Compensation, Retirement Programs, and Related Benefits, 3172-3184 [2012-901]
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testing practices and methodologies,
validation, and use of stress testing
results, as well as processes for updating
the covered bank’s stress testing
practices consistent with relevant
supervisory guidance.
(2) The board of directors and senior
management of each covered bank shall
approve and annually review the
controls, oversight, and documentation,
including policies and procedures of the
covered bank pursuant to this subpart.
§ 325.205 Report to the FDIC of stress test
results and related information.
(a) Report required for stress tests. On
or before January 5 of each year, each
covered bank must report the results of
the stress test required under section
325.203 to the FDIC in accordance with
paragraph 325.205(b) .
(b) Content of report for annual stress
tests. Each covered bank must file a
report in the manner, in such form, and
containing the information established
by the Corporation.
(c) Confidential treatment of
information submitted. The
confidentiality of information submitted
to the Corporation under this subpart
and related materials shall be
determined in accordance with
applicable law including any available
exemptions under the Freedom of
Information Act (5 U.S.C. 552(b)) and
the FDIC’s Rules and Regulations
regarding the Disclosure of Information
(12 CFR Part 309).
(d) Extension. The Corporation may,
in its discretion, and upon request by a
covered bank, extend the time period for
compliance established under paragraph
325.205(a) for up to an additional 60
days.
§ 325.206 Supervisory review of stress
tests and post-assessment actions.
(a) Each covered bank shall take the
results of the stress tests conducted
under section 325.203 into account in
making changes, as appropriate, to: The
covered bank’s capital structure
(including the level and composition of
capital); its exposures, concentrations,
and risk positions; any plans for
recovery and resolution; and to improve
overall risk management.
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§ 325.207
results.
Publication of summary of
(a) Public disclosure of results
required for stress tests of covered
banks. Within 90 days of the date
required for submitting a report under
§ 325.205(a) for its required stress test
under § 325.203, a covered bank shall
publicly disclose a summary of the
results of the stress tests required under
§ 325.203.
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(b) Information to be disclosed in the
summary. The information disclosed by
each covered bank shall, at a minimum,
include—
(1) A description of the types of risks
being included in the stress test;
(2) A general description of the
methodologies employed to estimate
losses, pre-provision net revenue, loss
reserves, and changes in capital
positions over the planning horizon;
(3) Aggregate losses, pre-provision net
revenue, loss reserves, net income, and
pro forma capital levels and capital
ratios (including regulatory and any
other capital ratios specified by the
Corporation) over the planning horizon
under each scenario.
Dated at Washington, DC this 17th day of
January, 2012.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2012–1135 Filed 1–20–12; 8:45 am]
BILLING CODE 6714–01–P
FARM CREDIT ADMINISTRATION
12 CFR Parts 611, 612, 619, 620 and
630
RIN 3052–AC41
Compensation, Retirement Programs,
and Related Benefits
Farm Credit Administration.
Proposed rule.
AGENCY:
ACTION:
The Farm Credit
Administration (FCA, us, we, or our)
proposes to amend our regulations
related to Farm Credit System (System)
bank and association disclosures to
shareholders and investors. The
proposed rule would require reporting
of supplemental retirement plans, a
discussion of the link between senior
officer compensation and performance,
and timely and transparent reporting to
shareholders of significant events that
occur between annual reporting periods.
We believe the proposed changes will
provide full, transparent and consistent
disclosures to shareholders. The
proposed rule would identify the
minimum responsibilities a
compensation committee must perform
to ensure it continues to exercise good
stewardship, and require that System
banks and associations provide for a
nonbinding, advisory vote on senior
officer compensation in order to engage
shareholders in the management and
control of their institution. Also, the
proposed rule would bifurcate existing
annual reporting requirements at § 620.5
SUMMARY:
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and make other conforming technical
changes.
DATES: Submit comments on or before
March 23, 2012.
ADDRESSES: We offer a variety of
methods for you to submit your
comments. For accuracy and efficiency
reasons, commenters are encouraged to
submit comments by email or through
the FCA’s Web site. As facsimiles (faxes)
are difficult for us to process and
achieve compliance with section 508 of
the Rehabilitation Act, we no longer
accept comments submitted by fax.
Regardless of the method you use,
please do not submit your comments
multiple times via different methods.
You may submit comments by any of
the following methods:
• Email: Send an email to regcomm@fca.gov.
• FCA Web site: https://www.fca.gov.
Select ‘‘Public Commenters,’’ then
‘‘Public Comments,’’ and follow the
directions for ‘‘Submitting a Comment.’’
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Mail: Gary K. Van Meter, Director,
Office of Regulatory Policy, Farm Credit
Administration, 1501 Farm Credit Drive,
McLean, VA 22102–5090.
You may review copies of all
comments we receive at our office in
McLean, Virginia or on our Web site at
https://www.fca.gov. Once you are in the
Web site, select ‘‘Public Commenters,’’
then ‘‘Public Comments,’’ and follow
the directions for ‘‘Reading Submitted
Public Comments.’’ We will show your
comments as submitted, including any
supporting data provided, but for
technical reasons we may omit items
such as logos and special characters.
Identifying information that you
provide, such as phone numbers and
addresses, will be publicly available.
However, we will attempt to remove
email addresses to help reduce Internet
spam.
FOR FURTHER INFORMATION CONTACT:
Deborah Wilson, Senior Accountant,
Office of Regulatory Policy, Farm
Credit Administration, McLean, VA
22102–5090, (703) 883–4414, TTY
(703) 883–4434, or
Laura McFarland, Senior Counsel,
Office of General Counsel, Farm
Credit Administration, McLean, VA
22102–5090, (703) 883–4020, TTY
(703) 883–4020.
SUPPLEMENTARY INFORMATION:
I. Objective
The objectives of this proposed rule
are to:
• Improve the transparency and
completeness of disclosures in System
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institution annual reports or annual
meeting information statements
(collectively, Report) by requiring
disclosure of all components of senior
officer 1 compensation and retirement
benefits;
• Promote the continued safety and
soundness of System institutions by
requiring certain oversight
responsibilities of compensation
committees;
• Strengthen timely communication
with System shareholders on significant
events that occur between annual
reporting periods;
• Provide shareholders with a clear
and complete understanding of their
institution’s obligations and
commitments related to supplemental
retirement benefit plans (SRP) for
employees other than the senior officer
group; and
• Encourage member participation in
the control and management of their
institution by providing voting
shareholders an opportunity to cast a
nonbinding, advisory vote on senior
officer compensation.
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II. Background
The Farm Credit Act of 1971, as
amended (Act),2 authorizes the FCA to
issue regulations implementing the
Act’s provisions.3 Our regulations are
intended to ensure the safe and sound
operations of System institutions and to
govern the disclosure of financial
information to shareholders of, and
investors in, the System. Congress
explained in section 514 of the Farm
Credit Banks and Associations Safety
and Soundness Act of 1992 (1992 Act) 4
that disclosures of financial information
and compensation paid to senior
officers, among other disclosures,
provide System shareholders with
information necessary to better manage
their institution and make informed
decisions regarding the operation of
their institution.
Section 1.1(b) of the Act sets forth the
objective to continue to encourage
owners-borrowers to participate in the
management, control, and ownership of
their cooperative. In an October 14,
2010, Resolution of the Farm Credit
Administration Board, we declared our
commitment to support the cooperative
business model and structure of System
banks and associations.5 The FCA
1 All references to senior officer(s) in this
proposed rule refer to a senior officer as defined in
12 CFR 619.9310.
2 Public Law 92–181, 85 Stat. 583 (1971), 12
U.S.C. 2001, et seq.
3 12 U.S.C. 2252(a)(8), (9) and (10).
4 Public Law 102–552, 106 Stat. 4131 (1992).
5 Copies of the resolution may be obtained by
contacting the FCA.
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emphasizes the cooperative structure
and principles by advancing regulatory
proposals that encourage borrowers to
participate in the management, control
and ownership of their institution.
A. Comments Received
On November 18, 2010, we issued an
advance notice of proposed rulemaking
(ANPRM) on disclosure of senior officer
compensation and related topics in
order to gather information for the
development of a proposed
rulemaking.6 We received 99 comment
letters in response to the ANPRM from
individuals and entities associated with
the System, including the Farm Credit
Council (FCC), acting for its
membership, and the Federal Farm
Credit Banks Funding Corporation
(Funding Corporation). We reviewed all
comment letters and evaluated their
recommendations in recognition of
existing law and policy considerations
and the cooperative nature of the
System. We are proposing rules and
amendments related to senior officer
compensation disclosures and related
topics that were discussed in the
ANPRM. Other topics in the ANPRM
not included in this rulemaking may be
considered in future rulemakings.7
We are actively reviewing the
authority of the Funding Corporation’s
System Audit Committee (SAC) to have
‘‘unfettered ability to engage outside
advisors.’’ Section 630.6 authorizes the
Funding Corporation board to deny, by
a two-thirds majority vote of the full
board, any SAC request for resources.
The SAC requested we consider
amending our regulations to remove this
authority. We addressed this issue in
the ANPRM and most commenters
responded that it would be imprudent
to provide absolute discretion on the
use of resources to any bank or
association board committee. The FCC
expressed the view of its membership
that existing FCA regulations
appropriately balance audit committee
need with the board’s ultimate
responsibility to the customershareholder for the safety and financial
stability of the institution. However, the
FCC also noted that its membership
supported the Funding Corporation’s
request. The SAC’s response to the
ANPRM was that the SAC believed it
must have every resource it requires at
its disposal to effectively perform its
function. We are not proposing changes
to this authority in this rulemaking, but
6 75
FR 70619 (Nov. 18, 2010).
topics include the use of a compensation
consultant by an institution’s compensation
committee and director of severance benefits and
related payments.
7 These
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may revisit the matter in future
rulemakings.
B. Proposed Rule
We periodically review and update
our disclosure regulations to ensure
they are appropriate for current business
practices, provide shareholders with
necessary information, and provide
investors with information necessary to
assist them in making investment
decisions. In keeping with today’s
changing economic and business
environments, and in accordance with
the findings of Congress under the 1992
Act and the FCA Board Resolution of
October 14, 2010, we believe it is
appropriate to review and update our
rules on senior officer compensation
disclosures and other related topics. We
believe that banks and associations can
continue to support the cooperative
business model, fulfill the System’s
public policy mission in a safe and
sound manner, and best serve their
members by providing shareholders:
• Complete disclosure that allows
them to understand senior officer
compensation and retirement policies
and practices and all compensation and
retirement benefit obligations;
• Timely and transparent
communication on significant or
material events affecting their
institution; and
• A nonbinding, advisory vote on
senior officer compensation.
We believe the proposed rule continues
to balance meaningful disclosures,
committee oversight, and shareholder
rights with institution safety and
soundness.
III. Section-by-Section Analysis
A. Bifurcation of Annual Reporting
Requirements Sections [Existing
§ 620.5(h) Through (k); New § 620.6]
To enhance the clarity and
organization of our rules, we propose
moving the disclosure requirements for
directors and senior officers in
§ 620.5(h) through (k) to new § 620.6.
Also, we propose that § 620.5(h) contain
a reference to § 620.6, stating that the
presentation of the § 620.6 disclosures
would continue to be required in the
annual report. We propose no changes
to the current requirements of existing
§ 620.5(h), (j), and (k), except for minor
rewording of the language and cross
citations to recognize the proposed new
locations at § 620.6(a), (b), (d), (e), and
(f). However, in the process of moving
§ 620.5(h) through (k) to new § 620.6,
some regulatory language is proposed to
be changed in existing § 620.5(i) to
remove redundancy and enhance
clarity. Specifically, we propose
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clarifying how highly compensated
employees, who are not senior officers,
are treated in the Summary
Compensation Table (Compensation
Table) at new § 620.6(c)(2)(i).
Also, we propose clarifying where to
disclose the required statement that the
information on compensation for any
individual senior officer, as disclosed in
the Compensation Table, is available to
shareholders upon request. In new
§ 620.6(c)(2)(ii), we propose that the
statement must be presented directly
beneath the Compensation Table
because we believe the notice of this
right should be in close proximity to the
related disclosure. We propose new
disclosure requirements that would be
contained in new § 620.6(c) and are
discussed in Part III.B. of the preamble
to this proposed rule.
As conforming technical changes, we
propose changing references to the
annual report’s director and senior
officer compensation and conflicts of
interest disclosures, made in other areas
of our rules, to their location in new
§ 620.6. Specifically changing references
contained in § 611.330(b) of our rules
from § 620.5(j) and (k) to § 620.6(e) and
(f); changing references contained in
§ 612.2145(a)(2) of our rules from
§ 620.5(k) to § 620.6(f); changing
references contained in § 612.2155(a)(2)
of our rules from § 620.5(k) to § 620.6(f);
adding § 620.6 to the references
contained in §§ 612.2165(b)(12) and
620.4(c); renumbering existing § 620.5(l)
through (n) as (i) through (k); and
changing references in § 620.21(a)(3)(i)
of our rules from § 620.5(j)
(‘‘Transactions with senior officers and
directors’’) to § 620.6(e) and § 620.5(k)
(‘‘Involvement in certain legal
proceedings’’) to § 620.6(f).
B. Enhanced Disclosures of Senior
Officer Compensation [§ 620.5(i) and
New § 620.6(c)]
Existing § 620.5(i) requires that
compensation paid to or earned by
senior officers be disclosed in the
Compensation Table, and include
discussion of benefits paid in
connection with resignation, retirement,
or termination.
In developing this proposed rule, we
recognized that:
• Compensation and retirement
benefit practices at many System
institutions are increasingly more
complex and diverse;
• Our current disclosure
requirements may not capture all
current practices; and
• Disclosures should include a clear
discussion of the relationship between
the risks and rewards of compensation
practices.
