate to the sections of the final regulation follows. srobinson on DSK4SPTVN1PROD with RULES Section 1235.1 Purpose and Scope This section provides that the purpose of the proposed regulation is to set forth minimum requirements for a record retention program for each regulated entity and the Office of Finance. The proposed requirements are intended to ensure that complete and accurate records of each regulated entity and the Office of Finance are readily accessible by FHFA. One commenter requested that FHFA clarify whether the regulation is intended to apply on a prospective or retroactive basis to existing records of a Federal Home Loan Bank. FHFA clarifies that the minimum requirements of the record retention program are applicable prospectively to regulated entities and the Office of Finance. FHFA notes that the Federal Home Loan Banks were subject to FHFB Resolution 93–50 ‘‘Approval of the Policy Statement on Retention of Records’’ (May 26, 1993) (Resolution) issued by the Federal Housing Finance Board, a predecessor agency of FHFA, which discussed the objectives of the policy, the retention periods of Federal Home Loan Bank documents, and the availability of such documents, and attached a record retention schedule. (See the discussion below on the rescission of the Resolution.) Consequently, establishing a record retention program that meets the minimum requirements of the regulation should not create a significant burden on any Federal Home Loan Bank. In reviewing the proposed Purpose and Scope section, FHFA has determined to include the express purpose of furthering prudent management within the scope of the final regulation, which was implied in the proposed regulation. Section 1235.2 Definitions Active, inactive, and vital records. The proposed regulation provides definitions for ‘‘active,’’ ‘‘inactive,’’ and ‘‘vital’’ records. Several commenters requested that the definitions of the terms ‘‘active record,’’ ‘‘inactive record,’’ and ‘‘vital record’’ be removed from the regulation. One commenter pointed out that the terms are not used in other parts of the regulation. Another commenter suggested providing a period of time a record is active, such as to the end of the last year in which the matter is active or as long as property is owned. In addition, a commenter suggested that VerDate Mar<15>2010 20:41 Jun 07, 2011 Jkt 223001 the definition of ‘‘inactive record’’ and ‘‘vital record’’ include a clearly defined retention period consistent with the organization’s record retention schedule. FHFA has determined to remove the definitions of the terms ‘‘active record,’’ ‘‘inactive record,’’ and ‘‘vital record’’ as requested by several commenters because such terms are not used in the proposed regulation. FHFA notes, however, that a regulated entity and the Office of Finance must have a record retention period that pertains to all records regardless whether a record is active, inactive, or vital. FHFA will evaluate the reasonableness of the record retention period established by each regulated entity and the Office of Finance. Electronic Record. The proposed regulation defines the term ‘‘electronic record’’ as ‘‘a record created, generated, communicated, or stored by electronic means.’’ One commenter suggested clarifying the terms ‘‘created’’ and ‘‘generated’’ within the definition because such terms appear to be synonymous. FHFA is adopting the definition as proposed because the definition is a widely-used, generally accepted definition of the term electronic record. E-mail. One commenter recommended revising the definition of the term ‘‘e-mail’’ to include reference to computers or computer networks. FHFA has revised the definition to clarify that the term ‘‘e-mail’’ means a document created or received on a computer network for transmitting messages electronically, and any attachment transmitted with the document. Record. The proposed regulation defines ‘‘record’’ 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, includes 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; (3) PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 whether the information is maintained or used on regulated entity-owned or Office of Finance equipment, or on personal or home computer systems of an employee; or (4) whether the information is active or inactive. One commenter suggested that FHFA revise the definition of the term ‘‘record’’ to include regulatory requirements as well as business needs. FHFA notes that records needed for the business of the regulated entities and the Office of Finance include records to meet regulatory requirements, but has determined to include an express reference to regulatory requirements for greater clarity. Several Federal Home Loan Banks suggested the deletion of the term ‘‘voice mail’’ from the example of the form or format of a record. These commenters stated that as a matter of course, business is not conducted over voicemail such that a voicemail would not need to be maintained as a record. They suggested that recorded telephone lines that document formal communications and business transactions are the more appropriate form of documented telephone related communications. In response to this suggestion, FHFA has included the term ‘‘recorded telephone line records’’ in the description of form and format of a record but has not deleted the term ‘‘voicemail records’’ because some regulated entities or the Office of Finance may now or in the future use ‘‘voicemail records’’ in the transaction of business. If a regulated entity or the Office of Finance does not use voicemail records for business purposes and such records are not identified in its record retention policy as a category of records that represent business records, the voicemail records would not be records for purposes of the regulation. One commenter suggested that the definition of the term ‘‘record’’ should apply only to business records and not to personal records, public periodicals, and similar documents that would be burdensome to catalog. In addition, the commenter requested that confidential and privileged records be exempt from the requirements of the regulation. FHFA notes that under the Safety and Soundness Act and the Federal Home Loan Bank Act, the Director may require the production of records, whether confidential or privileged; therefore, confidential or privileged records are not exempt from the requirements of the regulation. In addition, it is a prudent management practice for confidential and privileged records to be retained. To clarify the definition of the term ‘‘record,’’ FHFA has revised the definition to apply to records related to E:\FR\FM\08JNR1.SGM 08JNR1 srobinson on DSK4SPTVN1PROD with RULES Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Rules and Regulations the conduct of the business of a regulated entity. Two commenters suggested the removal of the reference to personal or home computers. A regulated entity or the Office of Finance may maintain a record for purposes of this regulation solely on equipment it owns, as one commenter stated, even if employees access and use records on their home computers. Each regulated entity and the Office of Finance is required to maintain a record, in at least one form or format, regardless of where the record is created, used, or maintained, and may prohibit the transfer of business records to personal or home computers. If business records are transferred to personal or home computers, then such records would be records for purposes of the regulation. Consequently, FHFA has determined not to delete the reference to personal or home computers. One commenter sought clarification on the required form or format of a record; others sought clarification as to the required type and number of records that must be maintained. Another commenter sought clarification with regard to the destruction of drafts of records not subject to a record hold. In response to these comments, FHFA notes that a regulated entity or the Office of Finance may maintain only one copy of a record if the record is not subject to a record hold, there is no mandatory legal requirement to retain the record in the form or format, and another form or format of the record is not necessary to support administrative, business, external audit, or internal audit functions or litigation. Copies may be destroyed in accordance with the record retention schedule of the regulated entity or Office of Finance. In addition, FHFA notes that a record retention schedule should specifically address those records for which original signature documents will be maintained in electronic copy with the understanding that electronic copies of physical documents may face challenges as to authenticity and admissibility in court if the actual original signature is no longer available. One commenter requested that FHFA clarify that, unless subject to a record hold, transitory documents such as ‘‘to do’’ lists, unsolicited information, advertisements, and other similar documents would not be considered records. For purposes of this regulation, the permanent or transitory nature of a document does not determine whether it is a record. If a document is considered a record for purposes of this regulation, it must be retained in accordance with the record retention VerDate Mar<15>2010 20:41 Jun 07, 2011 Jkt 223001 schedule of the regulated entity or Office of Finance. That schedule may establish a category of transitory documents with a short or no-retention period in accordance with the record retention program of the regulated entity or Office of Finance. Record Hold. The proposed regulation defines ‘‘record hold’’ 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 or the Office of Finance has received notice from FHFA. One commenter requested that the definition of the term ‘‘record hold’’ be modified since the occurrence of an FHFA examination should not trigger the formal record hold process. FHFA notes that the occurrence of an FHFA examination does not automatically trigger a record hold; FHFA must provide notice of the record hold. As a matter of prudent management, regulated entities and the Office of Finance should have a record hold program with respect to anticipated litigation regardless of notice from FHFA. Consequently, FHFA has clarified the definition of the term ‘‘record hold’’ to include litigation of which the regulated entity or the Office of Finance becomes aware. Record Retention Schedule. The proposed regulation defines the term ‘‘record retention schedule’’ 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 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.’’ One commenter requested that the definition of the term ‘‘record retention schedule’’ be revised to cover only the information media that the regulated entity has determined to be the form in which it will retain a particular record in order to avoid maintaining duplicate records. As explained above in the discussion of the definition of the term ‘‘record,’’ a regulated entity may maintain only one copy of a record unless a record is subject to a record hold, there is a mandatory legal requirement to retain the record in another format, or a duplicate record is necessary to support administrative, business, external audit, or internal PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 33123 audit functions or litigation. For clarity, FHFA has deleted from the final regulation the sentence, ‘‘[r]eproductions are also included for each record category if the original of the official record is not available.’’ Another commenter suggested revising the definition of the term ‘‘record retention schedule’’ by striking ‘‘is required to retain’’ and inserting ‘‘retains’’ to clarify that many records retained by a regulated entity are kept for discretionary business reasons, not because a legal requirement forces retention. FHFA has determined that because a requirement to retain records may be based on a legal requirement or internal policy, it is not necessary to revise the definition as suggested. Finally, one commenter recommended including in the definition of the term ‘‘record retention schedule’’ that the record retention schedule must define the policies and procedures to be followed relative to access, safeguards, dispositions, and record holds. FHFA notes that although the record retention program should address such policies and procedures, they do not need to be addressed in the record retention schedule. Retention Period. The proposed regulation defines ‘‘retention period’’ 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.’’’ One commenter recommended adding the clarifying phrase ‘‘as determined by the organization’s record retention schedule.’’ FHFA agrees with the recommendation and has modified the definition accordingly. Another commenter suggested revising the definition of the term ‘‘retention period’’ by striking ‘‘must be kept’’ and inserting ‘‘are kept’’ to clarify that many records retained by a regulated entity are kept for discretionary business reasons, not because a legal requirement forces retention. As noted above, FHFA has determined that because a requirement to retain records for a certain period may be based on a legal requirement or internal policy, it is not necessary to revise the definition as suggested. Finally, after reviewing the proposed definitions, FHFA determined that the definition of the term ‘‘employee’’ in § 1235.2 needed a technical correction and has made the correction by deleting the reference to employees of a conservator. E:\FR\FM\08JNR1.SGM 08JNR1 33124 Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Rules and Regulations srobinson on DSK4SPTVN1PROD with RULES Section 1235.3 Establishment and Evaluation of a Record Retention Program As proposed, a regulated entity and the Office of Finance must provide a copy of its record retention program within 120 days of the effective date of the regulation. Several commenters questioned the length of time given to create a program and requested several alternatives. In consideration of the requests, FHFA has changed the requirement to produce a record retention program to within 180 days of the effective date of the regulation. This timeframe applies to the submission of a record retention program, including projected milestones, and does not apply to the implementation of the program. Those regulated entities currently submitting an annual record retention program also must comply with the time requirements of this regulation. One commenter asked whether a copy of the record retention program should also be submitted to the examiner-incharge of a regulated entity. FHFA notes that a regulated entity or the Office of Finance is not required to provide a copy of its record retention program to the examiner-in-charge unless he or she requests a copy. The proposed regulation provides that management of each regulated entity and the Office of Finance is to evaluate in writing the adequacy and effectiveness of its record retention program. One commenter asked whether management may rely on an audit conducted by an internal or external auditor. FHFA clarifies that an auditor may provide information to be taken into account by a regulated entity or the Office of Finance, but an auditor’s opinion may not replace management’s evaluation. Two commenters asked FHFA to provide the form and content of management’s evaluation of a record retention program. One commenter requested that FHFA provide for appropriate qualifications on management’s evaluation of its record retention program in that it will not be able to test each employee’s compliance as a practical matter and so will have to rely on the assertions of each employee as to such employee’s compliance. Another commenter recommended that FHFA require that the record retention program be audited at least annually, rather than be evaluated every three years, as set forth in the section. In response to these comments, FHFA notes that it will rely on each regulated entity and the Office of Finance to determine the appropriate form and VerDate Mar<15>2010 20:41 Jun 07, 2011 Jkt 223001 content of the evaluation, which is subject to review by FHFA examiners. FHFA notes that the scope, expense, and evaluation of a record retention program should be reasonable in light of the size, complexity, and structure of the regulated entity or the Office of Finance. With respect to the evaluation of the record retention program, considering the importance of a record retention program and the recommendation for an annual evaluation, FHFA has determined to require an evaluation every two years rather than every three years. Section 1235.4 Minimum Requirements of a Record Retention Program Section 1235.4 of the proposed regulation provides minimum requirements of a record retention program. One commenter recommended that FHFA requirements be labeled as ‘‘elements’’ of a record retention program and instead include a list of general principles. FHFA has considered the recommendation and has determined not to restructure the minimum requirements, which encompass general principles. The purpose of the regulation, set forth in § 1235.1, and the principle underlying a record retention program of a regulated entity and the Office of Finance is that the records be complete and accurate and readily accessible by FHFA. One commenter suggested adding a requirement to audit the record retention program at least annually, and to include in the program a means of detecting any internal or external risks to the integrity of a record retention schedule, and the safeguarding and disposal of records. FHFA is not adding an audit requirement because it is more appropriate for the internal and external audit functions of the regulated entity and the Office of Finance to determine the frequency and scope of audits of the record retention program. Such determinations are reviewable by FHFA examiners. However, FHFA is adding a clarifying minimal requirement that the record retention program must provide for periodic testing of the ability to access records. Two commenters sought clarification of the term ‘‘existing information technology’’ used in proposed § 1235.4(a)(2)(iii) and questioned whether FHFA requires upgrades to technology. Records must be accessible. If a record is stored in an electronic format that is no longer accessible with existing information technology of a regulated entity or the Office of Finance, the record must be converted into a format that is accessible. Recognizing PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 that each regulated entity and the Office of Finance may have a different information technology infrastructure, FHFA is not requiring that a specific type of information technology be used. Nevertheless, FHFA is deleting proposed § 1235.4(a)(2)(iii) because it is duplicative of § 1235.6, and is adding clarifying language in § 1235.4(b) to address the minimum storage requirements for electronic records; that is, they must be maintained on immutable, non-rewritable storage, preferably searchable, in a manner that provides for access to and accurate reproduction of such records for later reference by transmission, printing, or other means. One commenter asked that the final regulation clarify that the record retention program may specify which kinds of agents and independent contractors should be subjected to the record retention program and how often training will be provided to those agents and independent contractors. FHFA notes that it would be appropriate for the record retention program to address those matters. The commenter also asked FHFA to clarify whether existing contracts must be modified to inform agents and independent contractors of the record retention program. FHFA is not requiring that existing contracts be modified. Several commenters suggested clarification that a record retention program must account for the proper disposition of records. FHFA agrees and has added clarifying language to § 1235.4. Lastly, two commenters requested that FHFA clarify that manual controls are appropriate so long as they are shown to be effective and that the regulation does not require a regulated entity or the Office of Finance to purchase expensive records management software and utilize costly consultants and vendors to advise on the additions of systems that may offer no more protection than the record management system currently in place. FHFA notes that the regulation does not require records management software be purchased or that consultants be utilized. The regulation requires that the record retention program meet the minimum requirements of § 1235.4, provide for record holds under § 1235.5 and access to records under § 1235.6, and be evaluated under § 1235.3. In addition to the clarifying revisions discussed above, the final § 1235.4 includes clarifying language as follows. As proposed, § 1235.4(a)(3) provides that one of the minimum requirements of a record retention program is that it assign in writing the authorities and E:\FR\FM\08JNR1.SGM 08JNR1 Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Rules and Regulations srobinson on DSK4SPTVN1PROD with RULES responsibilities for record retention activities. That section has been clarified to provide expressly that the authorities and responsibilities for record retention activities of employees, line managers, and corporate management must be assigned. As proposed, § 1235.4(a)(4) provides the record retention program include policies and procedures concerning record holds. It has been clarified to provide expressly that such policies and procedures must be integrated, as appropriate, with other policies and procedures throughout the organization. Finally, proposed § 1235.4(b), redesignated as § 1235.4(c) of the final regulation, has been clarified to address specifically communication of the record retention program. Section 1235.5 Record Hold Section 1235.5 of the proposed regulation requires that the record retention program of a regulated entity and the Office of Finance 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. It also would provide that any employee and, as appropriate, any agent or independent contractor 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, notify immediately the legal department or senior management of the regulated entity or the Office of Finance of a record hold. Two commenters sought clarification as to how a record hold notice will be provided by FHFA and requested that notice be given to the chief executive officer and general counsel to ensure that the record hold notice is promptly disseminated to the appropriate persons. In response to this comment, FHFA has added a new paragraph (a) in the final regulation, which clarifies that FHFA will notify the chief executive officer of the record hold. With respect to notice to independent contractors or agents, one commenter asked FHFA to clarify that although regulated entities and the Office of Finance may be required to notify independent contractors, they cannot accept legal or regulatory responsibility for the actions or inactions of independent contractors. FHFA notes that proposed § 1235.5(a)(1) requires VerDate Mar<15>2010 20:41 Jun 07, 2011 Jkt 223001 that the record retention program address only how 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. Another commenter asked how the obligation to notify certain agents and independent contractors of a record hold in proposed § 1235.5(a)(1) relates to other obligations a regulated entity or the Office of Finance may have to ensure the confidentiality of FHFA materials, such as under 12 CFR 911.3. FHFA sees no conflict between the obligation to notify certain agents and independent contractors to retain specific records without disclosing that FHFA required the record hold or the obligation of a regulated entity or the Office of Finance not to disclose unpublished FHFA information without written authorization. Two other commenters sought confirmation that a regulated entity is not required to have a legal department in light of the provision in proposed § 1235.5(a)(3) that employees notify the legal department of a potential investigation, enforcement proceeding, or litigation by FHFA. In response to these commenters, § 1235.5(a)(3), redesignated as § 1235.5(b)(3) in the final regulation, has been revised to provide that employees must notify the legal department or the individual providing legal services to the regulated entity or the Office of Finance as well as to senior management. Section 1235.5(b) of the proposed regulation, redesignated as § 1235.5(c) in the final regulation, requires that the record retention program of each regulated entity and the Office of Finance address the method for retaining records during a record hold, including a description of the method for the continued preservation of electronic records, including e-mail, and the conversion of records from paper to electronic form as well as any alternative storage method. One commenter requested clarification that a regulated entity or the Office of Finance is not required to convert records from paper to electronic format. FHFA clarifies that electronic conversion is not required and has added the phrase ‘‘as applicable’’ in connection with the conversion of records from paper to electronic form and alternate storage methods. Although electronic conversion is not required, FHFA notes in § 1235.5(d) of the final regulation that a record retention program must ensure access to and retrieval of records by the regulated entity and the Office of Finance, and access, upon request, by PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 33125 FHFA, during a record hold. Such access must be by reasonable means, consistent with the nature and availability of the records and existing information technology. Section 1235.6 Access to Records Section 1235.6(a) of the proposed regulation provides that each regulated entity or the Office of Finance 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. As proposed, § 1235.6(b) would provide that a reasonable period for requests for records made during the course of an on-site examination and pursuant to the examination’s scope is no longer than one business day. For requests for records made outside of an on-site examination, a reasonable period would be three business days. Several commenters requested either clarification or deletion of the requirement to produce records within a reasonable period. Some recommended deleting the one- and three-day