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Consequently, we believe our disclosure
rules should be amended to ensure that
all such practices are addressed in an
institution’s disclosure of senior officer
compensation.
In new § 620.6(c)(4), we propose
requiring that institutions disclose
information related to supplemental
executive retirement plans (SERP), if
provided to chief executive officers
(CEOs), senior officers or other highly
compensated employees (collectively,
senior officers). If the CEO and senior
officers participate solely in pension
and retirement plans offered to all
employees, the disclosures would not be
required. The information to be
disclosed would include, at a minimum:
• Funded and unfunded present
value of accumulated benefits for all
CEO and senior officers’ pension and
retirement benefit plans, including the
SERP.
• Years of credited service for the
CEO and for the senior officers.
• Vested and unvested dollar
amounts.
We propose that the disclosures be
included in a separate pension and
retirement benefits table, and that it be
presented in the report with the
Compensation Table.
In addition to requiring disclosure of
SERPs, we propose institutions:
• Include all compensation, benefit
and retirement plans when discussing
compensation programs;
• Describe the overall risk and reward
structure of compensation, benefit and
retirements plans; and
• Discuss the link between the CEO’s
and senior officers’ total compensation,
as reported, and both the institution’s
overall performance and the CEO’s and
senior officers’ performance.
In making these disclosures, we would
expect an institution to discuss the
criteria used in determining its overall
performance (e.g., capital and risk
management, credit risk and risk
exposure to earnings, liquidity
management, and compliance with the
general financing agreement). Also, we
would expect institutions to discuss the
benchmarks or other factors used to
determine compensation, including
incentive-based compensation.
Disclosures would be specific to the
institution, rather than being general or
boilerplate.
We further propose at new
§ 620.6(c)(3)(ii)(B) that institutions
disclose in the Compensation Table the
dollar amount of tax reimbursements or
tax payments provided by the
institution to senior officers. The
disclosure would be classified as a
perquisite and other personal benefit
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and would be reported in the period in
which payment is made. We are not
proposing to change the threshold for
perquisite disclosures.
We believe improved transparency
and consistency in disclosures of senior
officer compensation provides
meaningful and complete disclosure to
members-owners and investors.
Enhanced disclosures assist membersowners and investors in making
informed decisions regarding the
financial condition and operations of
the institution.
We also propose adding a new
§ 619.9335 to our general definition
rules to define SRP and SERP. A SRP or
SERP would be defined to mean a
nonqualified retirement plan that
provides benefits above and beyond
those covered by other retirement plans
for all employees, and that is funded in
whole or in part by the institution.
C. Compensation Committee
Responsibilities [§§ 620.31 and 630.6(b)]
Our existing rules at §§ 620.31 and
630.6(b) require a compensation
committee to review and approve the
overall compensation programs for
senior officers and to review the
compensation policies and plans for all
employees. Our July 9, 2009, FCA
Bookletter, ‘‘Compensation
Committees’’ (BL–060), provides
guidance on how compensation
committees should fulfill their duties.
However, we believe it is appropriate to
enhance our regulations to include the
minimum responsibilities a
compensation committee must perform
in order to carry out its duties.
Therefore, in order that a
compensation committee continues to
effectively fulfill its stewardship role,
maintain effective and active oversight,
and ensure compensation and
retirement benefit practices do not
jeopardize the institution’s safety and
soundness, we propose clarifying that
the compensation committee is
accountable for:
• Monitoring the terms and
provisions of the incentive-based
compensation programs for senior
officers,
• Analyzing the institution’s
projected long-term obligations for
compensation and retirement benefits,
and
• Balancing financial rewards to
senior officers against the risks to the
institution.
The proposed rule would amend our
regulations at §§ 620.31(b) and
630.6(b)(2) to enhance compensation
committee responsibilities to emphasize
that the committee must ensure that:
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• CEO and senior officers’
compensation promotes the continued
safety and soundness of the institution
and supports the institution’s long-term
business strategy and goals,
• Risks to the institution and the
financial rewards to the CEO and senior
officers are balanced (e.g., compensation
and benefits are not excessive relative to
the results of operations and financial
condition of the institution),
• The institution’s projected total
long-term compensation and retirement
obligations for the CEO and senior
officers are analyzed, and
• The compensation of employee
groups, other than the CEO and senior
officers, do not pose an imprudent risk
to the institution (e.g., loan officers).
In addition, we emphasize that
compensation committees should
ensure that incentive-based
compensation programs:
• Are not unreasonable or
disproportionate to the services
performed, and
• Are structured so that the payout
schedule considers the potential for
future losses or risks to the institution
from services performed in the current
period.
Under the proposed rule, the
compensation committee would be
required to document in meeting
minutes its actions related to the
proposed enhanced responsibilities.
Documenting its actions would facilitate
board review of how the committee
carried out its responsibilities and
provide the current committee with an
understanding of prior committee
actions.
For organizational reasons, we
propose moving the requirements that
all compensation committee members
must be members of the board of
directors and that the compensation
committee report only to the board. The
requirements would be moved to the
section that discusses the formation of
a compensation committee. Also, we
propose replacing ‘‘function’’ with
‘‘perform its duties’’ in §§ 620.31(c) and
630.6(b)(3) for clarification.
D. Notice to Shareholders [§§ 620.10,
620.11, and 620.15]
In FCA Board Policy Statement,
‘‘Cooperative Operating Philosophy—
Serving the Members of Farm Credit
System Institutions,’’ 8 (FCA–PS–80) the
FCA reaffirmed its commitment to the
cooperative structure and its values and
practices, including regular and relevant
communication with members. As such,
we believe that certain events may be of
such significance or materiality to
8 See
75 FR 64728, Oct. 20, 2010.
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warrant communication to membersowners throughout the institution’s
operating cycle. We believe that timely
and transparent communication to
members encourages their continued
participation in the ownership, control
and management of their institution.
Existing §§ 620.15 and 620.17 require
that System institutions provide notice
to shareholders when the institution is
not in compliance with minimum
permanent capital standards. This
notice is a supplement to annual and
quarterly reporting requirements.
In a similar manner, we propose
adding a requirement in § 620.15 that
significant events or circumstances
occurring in interim or intervening
periods be communicated to
shareholders through separate notice.
As proposed, notices would be made as
soon as possible, but not later than 90
calendar days after occurrence. As an
alternative, we propose allowing the
institution to issue the notice within its
quarterly report, with prominent
disclosure at the front of the report.
The proposed rule would allow
institutions to distribute the notice via
electronic distribution (Web site) or by
publication with circulation wide
enough to be reasonably assured that all
shareholders have timely access to the
information. Also, we propose that the
notice be provided to the FCA at the
same time it is distributed to
shareholders and that the notice be
dated and signed.
The proposed rule would include a
list of events that must, at a minimum,
be reported. If the event would be a
‘‘significant’’ change to a compensation,
retirement, benefit or capitalization
plan, significance would be based on
the change to the individual plan and
not the impact of the change to the
institution as a whole.
As a related change to our rules, we
propose consolidating the current
contents of §§ 620.15 and 620.17 on
notices regarding permanent capital into
§ 620.17. This change would allow the
placement of the above proposed notice
of significant or material events to be
located in § 620.15 while preserving
existing requirements on notices for
permanent capital. We believe the
proposed consolidation would add
clarity to our rules by keeping like
subject matters together and removing
redundant language. It is not intended
that the meaning and requirements for
permanent capital notices be changed.
To conform our regulations in
§ 620.10, ‘‘Preparing the quarterly
report,’’ with the proposed notice of
significant or material events, we
propose adding a new paragraph (c) to
existing § 620.10. The proposed
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3175
addition would clarify that the quarterly
report may be used for notices to
shareholders, except minimum
permanent capital notices. We also
propose adding a similar provision to
§ 620.11 on contents of quarterly
reports, but including a proposed
requirement that notices included in the
quarterly report be located at the front
of the report. We believe this proposed
requirement preserves the objective of
the notices, which is that membersowners receive timely and transparent
communication of significant and
material events.
E. Disclosure of Supplemental
Retirement Plans to Employees,
Exclusive of the CEO and Senior
Officers [§ 620.5(e)]
We propose adding a new paragraph
(4) to existing § 620.5(e) that would
require disclosure of the institution’s
obligations related to a SRP to
employees, exclusive of any plan
provided to the CEO and senior officers.
The disclosure would include, at a
minimum:
• A description of the plan;
• Funded and unfunded obligations
of the plan; and
• Vested and unvested dollar
amounts.
We believe that by disclosing an
institution’s current and future
supplemental benefit obligations,
shareholders and investors will have a
more complete understanding of the
related liabilities and commitments,
both on- and off-balance sheet.
F. Nonbinding, Advisory Vote by
Shareholders on Senior Officer
Compensation [§§ 611.100, 620.5(a),
and 630.20(i); New §§ 611.360, 611.410,
and 620.6(c)(6)]
Our existing regulations do not
require a nonbinding, advisory vote by
an institution’s shareholders on senior
officer compensation. However, in FCA
Informational Memorandum, ‘‘Serving
the Members of Farm Credit System
Institutions’’ (IM), dated November 4,
2010, we noted that boards of directors
can encourage member participation in
the management and control of the
institution by engaging members as
owners and communicating with
members. The IM highlighted our belief
that effective boards use information
obtained from members to establish
strategic direction for their institutions
and to ensure business activities remain
member-focused.
We continue to believe that a
Government-sponsored enterprise
comprised of cooperative institutions
should continually strive to operate
under high standards in order to achieve
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the System’s public policy mission and
encourage member-owner participation
in their institution. Therefore, we
propose adding a new § 611.410
requiring that Farm Credit banks and
associations provide shareholders the
opportunity to cast a nonbinding,
advisory vote on senior officer
compensation.
The proposed § 611.410 advisory vote
would be required at banks and
associations if either the CEO’s or the
aggregate of all senior officers’
compensation, as disclosed in the
Compensation Table, increased or
decreased by 15 percent or more from
the previous reporting period. The vote
would not be required if the 15-percent
change resulted solely from a change in
the CEO or a change in the composition
of personnel included in the senior
officer group. Also, we propose that
associations be required to hold a
nonbinding, advisory vote on
compensation if 5 percent of their
voting shareholders petition for it. We
did not propose this additional petition
requirement for banks because there are
fewer shareholders at the bank level,
thereby allowing a few shareholders to
control the petition process.
We do not believe the vote would be
burdensome to institutions since it
would be required only when a 15percent change in practice has occurred
or, for associations, when 5 percent of
their voting shareholders petition for the
vote. We believe the proposed
nonbinding, advisory vote would
provide a means for shareholders to
clearly express and communicate either
their approval or disapproval of
compensation practices for senior
officers to their institution’s board. The
board could then use the information, as
appropriate, when establishing the
institution’s strategic direction and
ensure that it remains member-focused.
We selected 15 percent as a threshold
change in compensation based on the
recent range of percentage changes to
bank and association CEO’s and senior
officers’ compensation. We consider the
15-percent threshold to be reasonable.
We selected 5 percent as the maximum
percentage of voting shareholders
required to petition their association for
the vote because 5 percent is generally
accepted as a criteria for assessing
significance or materiality.
We are also proposing general
procedures for advisory votes in new
§ 611.360. The proposed procedures
would apply to all advisory votes held
by an institution including, but not
limited to, the proposed advisory vote
on compensation. As proposed,
advisory votes would be subject to the
same confidentiality and security in
VerDate Mar<15>2010
16:33 Jan 20, 2012
Jkt 226001
voting requirements of § 611.340 and
would be cast on a one-member, onevote basis, including votes cast by
shareholders of Farm Credit banks. We
propose that weighted and cumulative
voting not be allowed in advisory votes
in order to further the objective of giving
equal voice to each shareholder. Also,
new § 611.360 would require that
institutions develop voting procedures
and provide notice to shareholders of
any advisory vote and the procedures
used in casting the vote. In addition,
proposed § 611.360 would permit the
advisory votes to be made in-person, by
proxy, and by mail.
We propose disclosure in the annual
report when an advisory vote is held,
including disclosure of the results of the
vote. We propose adding a new
§ 620.5(a)(11) to the ‘‘Description of
business’’ section of the annual report,
requiring a discussion of the types of
advisory votes held during the reporting
period. We further propose that
disclosure of nonbinding, advisory votes
on senior officer compensation be
included with senior officer
compensation disclosures in new
§ 620.6(c)(6). This disclosure
requirement is proposed to be carried
forward into the System-wide report to
investors at § 630.20(i).
We propose in new § 611.410(c)(6)
that associations disclose that
shareholders may petition for an
advisory vote, disclose when a petition
is received and disclose the results of
the petition. The proposal would
require that the disclosures be presented
with the Compensation Table. We
believe that providing the disclosures
with the Compensation Table ensures
that shareholders are aware of their right
to express their opinion on senior
officer compensation practices of their
associations.
In addition, we propose adding a
definition of ‘‘advisory vote’’ at
§ 611.100(a) to ensure a consistent
meaning of the term.
G. Miscellaneous
1. Technical Changes [§§ 611.330(c),
611.400, 620.2(c), 620.4(c), and 620.11]
Our proposed amendments require
additional conforming and clarifying
changes to other regulatory provisions.
Likewise, in the proposed process of
consolidating provisions, some
regulatory language is proposed to be
changed to remove redundancy and
enhance clarity. We propose making the
following technical and conforming
changes:
a. We propose adding a definition for
‘‘business day’’ to § 611.100 to clarify
our longstanding position that when our
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rules reference business day it means a
day the institution is open for business,
but excludes Federal holidays. As a
technical change, we propose
renumbering existing § 611.100
paragraphs (a) through (f) as (c) through
(h).
b. In subpart D of part 611, we
propose revising the name of the
subpart from ‘‘Rules for Compensation
of Board Members’’ to ‘‘Compensation
Practices of Farm Credit Banks and
Associations.’’ The change will clarify
that the provisions of subpart D relate to
various compensation issues at the bank
and association level and not just to
bank board members. As a conforming
change, in § 611.400, we propose
revising the name of the section from
‘‘Compensation of bank board
members’’ to ‘‘Compensation of Farm
Credit bank board members’’ to align
terminology to that used in our general
definitions of part 619. We also propose
replacing the phrase ‘‘Farm Credit
System bank’’ with ‘‘Farm Credit bank’’
everywhere it appears to update the
section for the same reason.
c. We propose updating the language
in § 611.400(b) regarding annual
inflationary changes in the statutory
salary limit for Farm Credit bank
directors. The proposed change would
continue to require that we
communicate the annual changes to the
System, but remove the requirement
that we use a bookletter to do so. This
will expedite communication of the
information.
d. We propose clarifying that the
director-nominee disclosures discussed
in § 611.330(c)(1) relate to the annual
meeting information statement by
providing a corresponding rule citation
to § 620.21(b).
e. We propose changing the language
in § 620.2(c) regarding the electronic
delivery of reports to shareholders to
clarify that the provision applies only to
those reports individually sent to
shareholders, not all reports.
f. We propose a minor grammatical
change to § 620.4(c) on contents of the
annual report by breaking out the
sentence into two sentences. No change
to the meaning of the paragraph is
intended.
g. We propose to reorganize and
renumber the existing provisions of
§ 620.11 to enhance clarity. No changes
to the meaning of existing language is
proposed, although we propose adding
an additional provision to this section
on incorporating shareholder notices
into a quarterly report, as discussed
earlier.
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2. Incorporating by Reference
[§ 620.2(d)]
We propose changing the language in
§ 620.2(d), which allows System
institutions to incorporate by reference
in their reports. The proposed change is
to specify that information disclosed in
any part of the report may be
incorporated by reference in that report
unless instructions state otherwise. In a
prior rulemaking, we explained that
§ 620.2(d) allowed institutions to
provide information required to be in a
specific section of the annual report
through a reference to another section of
the report.9 The proposed limit on
incorporating by reference would only
exist when a rule limits the location of
a specific disclosure.
3. Signatures on Reports [§ 620.10(c)]
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the
Regulatory Flexibility Act (5 U.S.C. 601
et seq.), the FCA hereby certifies that the
proposed rule would not have a
significant economic impact on a
substantial number of small entities.
Each of the banks in the Farm Credit
System, considered together with its
affiliated associations, has assets and
annual income in excess of the amounts
that would qualify them as small
entities. Therefore, Farm Credit System
institutions are not ‘‘small entities’’ as
defined in the Regulatory Flexibility
Act.
srobinson on DSK4SPTVN1PROD with PROPOSALS
12 CFR Part 611
1. The authority citation for part 611
is revised to read as follows:
Authority: Secs. 1.2, 1.3, 1.4, 1.5, 1.13, 2.0,
2.1, 2.2, 2.10, 2.11, 2.12, 3.0, 3.1, 3.2, 3.21,
4.12, 4.12A, 4.15, 4.20, 4.21, 5.9, 5.17, 6.9,
6.26, 7.0–7.13, 8.5(e) of the Farm Credit Act
(12 U.S.C. 2002, 2011, 2012, 2013, 2021,
2071, 2072, 2073, 2091, 2092, 2093, 2121,
2122, 2123, 2142, 2183, 2184, 2203, 2208,
2209, 2243, 2252, 2278a–9, 2278b–6, 2279a–
2279f–1, 2279aa–5(e)); secs. 411 and 412 of
Pub. L. 100–233, 101 Stat. 1568, 1638; sec.
414 of Pub. L. 100–399, 102 Stat. 989, 1004.
Subpart A—General
2. Section 611.100 is amended by:
a. Redesignating existing paragraphs
(a) through (f) as paragraphs (c) through
(h), respectively; and
b. Adding new paragraphs (a) and (b)
to read as follows:
§ 611.100
Definitions.
*
*
*
*
*
(a) Advisory vote means a nonbinding
vote by the voting stockholders on
certain events of the institution,
including compensation practices.
(b) Business day means a day the
institution is open for business,
excluding the legal public holidays
identified in 5 U.S.C. 6103(a).
*
*
*
*
*
§ 611.330
Agriculture, Banks, banking, Rural
areas.
12 CFR Part 612
Agriculture, Banks, Banking, Conflict
of interests, Crime, Investigations, Rural
areas.
74 FR 28597, June 17, 2009.
16:33 Jan 20, 2012
12 CFR Part 630
Accounting, Agriculture, Banks,
Banking, Organization and functions
(Government agencies), Reporting and
recordkeeping requirements, Rural
areas.
For the reasons stated in the
preamble, parts 611, 612, 619, 620, and
630 of chapter VI, title 12 of the Code
of Federal Regulations are proposed to
be amended as follows:
Subpart C—Election of Directors and
Other Voting Procedures
List of Subjects
VerDate Mar<15>2010
12 CFR Part 620
Accounting, Agriculture, Banks,
Banking, Reporting and recordkeeping
requirements, Rural areas.
PART 611—ORGANIZATION
In developing this proposed rule on
disclosures in annual and quarterly
reports, we noticed an inadvertent
omission in the preparation
requirements of quarterly reports. While
quarterly reports are not required to be
mailed to shareholders, we have always
expected them to contain signatures and
certifications used for other reports.
However, existing § 620.10(a) does not
clearly state this requirement. Therefore,
we propose adding a new paragraph
(a)(3) requiring quarterly reports to be
signed and financial statements
contained in the report to be certified as
complete and accurate.
9 See
12 CFR Part 619
Agriculture, Banks, banking, Rural
areas.
Jkt 226001
[Amended]
3. Section 611.330 is amended by:
a. Removing the reference ‘‘§ 620.5(j)
and (k)’’ and adding in its place, the
reference, ‘‘§ 620.6(e) and (f)’’ in the first
sentence of paragraphs (b)(1) and (b)(2);
and
b. Adding the words ‘‘in accordance
with § 620.21(b)’’ to the end of
paragraph (c)(1).
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3177
4. Subpart C is amended by adding a
new § 611.360 to read as follows:
§ 611.360
Stockholder advisory votes.
(a) Each Farm Credit bank and
association must establish and maintain
written procedures to implement
advisory votes. The procedures, at a
minimum, must:
(1) Identify the subject of the advisory
vote.
(2) Establish the timing, manner, and
notice of the vote.
(i) If the vote will be held in
connection with a stockholder meeting
or director election, notice of the
advisory vote must be part of the
Annual Meeting Information Statement,
pursuant to § 620.21(d).
(ii) The vote may be in-person, by
proxy, or by mail, or any combination
thereof.
(3) For associations, explain the
process for petitioning for an advisory
vote.
(b) Advisory votes are subject to the
requirements of § 611.340 and the
confidential voting provisions of section
4.20 of the Act (12 U.S.C. 2208).
(c) Advisory votes must be cast using
a ‘‘one-member, one-vote’’ voting
scheme and are not subject to the
provisions in § 615.5230 allowing
weighted, cumulative, and other voting
schemes.
Subpart D—Compensation Practices of
Farm Credit Banks and Associations
5. Revise the heading of subpart D to
read as set forth above.
§ 611.400
[Amended]
6. Section 611.400 is amended by:
a. Removing the words ‘‘Farm Credit
System bank’’ and adding in their place
‘‘Farm Credit bank’’ in paragraphs (a)
and (d)(1); and
b. Removing the words ‘‘distribute a
bookletter to all FCS banks that
communicates’’ and adding in their
place the word ‘‘communicate’’ in the
last sentence of paragraph (b).
7. Subpart D is amended by adding a
new § 611.410 to read as follows:
§ 611.410
Compensation of senior officers.
(a) If compensation for the chief
executive officer either increases or
decreases 15 percent or more from the
previous reporting period, then the bank
or association must present the
compensation to voting stockholders for
an advisory vote. Such advisory vote
must be held in accordance with the
provisions of § 611.360. Advisory votes
on compensation resulting solely from a
change in the chief executive officer
during the reporting period are not
required.
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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules
(b) If senior officer compensation, as
reported in the aggregate, either
increases or decreases 15 percent or
more from the previous reporting
period, then the bank or association
must present the compensation to
voting stockholders for an advisory vote.
Such advisory vote must be held in
accordance with the provisions of
§ 611.360. Advisory votes on
compensation resulting solely from a
change in senior officers included in the
aggregate during the reporting period
are not required.
(c) Each association must hold an
advisory vote on compensation paid to
chief executive officers, or senior
officers in the aggregate, in accordance
with the provisions of § 611.360 when 5
percent of the association’s voting
stockholders petition for an advisory
vote.
(d) Each association must disclose in
its annual report to shareholders the
authority to petition for an advisory vote
on senior officer compensation. The
disclosure must also state if a petition
was submitted during the reporting
period, disclosing if it was certified and
a vote held and, if applicable, the results
of the vote.
PART 612—STANDARDS OF
CONDUCT AND REFERRAL OF
KNOWN OR SUSPECTED CRIMINAL
VIOLATIONS
8. The authority citation for part 612
continues to read as follows:
Authority: Secs. 5.9, 5.17, 5.19 of the Farm
Credit Act (12 U.S.C. 2243, 2252, 2254).
Subpart A—Standards of Conduct
§ 612.2145
[Amended]
9. Section 612.2145 is amended by
removing the reference ‘‘§ 620.5(k)’’ and
adding in its place, the reference
‘‘§ 620.6 (f)’’ in paragraph (a)(2).
§ 612.2155
[Amended]
10. Section 612.2155 is amended by
removing the reference ‘‘§ 620.5 (k)’’ and
adding in its place, the reference
‘‘§ 620.6 (f)’’ in paragraph (a)(2).
srobinson on DSK4SPTVN1PROD with PROPOSALS
§ 612.2165
[Amended]
11. Section 612.2165 is amended by
removing the reference ‘‘§ 620.5’’ and
adding in its place ‘‘§§ 620.5 and 620.6’’
in paragraph (b)(12).
PART 619—DEFINITIONS
12. The authority citation for part 619
is revised to read as follows:
Authority: Secs. 1.4, 1.5, 1.7, 2.1, 2.2, 2.4,
2.11, 2.12, 3.1, 3.2, 3.21, 4.9, 5.9, 5.17, 5.19,
7.0, 7.1, 7.6, 7.8 and 7.12 of the Farm Credit
Act (12 U.S.C. 2012, 2013, 2015, 2072, 2073,
VerDate Mar<15>2010
16:33 Jan 20, 2012
Jkt 226001
2075, 2092, 2093, 2122, 2123, 2142, 2160,
2243, 2252, 2254, 2279a, 2279a–1, 2279b,
2279c–1, 2279f); sec. 514 of Pub. L. 102–552,
106 Stat. 4102.
13. Part 619 is amended by adding a
new § 619.9335 to read as follows:
§ 619.9335 Supplemental retirement plan
or supplemental executive retirement plan.
A nonqualified retirement plan that
provides benefits in addition to those
covered by other retirement plans for all
employees and funded in whole or part
by a Farm Credit bank or association.
PART 620—DISCLOSURE TO
SHAREHOLDERS
14. The authority citation for part 620
is revised to read as follows:
Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.17,
5.19 of the Farm Credit Act (12 U.S.C. 2154,
2154a, 2207, 2243, 2252, 2254); sec. 424 of
Pub. L. 100–233, 101 Stat. 1568, 1656; sec.
514 of Pub. L. 102–552, 106 Stat. 4102.
Subpart A—General
15. Section 620.2 is amended by
revising paragraphs (c) and (d) to read
as follows:
§ 620.2
Preparing and filing reports.
*
*
*
*
*
(c) The reports sent to shareholders
must comply with the requirements of
§ 620.3 of this part and shareholders
must agree to electronic delivery of
those reports.
(d) Information in any part of a report
may be incorporated by reference in
answer or partial answer to any other
item of the report, unless instructions
for the report state otherwise.
*
*
*
*
*
Subpart B—Annual Report to
Shareholders
16. Section 620.4 is amended by
revising paragraph (c) to read as follows:
§ 620.4 Preparing and providing the
annual report.
*
*
*
*
*
(c) The report must contain, at a
minimum, the information required by
§§ 620.5 and 620.6. In addition, the
report must contain such other
information as is necessary to make the
required statements, in light of the
circumstances under which they are
made, not misleading.
17. Section 620.5 is amended by:
a. Adding new paragraphs (a)(11) and
(e)(4);
b. Revising paragraph (h);
c. Removing paragraphs (i), (j), and
(k); and
d. Redesignating existing paragraphs
(l), (m), and (n) as paragraphs (i), (j), and
(k), respectively, to read as follows:
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§ 620.5 Contents of the annual report to
shareholders.
*
*
*
*
*
(a) Description of business.
*
*
*
*
*
(11) The types of advisory votes held
during the reporting period and the
results of the vote(s).
*
*
*
*
*
(e) Description of liabilities.
*
*
*
*
*
(4) Describe any supplemental
retirement plans funded by the
institution on behalf of employees
whose benefits are not included in the
Pension Benefits Table in § 620.6(c) of
this part. Disclose the present value of
the aggregate accumulated benefits of
funded, unfunded, and unvested
obligations related to the plan(s).
*
*
*
*
*
(h) Directors and senior officers. In a
separate section of the annual report,
make the disclosures required in § 620.6
of this part.
*
*
*
*
*
18. Subpart B is amended by adding
a new § 620.6 to read as follows:
§ 620.6 Disclosures in the annual report to
shareholders relating to directors and
senior officers.
(a) General.
(1) List the names of all directors and
senior officers of the institution,
indicating the position title and term of
office of each director, and the position,
title, and date each senior officer
commenced employment in his or her
current position.
(2) Briefly describe the business
experience during the past 5 years of
each director and senior officer,
including each person’s principal
occupation and employment during the
past 5 years.