presumption, but retaining the reasonable period requirement. Others requested a longer period of time in which to provide access to FHFA, that the presumptive time-periods could be rebutted, or that FHFA should take into consideration the location of the records in determining what time-period is reasonable. Taking the comments into consideration, FHFA has revised § 1235.6 by deleting the presumptive time periods and the reference to a reasonable time period and has added that records are to be made available promptly upon request by FHFA. Facts and circumstances that FHFA will consider in determining whether records are made promptly available include, but are not limited to, the timesensitivity of the request, whether the request is made pursuant to an examination or other supervisory activity, and the format, volume and the location of the records. Section 1235.7 Supervisory Action Section 1235.7 of the proposed regulation provides that failure by a regulated entity or the Office of Finance to comply with the regulation may subject the regulated entity or the Office of Finance or their board members, officers, or employees to supervisory action by FHFA under the Safety and Soundness Act. One commenter recommended the removal of the imposition of supervisory action on E:\FR\FM\08JNR1.SGM 08JNR1 33126 Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Rules and Regulations board members, officers, and employees in the absence of willful and wrongful conduct. The commenters are of the view that there should be no individual liability. After considering the comment, FHFA has determined, consistent with its statutory enforcement authority, to adopt the proposed section without change. srobinson on DSK4SPTVN1PROD with RULES Discussion of FHFB Resolution 93–50 FHFB Resolution 93–50 ‘‘Approval of the Policy Statement on Retention of Records’’ (May 26, 1993) (Resolution) issued by the Federal Housing Finance Board, a predecessor agency of FHFA, discussed the objectives of the policy, the retention periods of Federal Home Loan Bank documents, and the availability of such documents and attached a record retention schedule. One commenter asked whether the Resolution survives after the regulation becomes final; another commenter recommended that the regulation expressly rescind the Resolution. FHFA clarifies that the Resolution is terminated on the effective date of the Record Retention regulation.4 FHFA notes that it may issue advisory or supervisory guidance on the implementation of the final Record Retention regulation. III. Final Regulation Section 1313(f) of the Safety and Soundness Act (12 U.S.C. 4513(f)), requires the Director, when promulgating regulations relating to the Federal Home Loan Banks, to consider the differences between the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (Enterprises) and the Federal Home Loan Banks with respect to the Federal Home Loan Banks’ cooperative ownership structure, liquidity mission, 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 final regulation, the Director considered the differences between the Federal Home Loan Banks and the Enterprises as they relate to the above factors. The Director believes that none of the unique factors relating to the Federal Home Loan Banks warrants establishing different treatment under the final regulation. The regulation speaks at a high level and permits a regulated entity and the Office of 4 Resolutions of the Federal Housing Finance Board, such as FHFB Resolution 93–50, remain in effect until modified, terminated, set aside, or superseded by the FHFA Director. Sec. 1312(a) of the Housing and Economic Recovery Act of 2008. VerDate Mar<15>2010 20:41 Jun 07, 2011 Jkt 223001 Finance to adopt a records retention policy that is appropriate to its own size, complexity, and business activities. The final regulation requires 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 so as to be able to determine the financial condition of the regulated entity and the Office of Finance, assess 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, evaluate the entity’s compliance with applicable laws, regulations, and supervisory guidance and directives, or otherwise fulfill the mission of FHFA. 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 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.5 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 the Sarbanes-Oxley Act, 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 5 12 U.S.C. 4513b(a)(10) and 4514(c). See also 12 U.S.C. 1829b. PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 issuers’ financial statements.6 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.7 The final regulation is not intended to have an 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 this regulation. FHFA is issuing the final regulation as proposed with the clarifying revisions and technical correction discussed above. On the effective date of this regulation, the regulations at 12 CFR 914.3 (access to books and records) and 12 CFR part 1732 (record retention) are removed and FHFB Resolution 93–50, dated May 26, 1993, is terminated. IV. Regulatory Impact Paperwork Reduction Act The final regulation 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 regulation under the Regulatory Flexibility Act. FHFA certifies that the regulation is not likely to have a significant economic impact on a substantial number of small business entities because the regulation is applicable to only 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. 6 Public 7 17 E:\FR\FM\08JNR1.SGM Law 107–204, 116 Stat. 745 (2002). CFR part 210. 08JNR1 Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Rules and Regulations 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 amends Chapters IX, XII and XVII of title 12 of the Code of Federal Regulations, as follows: CHAPTER IX—FEDERAL HOUSING FINANCE BOARD PART 914—DATA AVAILABILITY AND REPORTING 1. The authority citation for 12 CFR 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 FOR REGULATED ENTITIES AND OFFICE OF FINANCE Sec. 1235.1 Purpose and scope. 1235.2 Definitions. 1235.3 Establishment and evaluation of a record retention program. 1235.4 Minimum requirements of a 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. srobinson on DSK4SPTVN1PROD with RULES § 1235.1 Purpose and scope. The purpose of this part is to set forth minimum requirements for a record retention program for each regulated entity and the Office of Finance. The requirements are intended to further prudent management as well as to ensure that complete and accurate records of each regulated entity and the Office of Finance are readily accessible to FHFA. § 1235.2 Definitions. For purposes of this part, the term— Director means the Director of FHFA, or his or her designee. VerDate Mar<15>2010 20:41 Jun 07, 2011 Jkt 223001 Electronic record means a record created, generated, communicated, or stored by electronic means. E-mail means a document created or received on a computer network for transmitting messages electronically, and any attachments which may be transmitted with the document. Employee means any officer or employee of a regulated entity or the Office of Finance. Federal Home Loan Bank means a Bank established under the Federal Home Loan Bank Act; the term ‘‘Federal Home Loan Banks’’ means, collectively, all the Federal Home Loan Banks. FHFA means the Federal Housing Finance Agency. Financing Corporation 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. The Financing Corporation has a board of directors consisting of the managing director of the Office of Finance and two Federal Home Loan Bank presidents. 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, related to the conduct of the business of a regulated entity or the Office of Finance (which business, in the case of the Office of Finance, shall include any functions performed with respect to the Financing Corporation) or to legal or regulatory requirements, regardless of the following— (1) Form or format, including hard copy documents (e.g., files, logs, and reports), electronic documents (e.g., email, databases, spreadsheets, PowerPoint presentations, electronic reporting systems, electronic tapes and back-up tapes, optical discs, CD–ROMS, and DVDs), and voicemail or recorded telephone line 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 or Office of Finance equipment, or on personal or home computer systems of an employee; or (4) Whether the information is active or inactive. PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 33127 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 or otherwise has knowledge. 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. 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, as determined by the organization’s record retention schedule. 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. § 1235.3 Establishment and evaluation of a 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 for the Division of Federal Home Loan Bank Regulation, or his or her designee, as appropriate, within 180 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 two years and provide a copy of the evaluation to the board of directors and the Director. E:\FR\FM\08JNR1.SGM 08JNR1 33128 Federal Register / Vol. 76, No. 110 / Wednesday, June 8, 2011 / Rules and Regulations srobinson on DSK4SPTVN1PROD with RULES § 1235.4 Minimum requirements of a record retention program. (a) General minimum requirements. The record retention program established and maintained by each regulated entity and the Office of Finance under § 1235.3 shall: (1) Assure that retained records are complete and accurate; (2) Assure that the form of retained records and the retention period— (i) Are appropriate to support administrative, business, external and internal audit functions, and litigation of the regulated entity or the Office of Finance; and (ii) Comply with requirements of applicable laws and regulations, including this part; (3) Assign in writing the authorities and responsibilities for record retention activities for employees, including line managers and corporate management; (4) Include policies and procedures concerning record holds, consistent with § 1235.5, and, as appropriate, integrate them with policies and procedures throughout the organization; (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, operational, and business requirements; (6) Include appropriate security and internal controls to protect records from unauthorized access and data alteration; (7) Provide for appropriate back-up and recovery of electronic records to ensure the same accuracy as the primary records; (8) Provide for a periodic testing of the ability to access records; and (9) Provide for the proper disposition of records. (b) Minimum storage requirements for electronic records. Electronic records, preferably searchable, must be maintained on immutable, nonrewritable storage in a manner that provides for both ready access by any person who is entitled to access the records, including staff of FHFA, and accurate reproduction for later reference by transmission, printing or other means. (c) Communication and training.—(1) The record retention program established and maintained by each regulated entity and the Office of Finance under § 1235.3 shall provide for periodic training and communication throughout the organization. (2) The record retention program shall: (i) Provide for communication throughout the organization on record VerDate Mar<15>2010 20:41 Jun 07, 2011 Jkt 223001 retention policies, procedures, and record retention schedule updates; and (ii) 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 FHFA. In the event that FHFA is requiring a record hold, FHFA shall notify the chief executive officer of the regulated entity or the Office of Finance. Regulated entities and the Office of Finance must have a written policy for handling notice of a record hold. (b) Notification by a regulated entity or the Office of Finance. The record retention program of a regulated entity and the Office of Finance shall— (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 or Office of Finance, 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 or the individual providing legal services as well as senior management 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. (c) Method of record retention during a record hold. The record retention program of each regulated entity and the Office of Finance shall address the method by which the regulated entity or PO 00000 Frm 00008 Fmt 4700 Sfmt 9990 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-mail, and, as applicable, the conversion of records from paper to electronic form as well as any alternative storage method. (d) 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 and 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. § 1235.6 Access to records. Each regulated entity and the Office of Finance shall make its records available promptly upon request by FHFA, at a location and in a form and manner acceptable to FHFA. § 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: June 1, 2011. Edward J. DeMarco, Acting Director, Federal Housing Finance Agency. [FR Doc. 2011–14055 Filed 6–7–11; 8:45 am] BILLING CODE 8070–01–P E:\FR\FM\08JNR1.SGM 08JNR1