(3) For each director and senior
officer, list any other business interest
where the director or senior officer
serves on the board of directors or as a
senior officer. Name the position held
and state the principal business in
which the business is engaged.
(b) Compensation of directors.
Describe the arrangements under which
directors of the institution are
compensated for all services as a
director (including total cash
compensation and noncash
compensation). Noncash compensation
with an annual aggregate value of less
than $5,000 does not have to be
reported. State the total cash and
reportable noncash compensation paid
to all directors as a group during the last
fiscal year. For the purposes of this
paragraph, disclosure of compensation
paid to and days served by directors
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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules
applies to any director who served in
that capacity at any time during the
reporting period. If applicable, describe
any exceptional circumstances
justifying the additional director
compensation as authorized by
§ 611.400(c) of this chapter. For each
director, state:
(1) The number of days served at
board meetings;
(2) The total number of days served in
other official activities, including any
board committee(s);
(3) Any additional compensation paid
for service on a board committee,
naming the committee; and
(4) The total cash and noncash
compensation paid to each director
during the last fiscal year. Reportable
compensation includes cash and the
value of noncash items provided by a
third party to a director for services
rendered by the director on behalf of the
reporting Farm Credit institution.
Noncash compensation with an annual
aggregate value of less than $5,000 does
not have to be reported.
(c) Compensation of senior officers.
Disclose the information on senior
officer compensation and compensation
plans as required by this paragraph. The
institution must disclose the total
amount of compensation paid to senior
officers in substantially the same
manner as the tabular form specified in
the Summary Compensation Table
(Compensation Table), located in
paragraph (c)(3) of this section.
(1) For each of the last 3 completed
fiscal years, report the total amount of
compensation paid and the amount of
each component of compensation paid
to the institution’s chief executive
officer (CEO), naming the individual. If
more than one person served in the
capacity of CEO during any given fiscal
year, individual compensation
disclosures must be provided for each
CEO.
(2) For each of the last 3 completed
fiscal years, report the aggregate amount
of compensation paid, and the
components of compensation paid, to
all senior officers as a group, stating the
number of officers in the group without
naming them.
(i) If applicable, when any employee
who is not a senior officer has annual
compensation at a level that is among
the five highest paid by the institution
during the reporting period, include the
highly compensated employee(s) in the
aggregate number and amount of
compensation reported in the
Compensation Table.
(ii) The report containing the
aggregate compensation disclosure must
include a statement that disclosure of
information on the total compensation
paid during the last fiscal year to any
senior officer, or to any other employee
included in the aggregate, is available
and will be disclosed to shareholders of
the institution and shareholders of
related associations (if applicable) upon
request. This statement must be located
directly beneath the Compensation
Table.
(3) The institution must complete the
Compensation Table, or something
substantially similar, according to the
following instructions:
SUMMARY COMPENSATION TABLE
Annual
Name of individual or number in group
Year
Salary
Bonus
Deferred/
perquisite
Other
Total
(a)
(b)
(c)
(d)
(e)
(f)
(g)
CEO .........................................................
20XX
20XX
20XX
$
$
$
$
$
srobinson on DSK4SPTVN1PROD with PROPOSALS
Aggregate number of Senior Officers (&
other highly compensated employees,
if applicable):
(X) .....................................................
(X) .....................................................
(X) .....................................................
20XX
20XX
20XX
(i) Amounts shown as ‘‘Salary’’
(column (c)) and ‘‘Bonus’’ (column (d))
must reflect the dollar value of salary
and bonus earned by the senior officer
during the fiscal year. Amounts
contributed during the fiscal year by the
senior officer pursuant to a plan
established under section 401(k) of the
Internal Revenue Code, or similar plan,
must be included in the salary column
or bonus column, as appropriate. If the
amount of salary or bonus earned during
the fiscal year is not calculable by the
time the report is prepared, the
reporting institution must provide its
best estimate of the compensation
amount(s) and disclose that fact in a
footnote to the table.
(ii) Amounts shown as ‘‘deferred/
perquisites’’ (column (e)) must reflect
the dollar value of other annual
compensation not properly categorized
as salary or bonus, including but not
limited to:
(A) Deferred compensation earned
during the fiscal year, whether or not
paid in cash; or
(B) Perquisites and other personal
benefits, including the value of noncash
items, unless the annual aggregate value
of such perquisites is less than $5,000.
Reportable perquisites include cash and
the value of noncash items provided by
a third party to a senior officer for
services rendered by the officer on
behalf of the reporting institution.
Reportable other personal benefits
include the dollar value of any tax
reimbursement provided by the
institution.
(iii) Compensation amounts reported
under the category ‘‘Other’’ (column (f))
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16:33 Jan 20, 2012
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must reflect the dollar value of all other
compensation not properly reportable in
any other column. Items reported in this
column must be specifically identified
and described in a footnote to the table,
including compensation relating to
pensions and defined benefit plans that
may also be reported in the ‘‘Pension
Benefits Table’’ at paragraph (c)(4) of
this section. ‘‘Other’’ compensation
includes, but is not limited to:
(A) The amount paid to the senior
officer pursuant to a plan or
arrangement in connection with the
resignation, retirement, or termination
of such officer’s employment with the
institution;
(B) The amount of contributions by
the institution on behalf of the senior
officer to a vested or unvested defined
contribution plan unless the plan is
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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules
made available to all employees on the
same basis.
(iv) Amounts displayed under ‘‘Total’’
(column (g)) shall reflect the sum total
of amounts reported in columns (c), (d),
(e), and (f).
(4) If the institution provides a
defined benefit plan or a supplemental
executive retirement plan (SERP) to its
senior officers, the institution must
complete the following Pension Benefits
Table, or something substantially
similar, for each plan according to the
following instructions:
PENSION BENEFITS TABLE
Annual
Years of
credited
service
Funded
Unfunded
Unvested
Total
........................
$
$
$
$
Name of individual
srobinson on DSK4SPTVN1PROD with PROPOSALS
CEO .....................................................................................
Senior Officers as a Group (& other highly compensated
employees, if applicable).
(i) Report separately the present value
of accumulated benefits for the CEO and
the senior officer group.
(ii) Report the number of credited
years of service in ‘‘Years of credited
service’’ column.
(iii) Report the amount of the plan(s)
that is unfunded in ‘‘Unfunded’’
column.
(iv) Report any off-balance sheet
commitments, such as benefits earned
but not yet vested, in the ‘‘unvested’’
column.
(v) Report the sum of the funded,
unfunded, and unvested columns in the
‘‘Total’’ column.
(5) Provide a description of all
compensation, retirement, incentive,
performance, and other benefit plans
(plans) pursuant to which cash or
noncash compensation was paid or
distributed during the last fiscal year, or
is proposed to be paid or distributed in
the future for performance during the
last fiscal year, to those individuals
included in the Compensation Table.
The description of each plan must
include, but not be limited to:
(i) A summary of how each plan
operates and who is covered by the
plan. The summary must include the
criteria used to determine amounts
payable, including any performance
formula or measure, as well as the time
period over which the measurement of
compensation will be determined,
payment schedules, and any material
amendments to the plan during the last
fiscal year.
(ii) The overall risk and reward
structure of the plan as it relates to
senior officers’ compensation. The
description must include, at a
minimum, how each plan is compatible
with and promotes the institution’s
goals and business strategy and the
mission as a Government-sponsored
enterprise.
(iii) A discussion of the relationship
between the CEO and senior officers’
compensation to the reporting
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institution’s overall performance. The
disclosure must also discuss the
relationship between the CEO’s and
senior officers’ compensation to their
performance.
(6) In the same vicinity as the
Compensation Table, discuss any
advisory votes that were held under the
provisions of § 611.410 of this chapter
during the reporting period and the
results of the vote(s). For associations,
include a discussion of whether or not
the vote resulted from a shareholder
petition. Each association must disclose
in this same location the authority of
shareholders to petition for an advisory
vote on CEO and senior officer
compensation.
(7) Associations may disclose the
information required by paragraph (c) of
this section in the Annual Meeting
Information Statement (AMIS) pursuant
to subpart E of this part. Associations
exercising this option must include a
reference in the annual report stating
that the senior officer compensation
information is included in the AMIS
and that the AMIS is available for public
inspection at the reporting association
offices pursuant to § 620.2(b).
(d) Travel, subsistence, and other
related expenses.
(1) Briefly describe your policy
addressing reimbursements for travel,
subsistence, and other related expenses
as it applies to directors and senior
officers. The report shall include a
statement that a copy of the policy is
available to shareholders of the
institution and shareholders of related
associations (if applicable) upon
request.
(2) For each of the last 3 fiscal years,
state the aggregate amount of
reimbursement for travel, subsistence,
and other related expenses for all
directors as a group.
(e) Transactions with senior officers
and directors.
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(1) State the institution’s policies, if
any, on loans to and transactions with
officers and directors of the institution.
(2) Transactions other than loans. For
each person who served as a senior
officer or director on January 1 of the
year following the fiscal year of which
the report is filed, or at any time during
the fiscal year just ended, describe
briefly any transaction or series of
transactions other than loans that
occurred at any time since the last
annual meeting between the institution
and such person, any member of the
immediate family of such person, or any
organization with which such person is
affiliated.
(i) For transactions relating to the
purchase or retirement of preferred
stock issued by the institution, state the
name of each senior officer or director
that held preferred stock issued by the
institution during the reporting period,
the current amount of preferred stock
held by the senior officer or director, the
average dividend rate on the preferred
stock currently held, and the amount of
purchases and retirements by the
individual during the reporting period.
(ii) For all other transactions, state the
name of the senior officer or director
who entered into the transaction or
whose immediate family member or
affiliated organization entered into the
transaction, the nature of the person’s
interest in the transaction, and the terms
of the transaction. No information need
be given where the purchase price, fees,
or charges involved were determined by
competitive bidding or where the
amount involved in the transaction
(including the total of all periodic
payments) does not exceed $5,000, or
the interest of the person arises solely as
a result of his or her status as a
stockholder of the institution and the
benefit received is not a special or extra
benefit not available to all stockholders.
(3) Loans to senior officers and
directors.
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(i) To the extent applicable, state that
the institution (or in the case of an
association that does not carry loans to
its senior officers and directors on its
books, its related bank) has had loans
outstanding during the last full fiscal
year to date to its senior officers and
directors, their immediate family
members, and any organizations with
which such senior officers or directors
are affiliated that:
(A) Were made in the ordinary course
of business; and
(B) Were made on the same terms,
including interest rate, amortization
schedule, and collateral, as those
prevailing at the time for comparable
transactions with other persons.
(ii) To the extent applicable, state that
no loan to a senior officer or director, or
to any organization affiliated with such
person, or to any immediate family
member who resides in the same
household as such person or in whose
loan or business operation such person
has a material financial or legal interest,
involved more than the normal risk of
collectability; provided that no such
statement need be made with respect to
any director or senior officer who has
resigned before the time for filing the
applicable report with the Farm Credit
Administration (but in no case later
than the actual filing), or whose term of
office will expire or terminate no later
than the date of the meeting of
stockholders to which the report relates.
(iii) If the conditions stated in
paragraphs (e)(3)(i) and (ii) of this
section do not apply to the loans of the
persons or organizations specified
therein, with respect to such loans state:
(A) The name of the officer or director
to whom the loan was made or to whose
relative or affiliated organization the
loan was made.
(B) The largest aggregate amount of
each indebtedness outstanding at any
time during the last fiscal year.
(C) The nature of the loan(s).
(D) The amount outstanding as of the
latest practicable date.
(E) The reasons the loan does not
comply with the criteria contained in
paragraphs (e)(3)(i) and (e)(3)(ii) of this
section.
(F) If the loan does not comply with
paragraph (e)(3)(i)(B) of this section, the
rate of interest payable on the loan and
the repayment terms.
(G) If the loan does not comply with
paragraph (e)(3)(ii) of this section, the
amount past due, if any, and the reason
the loan is deemed to involve more than
a normal risk of collectability.
(f) Involvement in certain legal
proceedings. Describe any of the
following events that occurred during
the past 5 years and that are material to
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an evaluation of the ability or integrity
of any person who served as director or
senior officer on January 1 of the year
following the fiscal year for which the
report is filed or at any time during the
fiscal year just ended:
(1) A petition under the Federal
bankruptcy laws or any State insolvency
law was filed by or against, or a
receiver, fiscal agent, or similar officer
was appointed by a court for the
business or property of such person, or
any partnership in which such person
was a general partner at or within 2
years before the time of such filing, or
any corporation or business association
of which such person was a senior
officer at or within 2 years before the
time of such filing;
(2) Such person was convicted in a
criminal proceeding or is a named party
in a pending criminal proceeding
(excluding traffic violations and other
misdemeanors);
(3) Such person was the subject of any
order, judgment, or decree, not
subsequently reversed, suspended, or
vacated, by any court of competent
jurisdiction, permanently or temporarily
enjoining or otherwise limiting such
person from engaging in any type of
business practice.
Subpart C—Quarterly Report
19. Section 620.10 is amended by:
a. Revising paragraph (a); and
b. Adding a new paragraph (c) to read
as follows:
§ 620.10
Preparing the quarterly report.
(a) Each institution of the Farm Credit
System must:
(1) Prepare and send to the Farm
Credit Administration an electronic
copy of its quarterly report within 40
calendar days after the end of each fiscal
quarter, except that no report need be
prepared for the fiscal quarter that
coincides with the end of the fiscal year
of the institution;
(2) Publish a copy of its quarterly
report on its Web site when it
electronically sends the report to the
Farm Credit Administration; and
(3) Ensure the report complies with
the applicable provisions of §§ 620.2
and 620.3 of this part.
*
*
*
*
*
(c) Institutions may use the quarterly
report to deliver any notice required
under § 620.15 of this part. Notices
required under § 620.17 must be issued
separately from the quarterly report,
unless otherwise authorized by the
Farm Credit Administration.
20. Section 620.11 is amended by:
a. Revising the introductory text of
paragraph (b), paragraphs (c) and (d);
and
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3181
b. Removing paragraphs (e) and (f) to
read as follows:
§ 620.11 Content of quarterly report to
shareholders.
*
*
*
*
*
(b) Rules for condensation. For
purposes of this section, major captions
to be provided in the financial
statements are the same as those
provided in the financial statements
contained in the institution’s annual
report to shareholders, except that the
financial statements included in the
quarterly report may be condensed into
major captions in accordance with the
rules prescribed under this paragraph. If
any amount that would otherwise be
required to be shown by this subpart
with respect to any item is not material,
it need not be separately shown. The
combination of insignificant items is
permitted.
*
*
*
*
*
(c) Required content. A quarterly
report must, at a minimum, contain the
following items:
(1) Management’s discussion and
analysis of financial condition and
results of operations. Discuss material
changes, if any, to the information
provided to shareholders pursuant to
§ 620.5(g) that have occurred during the
periods specified in paragraphs (c)(2)(i)
and (ii) of this section. Such additional
information as is needed to enable the
reader to assess material changes in
financial condition and results of
operations between the periods
specified in paragraphs (c)(2)(i) and (ii)
of this section shall be provided.
(i) Material changes in financial
condition. Discuss any material changes
in financial condition from the end of
the preceding fiscal year to the date of
the most recent interim balance sheet
provided. If the interim financial
statements include an interim balance
sheet as of the corresponding interim
date of the preceding fiscal year, any
material changes in financial conditions
from that date to the date of the most
recent interim balance sheet provided
also shall be discussed. If discussions of
changes from both the end and the
corresponding interim date of the
preceding fiscal year are required, the
discussions may be combined at the
discretion of the institution.
(ii) Material changes in results of
operations. Discuss any material
changes in the institution’s results of
operations with respect to the most
recent fiscal year-to-date period for
which an income statement is provided
and the corresponding year-to-date
period of the preceding fiscal year. Such
discussion also shall cover material
changes with respect to that fiscal
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quarter and the corresponding fiscal
quarter in the preceding fiscal year. In
addition, if the institution has elected to
provide an income statement for the 12month period ended as of the date of the
most recent interim balance sheet
provided, the discussion also shall
cover material changes with respect to
that 12-month period and the 12-month
period ended as of the corresponding
interim balance sheet date of the
preceding fiscal year.
(2) Interim financial statements. The
following financial statements must be
provided:
(i) An interim balance sheet as of the
end of the most recent fiscal quarter and
as of the end of the preceding fiscal
year. A balance sheet for the comparable
quarter of the preceding fiscal year is
optional.
(ii) Interim statements of income for
the most recent fiscal quarter, for the
period between the end of the preceding
fiscal year and the end of the most
recent fiscal quarter, and for the
comparable periods for the previous
fiscal year.
(iii) Interim statements of changes in
protected borrower capital and at-risk
capital for the period between the end
of the preceding fiscal year and the end
of the most recent fiscal quarter, and for
the comparable period for the preceding
fiscal year.
(iv) For banks, interim statements of
cash flows for the period between the
end of the preceding fiscal year and the
end of the most recent fiscal quarter,
and for the comparable period for the
preceding fiscal year. For associations,
interim statements of cash flows are
optional.
(3) Other related financial items. State
that the financial statements were
prepared under the oversight of the
audit committee. The interim financial
information need not be audited or
reviewed by a qualified public
accountant or external auditor prior to
filing. If, however, a review of the data
is made in accordance with the
established professional standards and
procedures for such a review, the
institution may state that a qualified
public accountant or external auditor
has performed such a review under the
supervision of the institution’s audit
committee. If such a statement is made,
the report of a qualified public
accountant or external auditor on such
review must accompany the interim
financial information.
(d) Notices. Institutions using the
quarterly report to deliver any notice
required under § 620.15 of this part
must put the notice information at the
beginning of the quarterly report. The
notice must be conspicuous and may
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16:33 Jan 20, 2012
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not be part of any footnotes to the
quarterly report. Notices that are made
part of the quarterly report must comply
with the provisions of both this section
and § 620.15.
Subpart D—Notice to Shareholders
21. Subpart D is amended by revising
§§ 620.15 and 620.17 to read as follows:
§ 620.15
events.
Notice of significant or material
(a) When a Farm Credit bank or
association determines that it has a
significant or material event, the
institution must prepare and provide to
its shareholders and the Farm Credit
Administration a notice disclosing the
event(s).
(1) Events covered under this
provision include significant events
defined in § 620.1(q) and material
events defined in § 620.1(h).
(2) At a minimum, a notice must be
issued for significant or material events
involving compensation, retirement and
benefit plans, capitalization plans or
bylaws, results of shareholder votes,
early director departures, unplanned
departure of a senior officer, letters of
intent to merge, changes in external
auditors, and reportable Farm Credit
Administration supervisory and
enforcement actions.
(b) A notice issued under this section
must be made as soon as possible, but
not later than 90 days after occurrence
of the event.
(1) Each institution must
electronically provide the notice to the
Farm Credit Administration at the same
time as distribution of the notice to
shareholders.
(2) Delivery of the notice to
shareholders may be accomplished by
direct communications with the
shareholders, posting the notice on the
institution’s Web site, as part of the
quarterly report to shareholders, or by
publishing the notice in any publication
with circulation wide enough to
reasonably assure that all of the
institution’s shareholders have access to
the information in a timely manner.
(c) Every notice must be dated and
signed in a manner similar to the
requirements of § 620.3(b).
(d) The information required to be
included in a notice issued under this
section must be conspicuous, easily
understandable, complete, accurate, and
not misleading.
§ 620.17 Special notice provisions for
events related to minimum permanent
capital.
(a) When a Farm Credit bank or
association determines that it is not in
compliance with the minimum
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permanent capital standard prescribed
under § 615.5205 of this chapter, that
institution must prepare and provide to
its shareholders and the Farm Credit
Administration a notice stating that the
institution has initially determined it is
not in compliance with minimum
permanent capital standards. Such
notice must be given within 30 days
following the month end.
(b) When notice is given under
paragraph (a) of this section, the
institution must also notify its
shareholders and the Farm Credit
Administration when the institution’s
permanent capital ratio decreases by
one half of 1 percent or more from the
level reported in the original notice, or
from that reported in a subsequent
notice provided under this paragraph.
This notice must be given within 45
days following the end of every quarter
at which the institution’s permanent
capital ratio decreases as specified.
(c) Each institution required to
prepare a notice under paragraphs (a) or
(b) of this section shall provide the
notice to shareholders or publish it in
any publication with circulation wide
enough to be reasonably assured that all
of the institution’s shareholders have
access to the information in a timely
manner. The information required to be
included in this notice must be
conspicuous, easily understandable, and
not misleading.
(d) A notice, at a minimum, shall
include:
(1) A statement that:
(i) Briefly describes the regulatory
minimum permanent capital standard
established by the Farm Credit
Administration and the notice
requirement of paragraph (a) of this
section;
(ii) Indicates the institution’s current
level of permanent capital; and
(iii) Notifies shareholders that the
institution’s permanent capital is below
the Farm Credit Administration
regulatory minimum standard.
(2) A statement of the effect that
noncompliance has had on the
institution and its shareholders,
including whether the institution is
currently prohibited by statute or
regulation from retiring stock or
distributing earnings or whether the
Farm Credit Administration has issued
a capital directive or other enforcement
action to the institution.
(3) A complete description of any
event(s) that may have significantly
contributed to the institution’s
noncompliance with the minimum
permanent capital standard.
(4) A statement that the institution is
required by regulation to provide
another notice to shareholders within 45
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days following the end of any
subsequent quarter at which the
institution’s permanent capital ratio
decreases by one half of 1 percent or
more from the level reported in the
notice.
Subpart E—Annual Meeting
Information Statements and Other
Information To Be Furnished in
Connection With Annual Meetings and
Director Elections
22. Section 620.21 is amended by
revising paragraph (a)(3)(i) to read as
follows:
§ 620.21 Contents of the information
statement.
(a) * * *
(3) * * *
(i) If any transactions between the
institution and its senior officers and
directors of the type required to be
disclosed in the annual report to
shareholders under § 620.6(e), or any of
the events required to be disclosed in
the annual report to shareholders under
§ 620.6(f) have occurred since the end of
the last fiscal year and were not
disclosed in the annual report to
shareholders, the disclosures required
by § 620.6(e) and (f) shall be made with
respect to such transactions or events in
the information statement. If any
material change in the matters disclosed
in the annual report to shareholders
pursuant to § 620.6(e) and (f) has
occurred since the annual report to
shareholders was prepared, disclosure
shall be made of such change in the
information statement.
*
*
*
*
*
Subpart F—Bank and Association
Audit and Compensation Committees
23. Section 620.31 is revised to read
as follows:
srobinson on DSK4SPTVN1PROD with PROPOSALS
§ 620.31
Compensation committees.
Each Farm Credit bank and
association must establish and maintain
a compensation committee by adopting
a written charter describing the
committee’s composition, authorities,
and responsibilities in accordance with
this section. The compensation
committee must report only to the board
of directors. All compensation
committees will be required to maintain
records of meetings, including
attendance, for at least 3 fiscal years.
(a) Composition. Each compensation
committee must consist of at least three
members and all committee members
must be members of the institution’s
board of directors. Every member must
be free from any relationship that, in the
opinion of the board, would interfere
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with the exercise of independent
judgment as a committee member.
(b) Responsibilities. It is the
responsibility of each compensation
committee to review the compensation
policies and plans for senior officers
and employees and to approve the
overall compensation program for senior
officers. In fulfilling its responsibilities,
the compensation committee must
document that it:
(1) Analyzed the institution’s
projected long-term compensation and
retirement benefit obligations and
determined such obligations are
appropriate to the services performed
and not excessive.
(2) Reviewed incentive-based
compensation programs and payments
and determined that they were not
unreasonable or disproportionate to the
services performed and were structured
so the payout schedule considered the
potential for future losses or risks to the
institution.
(3) Reviewed senior officer
compensation, incentive and benefit
programs and determined that they
support the institution’s long-term
business strategy, as well as promote
safe and sound business practices.
(4) Reviewed compensation programs
designed for specific groups of
employees, other than senior officers, to
ensure the plan(s) pose no imprudent
risk to the institution.
(c) Resources. Each institution must
provide monetary and nonmonetary
resources to enable its compensation
committee to perform its duties.
PART 630—DISCLOSURE TO
INVESTORS IN SYSTEM–WIDE AND
CONSOLIDATED BANK DEBT
OBLIGATIONS OF THE FARM CREDIT
SYSTEM
24. The authority citation for part 630
is revised to read as follows:
Authority: Secs. 4.2, 4.9, 5.9, 5.17, 5.19 of
the Farm Credit Act (12 U.S.C. 2153, 2160,
2243, 2252, 2254); sec. 424 of Pub. L. 100–
233, 101 Stat. 1568, 1656; sec. 514 of Pub. L.
102–552, 106 Stat. 4102.
Subpart A—General
25. Section 630.6 is amended by
revising paragraph (b) to read as follows:
§ 630.6
Funding Corporation committees.
*
*
*
*
*
(b) Compensation committee. The
Funding Corporation must establish and
maintain a compensation committee by
adopting a written charter describing
the committee’s composition,
authorities, and responsibilities in
accordance with this section. The
compensation committee must report
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3183
only to the board of directors. The
compensation committee will be
required to maintain records of
meetings, including attendance, for at
least 3 fiscal years.
(1) Composition. The committee must
consist of at least three members and all
members must be members of the
Funding Corporation’s board of
directors. Every compensation
committee member must be free from
any relationship that, in the opinion of
the board, would interfere with the
exercise of independent judgment as a
committee member.
(2) Responsibilities. It is the
responsibility of the compensation
committee to review the compensation
policies and plans for senior officers
and employees and to approve the
overall compensation program for senior
officers. In fulfilling its responsibilities,
the compensation committee must
document that it:
(i) Analyzed the Funding
Corporation’s projected long-term
compensation and retirement benefit
obligations and determined such
obligations are appropriate to the
services performed and not excessive.
(ii) Reviewed incentive-based
compensation programs and payments
and determined that they were not
unreasonable or disproportionate to the
services performed and were structured
so the payout schedule considered the
potential for future losses or risks to the
Funding Corporation.
(iii) Reviewed senior officer
compensation, incentive and benefit
programs and determined that they
support the Funding Corporation’s longterm business strategy and mission, as
well as continue to promote safe and
sound business practices.
(3) Resources. The Funding
Corporation must provide monetary and
nonmonetary resources to enable its
compensation committee to perform its
duties.
Subpart B—Annual Report to Investors
26. Section 630.20 is amended by
revising paragraph (i) to read as follows:
§ 630.20 Contents of the annual report to
investors.
*
*
*
*
*
(i) Compensation of directors and
senior officers. State that information on
the compensation of directors and
senior officers of Farm Credit banks is
contained in each bank’s annual report
to shareholders and that the annual
report of each bank is available to
investors upon request pursuant to
§ 630.3(g). State whether advisory votes
were held in any of the disclosure
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entities during the reporting period and
the results of such vote.
*
*
*
*
*
Dated: January 12, 2012.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2012–901 Filed 1–20–12; 8:45 am]
BILLING CODE 6705–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2012–0034; Directorate
Identifier 2011–NM–153–AD]
RIN 2120–AA64
Airworthiness Directives; Bombardier,
Inc. Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
We propose to adopt a new
airworthiness directive (AD) for certain
Bombardier, Inc. Model CL–600–2B19
(Regional Jet Series 100 & 440)
airplanes. This proposed AD was
prompted by a report of a fire which
started in the vicinity of an electrical
panel that was fed by oxygen escaping
from a damaged third crew person
oxygen line that occurred while the
airplane was on the ground. This
proposed AD would require replacing
and changing the routing of the flexible
oxygen hose of the third crew person
oxygen line and modifying the entrance
compartment assembly. We are
proposing this AD to prevent the
possibility of damage to the third crew
person oxygen line and an oxygen-fed
fire in the airplane.