Agencies

[Federal Register Volume 76, Number 110 (Wednesday, June 8, 2011)]
[Rules and Regulations]
[Pages 33121-33128]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-14055]


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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 for Regulated Entities and Office of Finance

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

ACTION: Final regulation.

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SUMMARY: The Federal Housing Finance Agency is issuing a final 
regulation to set forth record retention requirements for the Federal 
National Mortgage Association, the Federal Home Loan Mortgage 
Corporation, the Federal Home Loan Banks, and the Office of Finance.

DATES: Effective Date: July 8, 2011.

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. Background

    The Federal Housing Enterprises Financial Safety and Soundness Act 
of 1992 (12 U.S.C. 4501 et seq.), as amended (Safety and Soundness Act) 
provides that the Director is to establish standards for the Federal 
National Mortgage Association, the Federal Home Loan Mortgage 
Corporation, and the Federal Home Loan Banks (collectively ``regulated 
entities'') 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.\1\ 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 and in 
compliance with applicable laws, regulations, and supervisory guidance 
and directives.\2\
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    \1\ 12 U.S.C. 4513b(a)(10) and (11).
    \2\ 12 U.S.C. 4511(b) and 4513(a).
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II. Discussion of Comments

    On August 4, 2009, the Federal Housing Finance Agency (FHFA) 
published for comment a proposed regulation setting forth proposed 
requirements for 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.\3\ FHFA received comments from the Federal National Mortgage 
Association and the Federal Home Loan Mortgage Corporation, ten Federal 
Home Loan Banks, the Office of Finance, and ARMA International, a 
professional association of record and information managers. All 
comments are posted to the FHFA Web site at http://www.fhfa.gov and 
have been

[[Page 33122]]

taken into consideration in issuing the final regulation.
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    \3\ 74 FR 38559.
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    A discussion of the comments as they relate to the sections of the 
final regulation follows.

Section 1235.1 Purpose and Scope

    This section provides that the purpose of the proposed regulation 
is to set forth minimum requirements for a record retention program for 
each regulated entity and the Office of Finance. The proposed 
requirements are intended to ensure that complete and accurate records 
of each regulated entity and the Office of Finance are readily 
accessible by FHFA.
    One commenter requested that FHFA clarify whether the regulation is 
intended to apply on a prospective or retroactive basis to existing 
records of a Federal Home Loan Bank. FHFA clarifies that the minimum 
requirements of the record retention program are applicable 
prospectively to regulated entities and the Office of Finance. FHFA 
notes that the Federal Home Loan Banks were subject to FHFB Resolution 
93-50 ``Approval of the Policy Statement on Retention of Records'' (May 
26, 1993) (Resolution) issued by the Federal Housing Finance Board, a 
predecessor agency of FHFA, which discussed the objectives of the 
policy, the retention periods of Federal Home Loan Bank documents, and 
the availability of such documents, and attached a record retention 
schedule. (See the discussion below on the rescission of the 
Resolution.) Consequently, establishing a record retention program that 
meets the minimum requirements of the regulation should not create a 
significant burden on any Federal Home Loan Bank.
    In reviewing the proposed Purpose and Scope section, FHFA has 
determined to include the express purpose of furthering prudent 
management within the scope of the final regulation, which was implied 
in the proposed regulation.

Section 1235.2 Definitions

    Active, inactive, and vital records. The proposed regulation 
provides definitions for ``active,'' ``inactive,'' and ``vital'' 
records. Several commenters requested that the definitions of the terms 
``active record,'' ``inactive record,'' and ``vital record'' be removed 
from the regulation. One commenter pointed out that the terms are not 
used in other parts of the regulation. Another commenter suggested 
providing a period of time a record is active, such as to the end of 
the last year in which the matter is active or as long as property is 
owned. In addition, a commenter suggested that the definition of 
``inactive record'' and ``vital record'' include a clearly defined 
retention period consistent with the organization's record retention 
schedule.
    FHFA has determined to remove the definitions of the terms ``active 
record,'' ``inactive record,'' and ``vital record'' as requested by 
several commenters because such terms are not used in the proposed 
regulation. FHFA notes, however, that a regulated entity and the Office 
of Finance must have a record retention period that pertains to all 
records regardless whether a record is active, inactive, or vital. FHFA 
will evaluate the reasonableness of the record retention period 
established by each regulated entity and the Office of Finance.
    Electronic Record. The proposed regulation defines the term 
``electronic record'' as ``a record created, generated, communicated, 
or stored by electronic means.'' One commenter suggested clarifying the 
terms ``created'' and ``generated'' within the definition because such 
terms appear to be synonymous. FHFA is adopting the definition as 
proposed because the definition is a widely-used, generally accepted 
definition of the term electronic record.
    E-mail. One commenter recommended revising the definition of the 
term ``e-mail'' to include reference to computers or computer networks. 
FHFA has revised the definition to clarify that the term ``e-mail'' 
means a document created or received on a computer network for 
transmitting messages electronically, and any attachment transmitted 
with the document.
    Record. The proposed regulation defines ``record'' 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, 
includes 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; (3) whether the information is maintained or used on 
regulated entity-owned or Office of Finance equipment, or on personal 
or home computer systems of an employee; or (4) whether the information 
is active or inactive.
    One commenter suggested that FHFA revise the definition of the term 
``record'' to include regulatory requirements as well as business 
needs. FHFA notes that records needed for the business of the regulated 
entities and the Office of Finance include records to meet regulatory 
requirements, but has determined to include an express reference to 
regulatory requirements for greater clarity.
    Several Federal Home Loan Banks suggested the deletion of the term 
``voice mail'' from the example of the form or format of a record. 
These commenters stated that as a matter of course, business is not 
conducted over voicemail such that a voicemail would not need to be 
maintained as a record. They suggested that recorded telephone lines 
that document formal communications and business transactions are the 
more appropriate form of documented telephone related communications. 
In response to this suggestion, FHFA has included the term ``recorded 
telephone line records'' in the description of form and format of a 
record but has not deleted the term ``voicemail records'' because some 
regulated entities or the Office of Finance may now or in the future 
use ``voicemail records'' in the transaction of business. If a 
regulated entity or the Office of Finance does not use voicemail 
records for business purposes and such records are not identified in 
its record retention policy as a category of records that represent 
business records, the voicemail records would not be records for 
purposes of the regulation.
    One commenter suggested that the definition of the term ``record'' 
should apply only to business records and not to personal records, 
public periodicals, and similar documents that would be burdensome to 
catalog. In addition, the commenter requested that confidential and 
privileged records be exempt from the requirements of the regulation. 
FHFA notes that under the Safety and Soundness Act and the Federal Home 
Loan Bank Act, the Director may require the production of records, 
whether confidential or privileged; therefore, confidential or 
privileged records are not exempt from the requirements of the 
regulation. In addition, it is a prudent management practice for 
confidential and privileged records to be retained. To clarify the 
definition of the term ``record,'' FHFA has revised the definition to 
apply to records related to

[[Page 33123]]