DATES: We must receive comments on
this proposed AD by March 8, 2012.
ADDRESSES: You may send comments by
any of the following methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: (202) 493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE.,
Washington, DC 20590.
• Hand Delivery: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE.,
Washington, DC, between 9 a.m. and
5 p.m., Monday through Friday, except
Federal holidays.
srobinson on DSK4SPTVN1PROD with PROPOSALS
SUMMARY:
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16:33 Jan 20, 2012
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For service information identified in
this proposed AD, contact Bombardier,
ˆ
Inc., 400 Cote-Vertu Road West, Dorval,
´
Quebec H4S 1Y9, Canada; telephone
(514) 855–5000; fax (514) 855–7401;
email thd.crj@aero.bombardier.com;
Internet https://www.bombardier.com.
You may review copies of the
referenced service information at the
FAA, Transport Airplane Directorate,
1601 Lind Avenue SW., Renton,
Washington. For information on the
availability of this material at the FAA,
call (425) 227–1221.
Examining the AD Docket
You may examine the AD docket on
the Internet at https://
www.regulations.gov; or in person at the
Docket Operations office between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket
contains this proposed AD, the
regulatory evaluation, any comments
received, and other information. The
street address for the Docket Operations
office (telephone (800) 647–5527) is in
the ADDRESSES section. Comments will
be available in the AD docket shortly
after receipt.
FOR FURTHER INFORMATION CONTACT:
Cesar Gomez, Aerospace Engineer,
Airframe and Mechanical Systems
Branch, ANE–171, FAA, New York
Aircraft Certification Office, 1600
Stewart Avenue, Suite 410, Westbury,
New York 11590; telephone (516) 228–
7318; fax (516) 794–5531.
SUPPLEMENTARY INFORMATION:
Comments Invited
We invite you to send any written
relevant data, views, or arguments about
this proposed AD. Send your comments
to an address listed under the
ADDRESSES section. Include ‘‘Docket No.
FAA–2012–0034; Directorate Identifier
2011–NM–153–AD’’ at the beginning of
your comments. We specifically invite
comments on the overall regulatory,
economic, environmental, and energy
aspects of this proposed AD. We will
consider all comments received by the
closing date and may amend this
proposed AD based on those comments.
We will post all comments we
receive, without change, to https://
www.regulations.gov, including any
personal information you provide. We
will also post a report summarizing each
substantive verbal contact we receive
about this proposed AD.
Discussion
Transport Canada Civil Aviation
(TCCA), which is the aviation authority
for Canada, has issued Canadian
Airworthiness Directive CF–2011–23,
dated July 14, 2011 (referred to after this
PO 00000
Frm 00026
Fmt 4702
Sfmt 4702
as ‘‘the MCAI’’), to correct an unsafe
condition for the specified products.
The MCAI states:
An operator has reported a ground fire in
the CL–600–2B19 aeroplane. The fire burnt
an 18 inch hole through the left upper
fuselage skin panel in the cockpit area. The
fire started in the vicinity of the Junction Box
1 (JB1) electrical panel, and was fed by
oxygen escaping from a damaged third
crewman oxygen line.
This [TCCA] Airworthiness Directive (AD)
was issued to prevent the possibility of
damage to the third crewman oxygen line
and an oxygen fed fire in the aeroplane.
The required actions include
replacing and changing the routing of
the flexible oxygen hose of the third
crew person oxygen line and modifying
the entrance compartment assembly.
You may obtain further information by
examining the MCAI in the AD docket.
Relevant Service Information
Bombardier has issued Service
Bulletin 601R–35–017, Revision A,
dated June 9, 2011. The actions
described in this service information are
intended to correct the unsafe condition
identified in the MCAI.
FAA’s Determination and Requirements
of This Proposed AD
This product has been approved by
the aviation authority of another
country, and is approved for operation
in the United States. Pursuant to our
bilateral agreement with the State of
Design Authority, we have been notified
of the unsafe condition described in the
MCAI and service information
referenced above. We are proposing this
AD because we evaluated all pertinent
information and determined an unsafe
condition exists and is likely to exist or
develop on other products of the same
type design.
Costs of Compliance
Based on the service information, we
estimate that this proposed AD would
affect about 588 products of U.S.
registry. We also estimate that it would
take about 13 work-hours per product to
comply with the basic requirements of
this proposed AD. The average labor
rate is $85 per work-hour. Required
parts would cost about $108 per
product. Where the service information
lists required parts costs that are
covered under warranty, we have
assumed that there will be no charge for
these parts. As we do not control
warranty coverage for affected parties,
some parties may incur costs higher
than estimated here. Based on these
figures, we estimate the cost of the
proposed AD on U.S. operators to be
$713,244, or $1,213 per product.
E:\FR\FM\23JAP1.SGM
23JAP1
]]>Agencies
[Federal Register Volume 77, Number 14 (Monday, January 23, 2012)]
[Proposed Rules]
[Pages 3172-3184]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-901]
-----------------------------------------------------------------------
FARM CREDIT ADMINISTRATION
12 CFR Parts 611, 612, 619, 620 and 630
RIN 3052-AC41
Compensation, Retirement Programs, and Related Benefits
AGENCY: Farm Credit Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Farm Credit Administration (FCA, us, we, or our) proposes
to amend our regulations related to Farm Credit System (System) bank
and association disclosures to shareholders and investors. The proposed
rule would require reporting of supplemental retirement plans, a
discussion of the link between senior officer compensation and
performance, and timely and transparent reporting to shareholders of
significant events that occur between annual reporting periods. We
believe the proposed changes will provide full, transparent and
consistent disclosures to shareholders. The proposed rule would
identify the minimum responsibilities a compensation committee must
perform to ensure it continues to exercise good stewardship, and
require that System banks and associations provide for a nonbinding,
advisory vote on senior officer compensation in order to engage
shareholders in the management and control of their institution. Also,
the proposed rule would bifurcate existing annual reporting
requirements at Sec. 620.5 and make other conforming technical
changes.
DATES: Submit comments on or before March 23, 2012.
ADDRESSES: We offer a variety of methods for you to submit your
comments. For accuracy and efficiency reasons, commenters are
encouraged to submit comments by email or through the FCA's Web site.
As facsimiles (faxes) are difficult for us to process and achieve
compliance with section 508 of the Rehabilitation Act, we no longer
accept comments submitted by fax. Regardless of the method you use,
please do not submit your comments multiple times via different
methods. You may submit comments by any of the following methods:
Email: Send an email to reg-comm@fca.gov.
FCA Web site: https://www.fca.gov. Select ``Public
Commenters,'' then ``Public Comments,'' and follow the directions for
``Submitting a Comment.''
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Gary K. Van Meter, Director, Office of Regulatory
Policy, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA
22102-5090.
You may review copies of all comments we receive at our office in
McLean, Virginia or on our Web site at https://www.fca.gov. Once you are
in the Web site, select ``Public Commenters,'' then ``Public
Comments,'' and follow the directions for ``Reading Submitted Public
Comments.'' We will show your comments as submitted, including any
supporting data provided, but for technical reasons we may omit items
such as logos and special characters. Identifying information that you
provide, such as phone numbers and addresses, will be publicly
available. However, we will attempt to remove email addresses to help
reduce Internet spam.
FOR FURTHER INFORMATION CONTACT:
Deborah Wilson, Senior Accountant, Office of Regulatory Policy, Farm
Credit Administration, McLean, VA 22102-5090, (703) 883-4414, TTY (703)
883-4434, or
Laura McFarland, Senior Counsel, Office of General Counsel, Farm Credit
Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-
4020.
SUPPLEMENTARY INFORMATION:
I. Objective
The objectives of this proposed rule are to:
Improve the transparency and completeness of disclosures
in System
[[Page 3173]]
institution annual reports or annual meeting information statements
(collectively, Report) by requiring disclosure of all components of
senior officer \1\ compensation and retirement benefits;
---------------------------------------------------------------------------
\1\ All references to senior officer(s) in this proposed rule
refer to a senior officer as defined in 12 CFR 619.9310.
---------------------------------------------------------------------------
Promote the continued safety and soundness of System
institutions by requiring certain oversight responsibilities of
compensation committees;
Strengthen timely communication with System shareholders
on significant events that occur between annual reporting periods;
Provide shareholders with a clear and complete
understanding of their institution's obligations and commitments
related to supplemental retirement benefit plans (SRP) for employees
other than the senior officer group; and
Encourage member participation in the control and
management of their institution by providing voting shareholders an
opportunity to cast a nonbinding, advisory vote on senior officer
compensation.
II. Background
The Farm Credit Act of 1971, as amended (Act),\2\ authorizes the
FCA to issue regulations implementing the Act's provisions.\3\ Our
regulations are intended to ensure the safe and sound operations of
System institutions and to govern the disclosure of financial
information to shareholders of, and investors in, the System. Congress
explained in section 514 of the Farm Credit Banks and Associations
Safety and Soundness Act of 1992 (1992 Act) \4\ that disclosures of
financial information and compensation paid to senior officers, among
other disclosures, provide System shareholders with information
necessary to better manage their institution and make informed
decisions regarding the operation of their institution.
---------------------------------------------------------------------------
\2\ Public Law 92-181, 85 Stat. 583 (1971), 12 U.S.C. 2001, et
seq.
\3\ 12 U.S.C. 2252(a)(8), (9) and (10).
\4\ Public Law 102-552, 106 Stat. 4131 (1992).
---------------------------------------------------------------------------
Section 1.1(b) of the Act sets forth the objective to continue to
encourage owners-borrowers to participate in the management, control,
and ownership of their cooperative. In an October 14, 2010, Resolution
of the Farm Credit Administration Board, we declared our commitment to
support the cooperative business model and structure of System banks
and associations.\5\ The FCA emphasizes the cooperative structure and
principles by advancing regulatory proposals that encourage borrowers
to participate in the management, control and ownership of their
institution.
---------------------------------------------------------------------------
\5\ Copies of the resolution may be obtained by contacting the
FCA.
---------------------------------------------------------------------------
A. Comments Received
On November 18, 2010, we issued an advance notice of proposed
rulemaking (ANPRM) on disclosure of senior officer compensation and
related topics in order to gather information for the development of a
proposed rulemaking.\6\ We received 99 comment letters in response to
the ANPRM from individuals and entities associated with the System,
including the Farm Credit Council (FCC), acting for its membership, and
the Federal Farm Credit Banks Funding Corporation (Funding
Corporation). We reviewed all comment letters and evaluated their
recommendations in recognition of existing law and policy
considerations and the cooperative nature of the System. We are
proposing rules and amendments related to senior officer compensation
disclosures and related topics that were discussed in the ANPRM. Other
topics in the ANPRM not included in this rulemaking may be considered
in future rulemakings.\7\
---------------------------------------------------------------------------
\6\ 75 FR 70619 (Nov. 18, 2010).
\7\ These topics include the use of a compensation consultant by
an institution's compensation committee and director of severance
benefits and related payments.
---------------------------------------------------------------------------
We are actively reviewing the authority of the Funding
Corporation's System Audit Committee (SAC) to have ``unfettered ability
to engage outside advisors.'' Section 630.6 authorizes the Funding
Corporation board to deny, by a two-thirds majority vote of the full
board, any SAC request for resources. The SAC requested we consider
amending our regulations to remove this authority. We addressed this
issue in the ANPRM and most commenters responded that it would be
imprudent to provide absolute discretion on the use of resources to any
bank or association board committee. The FCC expressed the view of its
membership that existing FCA regulations appropriately balance audit
committee need with the board's ultimate responsibility to the
customer-shareholder for the safety and financial stability of the
institution. However, the FCC also noted that its membership supported
the Funding Corporation's request. The SAC's response to the ANPRM was
that the SAC believed it must have every resource it requires at its
disposal to effectively perform its function. We are not proposing
changes to this authority in this rulemaking, but may revisit the
matter in future rulemakings.
B. Proposed Rule
We periodically review and update our disclosure regulations to
ensure they are appropriate for current business practices, provide
shareholders with necessary information, and provide investors with
information necessary to assist them in making investment decisions. In
keeping with today's changing economic and business environments, and
in accordance with the findings of Congress under the 1992 Act and the
FCA Board Resolution of October 14, 2010, we believe it is appropriate
to review and update our rules on senior officer compensation
disclosures and other related topics. We believe that banks and
associations can continue to support the cooperative business model,
fulfill the System's public policy mission in a safe and sound manner,
and best serve their members by providing shareholders:
Complete disclosure that allows them to understand senior
officer compensation and retirement policies and practices and all
compensation and retirement benefit obligations;
Timely and transparent communication on significant or
material events affecting their institution; and
A nonbinding, advisory vote on senior officer
compensation.
We believe the proposed rule continues to balance meaningful
disclosures, committee oversight, and shareholder rights with
institution safety and soundness.
III. Section-by-Section Analysis
A. Bifurcation of Annual Reporting Requirements Sections [Existing
Sec. 620.5(h) Through (k); New Sec. 620.6]
To enhance the clarity and organization of our rules, we propose
moving the disclosure requirements for directors and senior officers in
Sec. 620.5(h) through (k) to new Sec. 620.6. Also, we propose that
Sec. 620.5(h) contain a reference to Sec. 620.6, stating that the
presentation of the Sec. 620.6 disclosures would continue to be
required in the annual report. We propose no changes to the current
requirements of existing Sec. 620.5(h), (j), and (k), except for minor
rewording of the language and cross citations to recognize the proposed
new locations at Sec. 620.6(a), (b), (d), (e), and (f). However, in
the process of moving Sec. 620.5(h) through (k) to new Sec. 620.6,
some regulatory language is proposed to be changed in existing Sec.