the conduct of the business of a regulated entity.
    Two commenters suggested the removal of the reference to personal 
or home computers. A regulated entity or the Office of Finance may 
maintain a record for purposes of this regulation solely on equipment 
it owns, as one commenter stated, even if employees access and use 
records on their home computers. Each regulated entity and the Office 
of Finance is required to maintain a record, in at least one form or 
format, regardless of where the record is created, used, or maintained, 
and may prohibit the transfer of business records to personal or home 
computers. If business records are transferred to personal or home 
computers, then such records would be records for purposes of the 
regulation. Consequently, FHFA has determined not to delete the 
reference to personal or home computers.
    One commenter sought clarification on the required form or format 
of a record; others sought clarification as to the required type and 
number of records that must be maintained. Another commenter sought 
clarification with regard to the destruction of drafts of records not 
subject to a record hold.
    In response to these comments, FHFA notes that a regulated entity 
or the Office of Finance may maintain only one copy of a record if the 
record is not subject to a record hold, there is no mandatory legal 
requirement to retain the record in the form or format, and another 
form or format of the record is not necessary to support 
administrative, business, external audit, or internal audit functions 
or litigation. Copies may be destroyed in accordance with the record 
retention schedule of the regulated entity or Office of Finance. In 
addition, FHFA notes that a record retention schedule should 
specifically address those records for which original signature 
documents will be maintained in electronic copy with the understanding 
that electronic copies of physical documents may face challenges as to 
authenticity and admissibility in court if the actual original 
signature is no longer available.
    One commenter requested that FHFA clarify that, unless subject to a 
record hold, transitory documents such as ``to do'' lists, unsolicited 
information, advertisements, and other similar documents would not be 
considered records. For purposes of this regulation, the permanent or 
transitory nature of a document does not determine whether it is a 
record. If a document is considered a record for purposes of this 
regulation, it must be retained in accordance with the record retention 
schedule of the regulated entity or Office of Finance. That schedule 
may establish a category of transitory documents with a short or no-
retention period in accordance with the record retention program of the 
regulated entity or Office of Finance.
    Record Hold. The proposed regulation defines ``record hold'' 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 or the Office of Finance has received notice from 
FHFA. One commenter requested that the definition of the term ``record 
hold'' be modified since the occurrence of an FHFA examination should 
not trigger the formal record hold process. FHFA notes that the 
occurrence of an FHFA examination does not automatically trigger a 
record hold; FHFA must provide notice of the record hold.
    As a matter of prudent management, regulated entities and the 
Office of Finance should have a record hold program with respect to 
anticipated litigation regardless of notice from FHFA. Consequently, 
FHFA has clarified the definition of the term ``record hold'' to 
include litigation of which the regulated entity or the Office of 
Finance becomes aware.
    Record Retention Schedule. The proposed regulation defines the term 
``record retention schedule'' 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.''
    One commenter requested that the definition of the term ``record 
retention schedule'' be revised to cover only the information media 
that the regulated entity has determined to be the form in which it 
will retain a particular record in order to avoid maintaining duplicate 
records. As explained above in the discussion of the definition of the 
term ``record,'' a regulated entity may maintain only one copy of a 
record unless a record is subject to a record hold, there is a 
mandatory legal requirement to retain the record in another format, or 
a duplicate record is necessary to support administrative, business, 
external audit, or internal audit functions or litigation. For clarity, 
FHFA has deleted from the final regulation the sentence, 
``[r]eproductions are also included for each record category if the 
original of the official record is not available.''
    Another commenter suggested revising the definition of the term 
``record retention schedule'' by striking ``is required to retain'' and 
inserting ``retains'' to clarify that many records retained by a 
regulated entity are kept for discretionary business reasons, not 
because a legal requirement forces retention. FHFA has determined that 
because a requirement to retain records may be based on a legal 
requirement or internal policy, it is not necessary to revise the 
definition as suggested.
    Finally, one commenter recommended including in the definition of 
the term ``record retention schedule'' that the record retention 
schedule must define the policies and procedures to be followed 
relative to access, safeguards, dispositions, and record holds. FHFA 
notes that although the record retention program should address such 
policies and procedures, they do not need to be addressed in the record 
retention schedule.
    Retention Period. The proposed regulation defines ``retention 
period'' 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.''' One commenter recommended adding the 
clarifying phrase ``as determined by the organization's record 
retention schedule.'' FHFA agrees with the recommendation and has 
modified the definition accordingly.
    Another commenter suggested revising the definition of the term 
``retention period'' by striking ``must be kept'' and inserting ``are 
kept'' to clarify that many records retained by a regulated entity are 
kept for discretionary business reasons, not because a legal 
requirement forces retention. As noted above, FHFA has determined that 
because a requirement to retain records for a certain period may be 
based on a legal requirement or internal policy, it is not necessary to 
revise the definition as suggested.
    Finally, after reviewing the proposed definitions, FHFA determined 
that the definition of the term ``employee'' in Sec.  1235.2 needed a 
technical correction and has made the correction by deleting the 
reference to employees of a conservator.

[[Page 33124]]

Section 1235.3 Establishment and Evaluation of a Record Retention 
Program

    As proposed, a regulated entity and the Office of Finance must 
provide a copy of its record retention program within 120 days of the 
effective date of the regulation. Several commenters questioned the 
length of time given to create a program and requested several 
alternatives. In consideration of the requests, FHFA has changed the 
requirement to produce a record retention program to within 180 days of 
the effective date of the regulation. This timeframe applies to the 
submission of a record retention program, including projected 
milestones, and does not apply to the implementation of the program. 
Those regulated entities currently submitting an annual record 
retention program also must comply with the time requirements of this 
regulation.
    One commenter asked whether a copy of the record retention program 
should also be submitted to the examiner-in-charge of a regulated 
entity. FHFA notes that a regulated entity or the Office of Finance is 
not required to provide a copy of its record retention program to the 
examiner-in-charge unless he or she requests a copy.
    The proposed regulation provides that management of each regulated 
entity and the Office of Finance is to evaluate in writing the adequacy 
and effectiveness of its record retention program. One commenter asked 
whether management may rely on an audit conducted by an internal or 
external auditor. FHFA clarifies that an auditor may provide 
information to be taken into account by a regulated entity or the 
Office of Finance, but an auditor's opinion may not replace 
management's evaluation.
    Two commenters asked FHFA to provide the form and content of 
management's evaluation of a record retention program. One commenter 
requested that FHFA provide for appropriate qualifications on 
management's evaluation of its record retention program in that it will 
not be able to test each employee's compliance as a practical matter 
and so will have to rely on the assertions of each employee as to such 
employee's compliance. Another commenter recommended that FHFA require 
that the record retention program be audited at least annually, rather 
than be evaluated every three years, as set forth in the section.
    In response to these comments, FHFA notes that it will rely on each 
regulated entity and the Office of Finance to determine the appropriate 
form and content of the evaluation, which is subject to review by FHFA 
examiners. FHFA notes that the scope, expense, and evaluation of a 
record retention program should be reasonable in light of the size, 
complexity, and structure of the regulated entity or the Office of 
Finance. With respect to the evaluation of the record retention 
program, considering the importance of a record retention program and 
the recommendation for an annual evaluation, FHFA has determined to 
require an evaluation every two years rather than every three years.

Section 1235.4 Minimum Requirements of a Record Retention Program

    Section 1235.4 of the proposed regulation provides minimum 
requirements of a record retention program. One commenter recommended 
that FHFA requirements be labeled as ``elements'' of a record retention 
program and instead include a list of general principles. FHFA has 
considered the recommendation and has determined not to restructure the 
minimum requirements, which encompass general principles. The purpose 
of the regulation, set forth in Sec.  1235.1, and the principle 
underlying a record retention program of a regulated entity and the 
Office of Finance is that the records be complete and accurate and 
readily accessible by FHFA.
    One commenter suggested adding a requirement to audit the record 
retention program at least annually, and to include in the program a 
means of detecting any internal or external risks to the integrity of a 
record retention schedule, and the safeguarding and disposal of 
records. FHFA is not adding an audit requirement because it is more 
appropriate for the internal and external audit functions of the 
regulated entity and the Office of Finance to determine the frequency 
and scope of audits of the record retention program. Such 
determinations are reviewable by FHFA examiners. However, FHFA is 
adding a clarifying minimal requirement that the record retention 
program must provide for periodic testing of the ability to access 
records.
    Two commenters sought clarification of the term ``existing 
information technology'' used in proposed Sec.  1235.4(a)(2)(iii) and 
questioned whether FHFA requires upgrades to technology. Records must 
be accessible. If a record is stored in an electronic format that is no 
longer accessible with existing information technology of a regulated 
entity or the Office of Finance, the record must be converted into a 
format that is accessible. Recognizing that each regulated entity and 
the Office of Finance may have a different information technology 
infrastructure, FHFA is not requiring that a specific type of 
information technology be used. Nevertheless, FHFA is deleting proposed 
Sec.  1235.4(a)(2)(iii) because it is duplicative of Sec.  1235.6, and 
is adding clarifying language in Sec.  1235.4(b) to address the minimum 
storage requirements for electronic records; that is, they must be 
maintained on immutable, non-rewritable storage, preferably searchable, 
in a manner that provides for access to and accurate reproduction of 
such records for later reference by transmission, printing, or other 
means.
    One commenter asked that the final regulation clarify that the 
record retention program may specify which kinds of agents and 
independent contractors should be subjected to the record retention 
program and how often training will be provided to those agents and 
independent contractors. FHFA notes that it would be appropriate for 
the record retention program to address those matters. The commenter 
also asked FHFA to clarify whether existing contracts must be modified 
to inform agents and independent contractors of the record retention 
program. FHFA is not requiring that existing contracts be modified.
    Several commenters suggested clarification that a record retention 
program must account for the proper disposition of records. FHFA agrees 
and has added clarifying language to Sec.  1235.4.
    Lastly, two commenters requested that FHFA clarify that manual 
controls are appropriate so long as they are shown to be effective and 
that the regulation does not require a regulated entity or the Office 
of Finance to purchase expensive records management software and 
utilize costly consultants and vendors to advise on the additions of 
systems that may offer no more protection than the record management 
system currently in place. FHFA notes that the regulation does not 
require records management software be purchased or that consultants be 
utilized. The regulation requires that the record retention program 
meet the minimum requirements of Sec.  1235.4, provide for record holds 
under Sec.  1235.5 and access to records under Sec.  1235.6, and be 
evaluated under Sec.  1235.3.
    In addition to the clarifying revisions discussed above, the final 
Sec.  1235.4 includes clarifying language as follows. As proposed, 
Sec.  1235.4(a)(3) provides that one of the minimum requirements of a 
record retention program is that it assign in writing the authorities 
and