620.5(i) to remove redundancy and enhance clarity. Specifically, we
propose
[[Page 3174]]
clarifying how highly compensated employees, who are not senior
officers, are treated in the Summary Compensation Table (Compensation
Table) at new Sec. 620.6(c)(2)(i).
Also, we propose clarifying where to disclose the required
statement that the information on compensation for any individual
senior officer, as disclosed in the Compensation Table, is available to
shareholders upon request. In new Sec. 620.6(c)(2)(ii), we propose
that the statement must be presented directly beneath the Compensation
Table because we believe the notice of this right should be in close
proximity to the related disclosure. We propose new disclosure
requirements that would be contained in new Sec. 620.6(c) and are
discussed in Part III.B. of the preamble to this proposed rule.
As conforming technical changes, we propose changing references to
the annual report's director and senior officer compensation and
conflicts of interest disclosures, made in other areas of our rules, to
their location in new Sec. 620.6. Specifically changing references
contained in Sec. 611.330(b) of our rules from Sec. 620.5(j) and (k)
to Sec. 620.6(e) and (f); changing references contained in Sec.
612.2145(a)(2) of our rules from Sec. 620.5(k) to Sec. 620.6(f);
changing references contained in Sec. 612.2155(a)(2) of our rules from
Sec. 620.5(k) to Sec. 620.6(f); adding Sec. 620.6 to the references
contained in Sec. Sec. 612.2165(b)(12) and 620.4(c); renumbering
existing Sec. 620.5(l) through (n) as (i) through (k); and changing
references in Sec. 620.21(a)(3)(i) of our rules from Sec. 620.5(j)
(``Transactions with senior officers and directors'') to Sec. 620.6(e)
and Sec. 620.5(k) (``Involvement in certain legal proceedings'') to
Sec. 620.6(f).
B. Enhanced Disclosures of Senior Officer Compensation [Sec. 620.5(i)
and New Sec. 620.6(c)]
Existing Sec. 620.5(i) requires that compensation paid to or
earned by senior officers be disclosed in the Compensation Table, and
include discussion of benefits paid in connection with resignation,
retirement, or termination.
In developing this proposed rule, we recognized that:
Compensation and retirement benefit practices at many
System institutions are increasingly more complex and diverse;
Our current disclosure requirements may not capture all
current practices; and
Disclosures should include a clear discussion of the
relationship between the risks and rewards of compensation practices.
Consequently, we believe our disclosure rules should be amended to
ensure that all such practices are addressed in an institution's
disclosure of senior officer compensation.
In new Sec. 620.6(c)(4), we propose requiring that institutions
disclose information related to supplemental executive retirement plans
(SERP), if provided to chief executive officers (CEOs), senior officers
or other highly compensated employees (collectively, senior officers).
If the CEO and senior officers participate solely in pension and
retirement plans offered to all employees, the disclosures would not be
required. The information to be disclosed would include, at a minimum:
Funded and unfunded present value of accumulated benefits
for all CEO and senior officers' pension and retirement benefit plans,
including the SERP.
Years of credited service for the CEO and for the senior
officers.
Vested and unvested dollar amounts.
We propose that the disclosures be included in a separate pension and
retirement benefits table, and that it be presented in the report with
the Compensation Table.
In addition to requiring disclosure of SERPs, we propose
institutions:
Include all compensation, benefit and retirement plans
when discussing compensation programs;
Describe the overall risk and reward structure of
compensation, benefit and retirements plans; and
Discuss the link between the CEO's and senior officers'
total compensation, as reported, and both the institution's overall
performance and the CEO's and senior officers' performance.
In making these disclosures, we would expect an institution to discuss
the criteria used in determining its overall performance (e.g., capital
and risk management, credit risk and risk exposure to earnings,
liquidity management, and compliance with the general financing
agreement). Also, we would expect institutions to discuss the
benchmarks or other factors used to determine compensation, including
incentive-based compensation. Disclosures would be specific to the
institution, rather than being general or boilerplate.
We further propose at new Sec. 620.6(c)(3)(ii)(B) that
institutions disclose in the Compensation Table the dollar amount of
tax reimbursements or tax payments provided by the institution to
senior officers. The disclosure would be classified as a perquisite and
other personal benefit and would be reported in the period in which
payment is made. We are not proposing to change the threshold for
perquisite disclosures.
We believe improved transparency and consistency in disclosures of
senior officer compensation provides meaningful and complete disclosure
to members-owners and investors. Enhanced disclosures assist members-
owners and investors in making informed decisions regarding the
financial condition and operations of the institution.
We also propose adding a new Sec. 619.9335 to our general
definition rules to define SRP and SERP. A SRP or SERP would be defined
to mean a nonqualified retirement plan that provides benefits above and
beyond those covered by other retirement plans for all employees, and
that is funded in whole or in part by the institution.
C. Compensation Committee Responsibilities [Sec. Sec. 620.31 and
630.6(b)]
Our existing rules at Sec. Sec. 620.31 and 630.6(b) require a
compensation committee to review and approve the overall compensation
programs for senior officers and to review the compensation policies
and plans for all employees. Our July 9, 2009, FCA Bookletter,
``Compensation Committees'' (BL-060), provides guidance on how
compensation committees should fulfill their duties. However, we
believe it is appropriate to enhance our regulations to include the
minimum responsibilities a compensation committee must perform in order
to carry out its duties.
Therefore, in order that a compensation committee continues to
effectively fulfill its stewardship role, maintain effective and active
oversight, and ensure compensation and retirement benefit practices do
not jeopardize the institution's safety and soundness, we propose
clarifying that the compensation committee is accountable for:
Monitoring the terms and provisions of the incentive-based
compensation programs for senior officers,
Analyzing the institution's projected long-term
obligations for compensation and retirement benefits, and
Balancing financial rewards to senior officers against the
risks to the institution.
The proposed rule would amend our regulations at Sec. Sec.
620.31(b) and 630.6(b)(2) to enhance compensation committee
responsibilities to emphasize that the committee must ensure that:
[[Page 3175]]
CEO and senior officers' compensation promotes the
continued safety and soundness of the institution and supports the
institution's long-term business strategy and goals,
Risks to the institution and the financial rewards to the
CEO and senior officers are balanced (e.g., compensation and benefits
are not excessive relative to the results of operations and financial
condition of the institution),
The institution's projected total long-term compensation
and retirement obligations for the CEO and senior officers are
analyzed, and
The compensation of employee groups, other than the CEO
and senior officers, do not pose an imprudent risk to the institution
(e.g., loan officers).
In addition, we emphasize that compensation committees should
ensure that incentive-based compensation programs:
Are not unreasonable or disproportionate to the services
performed, and
Are structured so that the payout schedule considers the
potential for future losses or risks to the institution from services
performed in the current period.
Under the proposed rule, the compensation committee would be
required to document in meeting minutes its actions related to the
proposed enhanced responsibilities. Documenting its actions would
facilitate board review of how the committee carried out its
responsibilities and provide the current committee with an
understanding of prior committee actions.
For organizational reasons, we propose moving the requirements that
all compensation committee members must be members of the board of
directors and that the compensation committee report only to the board.
The requirements would be moved to the section that discusses the
formation of a compensation committee. Also, we propose replacing
``function'' with ``perform its duties'' in Sec. Sec. 620.31(c) and
630.6(b)(3) for clarification.
D. Notice to Shareholders [Sec. Sec. 620.10, 620.11, and 620.15]
In FCA Board Policy Statement, ``Cooperative Operating Philosophy--
Serving the Members of Farm Credit System Institutions,'' \8\ (FCA-PS-
80) the FCA reaffirmed its commitment to the cooperative structure and
its values and practices, including regular and relevant communication
with members. As such, we believe that certain events may be of such
significance or materiality to warrant communication to members-owners
throughout the institution's operating cycle. We believe that timely
and transparent communication to members encourages their continued
participation in the ownership, control and management of their
institution.
---------------------------------------------------------------------------
\8\ See 75 FR 64728, Oct. 20, 2010.
---------------------------------------------------------------------------
Existing Sec. Sec. 620.15 and 620.17 require that System
institutions provide notice to shareholders when the institution is not
in compliance with minimum permanent capital standards. This notice is
a supplement to annual and quarterly reporting requirements.
In a similar manner, we propose adding a requirement in Sec.
620.15 that significant events or circumstances occurring in interim or
intervening periods be communicated to shareholders through separate
notice. As proposed, notices would be made as soon as possible, but not
later than 90 calendar days after occurrence. As an alternative, we
propose allowing the institution to issue the notice within its
quarterly report, with prominent disclosure at the front of the report.
The proposed rule would allow institutions to distribute the notice
via electronic distribution (Web site) or by publication with
circulation wide enough to be reasonably assured that all shareholders
have timely access to the information. Also, we propose that the notice
be provided to the FCA at the same time it is distributed to
shareholders and that the notice be dated and signed.
The proposed rule would include a list of events that must, at a
minimum, be reported. If the event would be a ``significant'' change to
a compensation, retirement, benefit or capitalization plan,
significance would be based on the change to the individual plan and
not the impact of the change to the institution as a whole.
As a related change to our rules, we propose consolidating the
current contents of Sec. Sec. 620.15 and 620.17 on notices regarding
permanent capital into Sec. 620.17. This change would allow the
placement of the above proposed notice of significant or material
events to be located in Sec. 620.15 while preserving existing
requirements on notices for permanent capital. We believe the proposed
consolidation would add clarity to our rules by keeping like subject
matters together and removing redundant language. It is not intended
that the meaning and requirements for permanent capital notices be
changed.
To conform our regulations in Sec. 620.10, ``Preparing the
quarterly report,'' with the proposed notice of significant or material
events, we propose adding a new paragraph (c) to existing Sec. 620.10.
The proposed addition would clarify that the quarterly report may be
used for notices to shareholders, except minimum permanent capital
notices. We also propose adding a similar provision to Sec. 620.11 on
contents of quarterly reports, but including a proposed requirement
that notices included in the quarterly report be located at the front
of the report. We believe this proposed requirement preserves the
objective of the notices, which is that members-owners receive timely
and transparent communication of significant and material events.
E. Disclosure of Supplemental Retirement Plans to Employees, Exclusive
of the CEO and Senior Officers [Sec. 620.5(e)]
We propose adding a new paragraph (4) to existing Sec. 620.5(e)
that would require disclosure of the institution's obligations related
to a SRP to employees, exclusive of any plan provided to the CEO and
senior officers. The disclosure would include, at a minimum:
A description of the plan;
Funded and unfunded obligations of the plan; and
Vested and unvested dollar amounts.
We believe that by disclosing an institution's current and future
supplemental benefit obligations, shareholders and investors will have
a more complete understanding of the related liabilities and
commitments, both on- and off-balance sheet.
F. Nonbinding, Advisory Vote by Shareholders on Senior Officer
Compensation [Sec. Sec. 611.100, 620.5(a), and 630.20(i); New
Sec. Sec. 611.360, 611.410, and 620.6(c)(6)]
Our existing regulations do not require a nonbinding, advisory vote
by an institution's shareholders on senior officer compensation.
However, in FCA Informational Memorandum, ``Serving the Members of Farm
Credit System Institutions'' (IM), dated November 4, 2010, we noted
that boards of directors can encourage member participation in the
management and control of the institution by engaging members as owners
and communicating with members. The IM highlighted our belief that
effective boards use information obtained from members to establish
strategic direction for their institutions and to ensure business
activities remain member-focused.
We continue to believe that a Government-sponsored enterprise
comprised of cooperative institutions should continually strive to
operate under high standards in order to achieve
[[Page 3176]]
the System's public policy mission and encourage member-owner
participation in their institution. Therefore, we propose adding a new
Sec. 611.410 requiring that Farm Credit banks and associations provide
shareholders the opportunity to cast a nonbinding, advisory vote on
senior officer compensation.
The proposed Sec. 611.410 advisory vote would be required at banks
and associations if either the CEO's or the aggregate of all senior
officers' compensation, as disclosed in the Compensation Table,
increased or decreased by 15 percent or more from the previous
reporting period. The vote would not be required if the 15-percent
change resulted solely from a change in the CEO or a change in the
composition of personnel included in the senior officer group. Also, we
propose that associations be required to hold a nonbinding, advisory
vote on compensation if 5 percent of their voting shareholders petition
for it. We did not propose this additional petition requirement for
banks because there are fewer shareholders at the bank level, thereby
allowing a few shareholders to control the petition process.
We do not believe the vote would be burdensome to institutions
since it would be required only when a 15-percent change in practice
has occurred or, for associations, when 5 percent of their voting
shareholders petition for the vote. We believe the proposed nonbinding,
advisory vote would provide a means for shareholders to clearly express
and communicate either their approval or disapproval of compensation
practices for senior officers to their institution's board. The board
could then use the information, as appropriate, when establishing the
institution's strategic direction and ensure that it remains member-
focused.
We selected 15 percent as a threshold change in compensation based
on the recent range of percentage changes to bank and association CEO's
and senior officers' compensation. We consider the 15-percent threshold
to be reasonable. We selected 5 percent as the maximum percentage of
voting shareholders required to petition their association for the vote
because 5 percent is generally accepted as a criteria for assessing
significance or materiality.
We are also proposing general procedures for advisory votes in new
Sec. 611.360. The proposed procedures would apply to all advisory
votes held by an institution including, but not limited to, the
proposed advisory vote on compensation. As proposed, advisory votes
would be subject to the same confidentiality and security in voting
requirements of Sec. 611.340 and would be cast on a one-member, one-
vote basis, including votes cast by shareholders of Farm Credit banks.