[[Page 33125]]

responsibilities for record retention activities. That section has been 
clarified to provide expressly that the authorities and 
responsibilities for record retention activities of employees, line 
managers, and corporate management must be assigned. As proposed, Sec.  
1235.4(a)(4) provides the record retention program include policies and 
procedures concerning record holds. It has been clarified to provide 
expressly that such policies and procedures must be integrated, as 
appropriate, with other policies and procedures throughout the 
organization. Finally, proposed Sec.  1235.4(b), redesignated as Sec.  
1235.4(c) of the final regulation, has been clarified to address 
specifically communication of the record retention program.

Section 1235.5 Record Hold

    Section 1235.5 of the proposed regulation requires that the record 
retention program of a regulated entity and the Office of Finance 
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. It also would provide that any employee 
and, as appropriate, any agent or independent contractor 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, notify immediately the legal department or senior 
management of the regulated entity or the Office of Finance of a record 
hold.
    Two commenters sought clarification as to how a record hold notice 
will be provided by FHFA and requested that notice be given to the 
chief executive officer and general counsel to ensure that the record 
hold notice is promptly disseminated to the appropriate persons. In 
response to this comment, FHFA has added a new paragraph (a) in the 
final regulation, which clarifies that FHFA will notify the chief 
executive officer of the record hold.
    With respect to notice to independent contractors or agents, one 
commenter asked FHFA to clarify that although regulated entities and 
the Office of Finance may be required to notify independent 
contractors, they cannot accept legal or regulatory responsibility for 
the actions or inactions of independent contractors. FHFA notes that 
proposed Sec.  1235.5(a)(1) requires that the record retention program 
address only how 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.
    Another commenter asked how the obligation to notify certain agents 
and independent contractors of a record hold in proposed Sec.  
1235.5(a)(1) relates to other obligations a regulated entity or the 
Office of Finance may have to ensure the confidentiality of FHFA 
materials, such as under 12 CFR 911.3. FHFA sees no conflict between 
the obligation to notify certain agents and independent contractors to 
retain specific records without disclosing that FHFA required the 
record hold or the obligation of a regulated entity or the Office of 
Finance not to disclose unpublished FHFA information without written 
authorization.
    Two other commenters sought confirmation that a regulated entity is 
not required to have a legal department in light of the provision in 
proposed Sec.  1235.5(a)(3) that employees notify the legal department 
of a potential investigation, enforcement proceeding, or litigation by 
FHFA. In response to these commenters, Sec.  1235.5(a)(3), redesignated 
as Sec.  1235.5(b)(3) in the final regulation, has been revised to 
provide that employees must notify the legal department or the 
individual providing legal services to the regulated entity or the 
Office of Finance as well as to senior management.
    Section 1235.5(b) of the proposed regulation, redesignated as Sec.  
1235.5(c) in the final regulation, requires that the record retention 
program of each regulated entity and the Office of Finance address the 
method for retaining records during a record hold, including a 
description of the method for the continued preservation of electronic 
records, including e-mail, and the conversion of records from paper to 
electronic form as well as any alternative storage method. One 
commenter requested clarification that a regulated entity or the Office 
of Finance is not required to convert records from paper to electronic 
format. FHFA clarifies that electronic conversion is not required and 
has added the phrase ``as applicable'' in connection with the 
conversion of records from paper to electronic form and alternate 
storage methods. Although electronic conversion is not required, FHFA 
notes in Sec.  1235.5(d) of the final regulation that a record 
retention program must ensure access to and retrieval of records by the 
regulated entity and the Office of Finance, and access, upon request, 
by FHFA, during a record hold. Such access must be by reasonable means, 
consistent with the nature and availability of the records and existing 
information technology.

Section 1235.6 Access to Records

    Section 1235.6(a) of the proposed regulation provides that each 
regulated entity or the Office of Finance 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. As 
proposed, Sec.  1235.6(b) would provide that a reasonable period for 
requests for records made during the course of an on-site examination 
and pursuant to the examination's scope is no longer than one business 
day. For requests for records made outside of an on-site examination, a 
reasonable period would be three business days.
    Several commenters requested either clarification or deletion of 
the requirement to produce records within a reasonable period. Some 
recommended deleting the one- and three-day presumption, but retaining 
the reasonable period requirement. Others requested a longer period of 
time in which to provide access to FHFA, that the presumptive time-
periods could be rebutted, or that FHFA should take into consideration 
the location of the records in determining what time-period is 
reasonable.
    Taking the comments into consideration, FHFA has revised Sec.  
1235.6 by deleting the presumptive time periods and the reference to a 
reasonable time period and has added that records are to be made 
available promptly upon request by FHFA. Facts and circumstances that 
FHFA will consider in determining whether records are made promptly 
available include, but are not limited to, the time-sensitivity of the 
request, whether the request is made pursuant to an examination or 
other supervisory activity, and the format, volume and the location of 
the records.

Section 1235.7 Supervisory Action

    Section 1235.7 of the proposed regulation provides that failure by 
a regulated entity or the Office of Finance to comply with the 
regulation may subject the regulated entity or the Office of Finance or 
their board members, officers, or employees to supervisory action by 
FHFA under the Safety and Soundness Act. One commenter recommended the 
removal of the imposition of supervisory action on

[[Page 33126]]

board members, officers, and employees in the absence of willful and 
wrongful conduct. The commenters are of the view that there should be 
no individual liability. After considering the comment, FHFA has 
determined, consistent with its statutory enforcement authority, to 
adopt the proposed section without change.

Discussion of FHFB Resolution 93-50

    FHFB Resolution 93-50 ``Approval of the Policy Statement on 
Retention of Records'' (May 26, 1993) (Resolution) issued by the 
Federal Housing Finance Board, a predecessor agency of FHFA, discussed 
the objectives of the policy, the retention periods of Federal Home 
Loan Bank documents, and the availability of such documents and 
attached a record retention schedule. One commenter asked whether the 
Resolution survives after the regulation becomes final; another 
commenter recommended that the regulation expressly rescind the 
Resolution. FHFA clarifies that the Resolution is terminated on the 
effective date of the Record Retention regulation.\4\ FHFA notes that 
it may issue advisory or supervisory guidance on the implementation of 
the final Record Retention regulation.
---------------------------------------------------------------------------

    \4\ Resolutions of the Federal Housing Finance Board, such as 
FHFB Resolution 93-50, remain in effect until modified, terminated, 
set aside, or superseded by the FHFA Director. Sec. 1312(a) of the 
Housing and Economic Recovery Act of 2008.
---------------------------------------------------------------------------

III. Final Regulation

    Section 1313(f) of the Safety and Soundness Act (12 U.S.C. 
4513(f)), requires the Director, when promulgating regulations relating 
to the Federal Home Loan Banks, to consider the differences between the 
Federal National Mortgage Association and the Federal Home Loan 
Mortgage Corporation (Enterprises) and the Federal Home Loan Banks with 
respect to the Federal Home Loan Banks' cooperative ownership 
structure, liquidity mission, 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 final regulation, the Director considered the 
differences between the Federal Home Loan Banks and the Enterprises as 
they relate to the above factors. The Director believes that none of 
the unique factors relating to the Federal Home Loan Banks warrants 
establishing different treatment under the final regulation. The 
regulation speaks at a high level and permits a regulated entity and 
the Office of Finance to adopt a records retention policy that is 
appropriate to its own size, complexity, and business activities.
    The final regulation requires 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 
so as to be able to determine the financial condition of the regulated 
entity and the Office of Finance, assess 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, evaluate 
the entity's compliance with applicable laws, regulations, and 
supervisory guidance and directives, or otherwise fulfill the mission 
of FHFA.
    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 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.\5\
---------------------------------------------------------------------------

    \5\ 12 U.S.C. 4513b(a)(10) and 4514(c). See also 12 U.S.C. 
1829b.
---------------------------------------------------------------------------

    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 the Sarbanes-Oxley 
Act, 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.\6\ 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.\7\
---------------------------------------------------------------------------

    \6\ Public Law 107-204, 116 Stat. 745 (2002).
    \7\ 17 CFR part 210.
---------------------------------------------------------------------------

    The final regulation is not intended to have an 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 
this regulation.
    FHFA is issuing the final regulation as proposed with the 
clarifying revisions and technical correction discussed above. On the 
effective date of this regulation, the regulations at 12 CFR 914.3 
(access to books and records) and 12 CFR part 1732 (record retention) 
are removed and FHFB Resolution 93-50, dated May 26, 1993, is 
terminated.

IV. Regulatory Impact

Paperwork Reduction Act

    The final regulation 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 
regulation under the Regulatory Flexibility Act. FHFA certifies that 
the regulation is not likely to have a significant economic impact on a 
substantial number of small business entities because the regulation is 
applicable to only 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.

[[Page 33127]]

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 amends Chapters IX, XII and XVII of 
title 12 of the Code of Federal Regulations, as follows:

CHAPTER IX--FEDERAL HOUSING FINANCE BOARD

PART 914--DATA AVAILABILITY AND REPORTING

0
1. The authority citation for 12 CFR part 914 is revised to read as 
follows:

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


Sec.  914.3  [Removed and reserved]

0
2. Remove and reserve Sec.  914.3.

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER B--ENTITY REGULATIONS

0
3. Add part 1235 to subchapter B to read as follows:

PART 1235--RECORD RETENTION FOR REGULATED ENTITIES AND OFFICE OF 
FINANCE

Sec.
1235.1 Purpose and scope.
1235.2 Definitions.
1235.3 Establishment and evaluation of a record retention program.
1235.4 Minimum requirements of a 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 for a 
record retention program for each regulated entity and the Office of 
Finance. The requirements are intended to further prudent management as 
well as to ensure that complete and accurate records of each regulated 
entity and the Office of Finance are readily accessible to FHFA.


Sec.  1235.2  Definitions.

    For purposes of this part, the term--
    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 a document created or received on a computer network 
for transmitting messages electronically, and any attachments which may 
be transmitted with the document.
    Employee means any officer or employee of a regulated entity or the 
Office of Finance.
    Federal Home Loan Bank means a Bank established under the Federal 
Home Loan Bank Act; the term ``Federal Home Loan Banks'' means, 
collectively, all the Federal Home Loan Banks.
    FHFA means the Federal Housing Finance Agency.
    Financing Corporation 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. The 
Financing Corporation has a board of directors consisting of the 
managing director of the Office of Finance and two Federal Home Loan 
Bank presidents.
    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, related to the conduct of the business of a regulated entity 
or the Office of Finance (which business, in the case of the Office of 
Finance, shall include any functions performed with respect to the 
Financing Corporation) or to legal or regulatory requirements, 
regardless of the following--
    (1) Form or format, including hard copy documents (e.g., files, 
logs, and reports), 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 or recorded telephone line 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 or Office of Finance equipment, or on 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 or otherwise has knowledge.
    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.
    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, as determined by the organization's record 
retention schedule. 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.


Sec.  1235.3  Establishment and evaluation of a 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 for the Division of Federal Home Loan Bank Regulation, or his 
or her designee, as appropriate, within 180 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 two years and provide a 
copy of the evaluation to the board of directors and the Director.

[[Page 33128]]

Sec.  1235.4  Minimum requirements of a record retention program.

    (a) General minimum requirements. The record retention program 
established and maintained by each regulated entity and the Office of 
Finance under Sec.  1235.3 shall:
    (1) Assure that retained records are complete and accurate;
    (2) Assure that the form of retained records and the retention 
period--
    (i) Are appropriate to support administrative, business, external 
and internal audit functions, and litigation of the regulated entity or 
the Office of Finance; and
    (ii) Comply with requirements of applicable laws and regulations, 
including this part;
    (3) Assign in writing the authorities and responsibilities for 
record retention activities for employees, including line managers and 
corporate management;
    (4) Include policies and procedures concerning record holds, 
consistent with Sec.  1235.5, and, as appropriate, integrate them with 
policies and procedures throughout the organization;
    (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, operational, and business 
requirements;
    (6) Include appropriate security and internal controls to protect 
records from unauthorized access and data alteration;
    (7) Provide for appropriate back-up and recovery of electronic 
records to ensure the same accuracy as the primary records;
    (8) Provide for a periodic testing of the ability to access 
records; and
    (9) Provide for the proper disposition of records.
    (b) Minimum storage requirements for electronic records. Electronic 
records, preferably searchable, must be maintained on immutable, non-
rewritable storage in a manner that provides for both ready access by 
any person who is entitled to access the records, including staff of 
FHFA, and accurate reproduction for later reference by transmission, 
printing or other means.
    (c) Communication and training.--(1) The record retention program 
established and maintained by each regulated entity and the Office of 
Finance under Sec.  1235.3 shall provide for periodic training and 
communication throughout the organization.
    (2) The record retention program shall:
    (i) Provide for communication throughout the organization on record 
retention policies, procedures, and record retention schedule updates; 
and
    (ii) 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 FHFA. In the event that FHFA is requiring a 
record hold, FHFA shall notify the chief executive officer of the 
regulated entity or the Office of Finance. Regulated entities and the 
Office of Finance must have a written policy for handling notice of a 
record hold.
    (b) Notification by a regulated entity or the Office of Finance. 
The record retention program of a regulated entity and the Office of 
Finance shall--
    (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 or Office of Finance, 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 or the 
individual providing legal services as well as senior management 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.
    (c) Method of record retention during a record hold. 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-mail, and, as applicable, the 
conversion of records from paper to electronic form as well as any 
alternative storage method.
    (d) 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 and 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.

    Each regulated entity and the Office of Finance shall make its 
records available promptly upon request by FHFA, at a location and in a 
form and manner acceptable to FHFA.


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]

0
4. Remove part 1732.

    Dated: June 1, 2011.
Edward J. DeMarco,
Acting Director, Federal Housing Finance Agency.
[FR Doc. 2011-14055 Filed 6-7-11; 8:45 am]
BILLING CODE 8070-01-P