We propose that weighted and cumulative voting not be allowed in
advisory votes in order to further the objective of giving equal voice
to each shareholder. Also, new Sec. 611.360 would require that
institutions develop voting procedures and provide notice to
shareholders of any advisory vote and the procedures used in casting
the vote. In addition, proposed Sec. 611.360 would permit the advisory
votes to be made in-person, by proxy, and by mail.
We propose disclosure in the annual report when an advisory vote is
held, including disclosure of the results of the vote. We propose
adding a new Sec. 620.5(a)(11) to the ``Description of business''
section of the annual report, requiring a discussion of the types of
advisory votes held during the reporting period. We further propose
that disclosure of nonbinding, advisory votes on senior officer
compensation be included with senior officer compensation disclosures
in new Sec. 620.6(c)(6). This disclosure requirement is proposed to be
carried forward into the System-wide report to investors at Sec.
630.20(i).
We propose in new Sec. 611.410(c)(6) that associations disclose
that shareholders may petition for an advisory vote, disclose when a
petition is received and disclose the results of the petition. The
proposal would require that the disclosures be presented with the
Compensation Table. We believe that providing the disclosures with the
Compensation Table ensures that shareholders are aware of their right
to express their opinion on senior officer compensation practices of
their associations.
In addition, we propose adding a definition of ``advisory vote'' at
Sec. 611.100(a) to ensure a consistent meaning of the term.
G. Miscellaneous
1. Technical Changes [Sec. Sec. 611.330(c), 611.400, 620.2(c),
620.4(c), and 620.11]
Our proposed amendments require additional conforming and
clarifying changes to other regulatory provisions. Likewise, in the
proposed process of consolidating provisions, some regulatory language
is proposed to be changed to remove redundancy and enhance clarity. We
propose making the following technical and conforming changes:
a. We propose adding a definition for ``business day'' to Sec.
611.100 to clarify our longstanding position that when our rules
reference business day it means a day the institution is open for
business, but excludes Federal holidays. As a technical change, we
propose renumbering existing Sec. 611.100 paragraphs (a) through (f)
as (c) through (h).
b. In subpart D of part 611, we propose revising the name of the
subpart from ``Rules for Compensation of Board Members'' to
``Compensation Practices of Farm Credit Banks and Associations.'' The
change will clarify that the provisions of subpart D relate to various
compensation issues at the bank and association level and not just to
bank board members. As a conforming change, in Sec. 611.400, we
propose revising the name of the section from ``Compensation of bank
board members'' to ``Compensation of Farm Credit bank board members''
to align terminology to that used in our general definitions of part
619. We also propose replacing the phrase ``Farm Credit System bank''
with ``Farm Credit bank'' everywhere it appears to update the section
for the same reason.
c. We propose updating the language in Sec. 611.400(b) regarding
annual inflationary changes in the statutory salary limit for Farm
Credit bank directors. The proposed change would continue to require
that we communicate the annual changes to the System, but remove the
requirement that we use a bookletter to do so. This will expedite
communication of the information.
d. We propose clarifying that the director-nominee disclosures
discussed in Sec. 611.330(c)(1) relate to the annual meeting
information statement by providing a corresponding rule citation to
Sec. 620.21(b).
e. We propose changing the language in Sec. 620.2(c) regarding the
electronic delivery of reports to shareholders to clarify that the
provision applies only to those reports individually sent to
shareholders, not all reports.
f. We propose a minor grammatical change to Sec. 620.4(c) on
contents of the annual report by breaking out the sentence into two
sentences. No change to the meaning of the paragraph is intended.
g. We propose to reorganize and renumber the existing provisions of
Sec. 620.11 to enhance clarity. No changes to the meaning of existing
language is proposed, although we propose adding an additional
provision to this section on incorporating shareholder notices into a
quarterly report, as discussed earlier.
[[Page 3177]]
2. Incorporating by Reference [Sec. 620.2(d)]
We propose changing the language in Sec. 620.2(d), which allows
System institutions to incorporate by reference in their reports. The
proposed change is to specify that information disclosed in any part of
the report may be incorporated by reference in that report unless
instructions state otherwise. In a prior rulemaking, we explained that
Sec. 620.2(d) allowed institutions to provide information required to
be in a specific section of the annual report through a reference to
another section of the report.\9\ The proposed limit on incorporating
by reference would only exist when a rule limits the location of a
specific disclosure.
---------------------------------------------------------------------------
\9\ See 74 FR 28597, June 17, 2009.
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3. Signatures on Reports [Sec. 620.10(c)]
In developing this proposed rule on disclosures in annual and
quarterly reports, we noticed an inadvertent omission in the
preparation requirements of quarterly reports. While quarterly reports
are not required to be mailed to shareholders, we have always expected
them to contain signatures and certifications used for other reports.
However, existing Sec. 620.10(a) does not clearly state this
requirement. Therefore, we propose adding a new paragraph (a)(3)
requiring quarterly reports to be signed and financial statements
contained in the report to be certified as complete and accurate.
IV. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), the FCA hereby certifies that the proposed rule
would not have a significant economic impact on a substantial number of
small entities. Each of the banks in the Farm Credit System, considered
together with its affiliated associations, has assets and annual income
in excess of the amounts that would qualify them as small entities.
Therefore, Farm Credit System institutions are not ``small entities''
as defined in the Regulatory Flexibility Act.
List of Subjects
12 CFR Part 611
Agriculture, Banks, banking, Rural areas.
12 CFR Part 612
Agriculture, Banks, Banking, Conflict of interests, Crime,
Investigations, Rural areas.
12 CFR Part 619
Agriculture, Banks, banking, Rural areas.
12 CFR Part 620
Accounting, Agriculture, Banks, Banking, Reporting and
recordkeeping requirements, Rural areas.
12 CFR Part 630
Accounting, Agriculture, Banks, Banking, Organization and functions
(Government agencies), Reporting and recordkeeping requirements, Rural
areas.
For the reasons stated in the preamble, parts 611, 612, 619, 620,
and 630 of chapter VI, title 12 of the Code of Federal Regulations are
proposed to be amended as follows:
PART 611--ORGANIZATION
1. The authority citation for part 611 is revised to read as
follows:
Authority: Secs. 1.2, 1.3, 1.4, 1.5, 1.13, 2.0, 2.1, 2.2, 2.10,
2.11, 2.12, 3.0, 3.1, 3.2, 3.21, 4.12, 4.12A, 4.15, 4.20, 4.21, 5.9,
5.17, 6.9, 6.26, 7.0-7.13, 8.5(e) of the Farm Credit Act (12 U.S.C.
2002, 2011, 2012, 2013, 2021, 2071, 2072, 2073, 2091, 2092, 2093,
2121, 2122, 2123, 2142, 2183, 2184, 2203, 2208, 2209, 2243, 2252,
2278a-9, 2278b-6, 2279a-2279f-1, 2279aa-5(e)); secs. 411 and 412 of
Pub. L. 100-233, 101 Stat. 1568, 1638; sec. 414 of Pub. L. 100-399,
102 Stat. 989, 1004.
Subpart A--General
2. Section 611.100 is amended by:
a. Redesignating existing paragraphs (a) through (f) as paragraphs
(c) through (h), respectively; and
b. Adding new paragraphs (a) and (b) to read as follows:
Sec. 611.100 Definitions.
* * * * *
(a) Advisory vote means a nonbinding vote by the voting
stockholders on certain events of the institution, including
compensation practices.
(b) Business day means a day the institution is open for business,
excluding the legal public holidays identified in 5 U.S.C. 6103(a).
* * * * *
Subpart C--Election of Directors and Other Voting Procedures
Sec. 611.330 [Amended]
3. Section 611.330 is amended by:
a. Removing the reference ``Sec. 620.5(j) and (k)'' and adding in
its place, the reference, ``Sec. 620.6(e) and (f)'' in the first
sentence of paragraphs (b)(1) and (b)(2); and
b. Adding the words ``in accordance with Sec. 620.21(b)'' to the
end of paragraph (c)(1).
4. Subpart C is amended by adding a new Sec. 611.360 to read as
follows:
Sec. 611.360 Stockholder advisory votes.
(a) Each Farm Credit bank and association must establish and
maintain written procedures to implement advisory votes. The
procedures, at a minimum, must:
(1) Identify the subject of the advisory vote.
(2) Establish the timing, manner, and notice of the vote.
(i) If the vote will be held in connection with a stockholder
meeting or director election, notice of the advisory vote must be part
of the Annual Meeting Information Statement, pursuant to Sec.
620.21(d).
(ii) The vote may be in-person, by proxy, or by mail, or any
combination thereof.
(3) For associations, explain the process for petitioning for an
advisory vote.
(b) Advisory votes are subject to the requirements of Sec. 611.340
and the confidential voting provisions of section 4.20 of the Act (12
U.S.C. 2208).
(c) Advisory votes must be cast using a ``one-member, one-vote''
voting scheme and are not subject to the provisions in Sec. 615.5230
allowing weighted, cumulative, and other voting schemes.
Subpart D--Compensation Practices of Farm Credit Banks and
Associations
5. Revise the heading of subpart D to read as set forth above.
Sec. 611.400 [Amended]
6. Section 611.400 is amended by:
a. Removing the words ``Farm Credit System bank'' and adding in
their place ``Farm Credit bank'' in paragraphs (a) and (d)(1); and
b. Removing the words ``distribute a bookletter to all FCS banks
that communicates'' and adding in their place the word ``communicate''
in the last sentence of paragraph (b).
7. Subpart D is amended by adding a new Sec. 611.410 to read as
follows:
Sec. 611.410 Compensation of senior officers.
(a) If compensation for the chief executive officer either
increases or decreases 15 percent or more from the previous reporting
period, then the bank or association must present the compensation to
voting stockholders for an advisory vote. Such advisory vote must be
held in accordance with the provisions of Sec. 611.360. Advisory votes
on compensation resulting solely from a change in the chief executive
officer during the reporting period are not required.
[[Page 3178]]
(b) If senior officer compensation, as reported in the aggregate,
either increases or decreases 15 percent or more from the previous
reporting period, then the bank or association must present the
compensation to voting stockholders for an advisory vote. Such advisory
vote must be held in accordance with the provisions of Sec. 611.360.
Advisory votes on compensation resulting solely from a change in senior
officers included in the aggregate during the reporting period are not
required.
(c) Each association must hold an advisory vote on compensation
paid to chief executive officers, or senior officers in the aggregate,
in accordance with the provisions of Sec. 611.360 when 5 percent of
the association's voting stockholders petition for an advisory vote.
(d) Each association must disclose in its annual report to
shareholders the authority to petition for an advisory vote on senior
officer compensation. The disclosure must also state if a petition was
submitted during the reporting period, disclosing if it was certified
and a vote held and, if applicable, the results of the vote.
PART 612--STANDARDS OF CONDUCT AND REFERRAL OF KNOWN OR SUSPECTED
CRIMINAL VIOLATIONS
8. The authority citation for part 612 continues to read as
follows:
Authority: Secs. 5.9, 5.17, 5.19 of the Farm Credit Act (12
U.S.C. 2243, 2252, 2254).
Subpart A--Standards of Conduct
Sec. 612.2145 [Amended]
9. Section 612.2145 is amended by removing the reference ``Sec.
620.5(k)'' and adding in its place, the reference ``Sec. 620.6 (f)''
in paragraph (a)(2).
Sec. 612.2155 [Amended]
10. Section 612.2155 is amended by removing the reference ``Sec.
620.5 (k)'' and adding in its place, the reference ``Sec. 620.6 (f)''
in paragraph (a)(2).
Sec. 612.2165 [Amended]
11. Section 612.2165 is amended by removing the reference ``Sec.
620.5'' and adding in its place ``Sec. Sec. 620.5 and 620.6'' in
paragraph (b)(12).
PART 619--DEFINITIONS
12. The authority citation for part 619 is revised to read as
follows:
Authority: Secs. 1.4, 1.5, 1.7, 2.1, 2.2, 2.4, 2.11, 2.12, 3.1,
3.2, 3.21, 4.9, 5.9, 5.17, 5.19, 7.0, 7.1, 7.6, 7.8 and 7.12 of the
Farm Credit Act (12 U.S.C. 2012, 2013, 2015, 2072, 2073, 2075, 2092,
2093, 2122, 2123, 2142, 2160, 2243, 2252, 2254, 2279a, 2279a-1,
2279b, 2279c-1, 2279f); sec. 514 of Pub. L. 102-552, 106 Stat. 4102.
13. Part 619 is amended by adding a new Sec. 619.9335 to read as
follows:
Sec. 619.9335 Supplemental retirement plan or supplemental executive
retirement plan.
A nonqualified retirement plan that provides benefits in addition
to those covered by other retirement plans for all employees and funded
in whole or part by a Farm Credit bank or association.
PART 620--DISCLOSURE TO SHAREHOLDERS
14. The authority citation for part 620 is revised to read as
follows:
Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.17, 5.19 of the Farm
Credit Act (12 U.S.C. 2154, 2154a, 2207, 2243, 2252, 2254); sec. 424
of Pub. L. 100-233, 101 Stat. 1568, 1656; sec. 514 of Pub. L. 102-
552, 106 Stat. 4102.
Subpart A--General
15. Section 620.2 is amended by revising paragraphs (c) and (d) to
read as follows:
Sec. 620.2 Preparing and filing reports.
* * * * *
(c) The reports sent to shareholders must comply with the
requirements of Sec. 620.3 of this part and shareholders must agree to
electronic delivery of those reports.
(d) Information in any part of a report may be incorporated by
reference in answer or partial answer to any other item of the report,
unless instructions for the report state otherwise.
* * * * *
Subpart B--Annual Report to Shareholders
16. Section 620.4 is amended by revising paragraph (c) to read as
follows:
Sec. 620.4 Preparing and providing the annual report.
* * * * *
(c) The report must contain, at a minimum, the information required
by Sec. Sec. 620.5 and 620.6. In addition, the report must contain
such other information as is necessary to make the required statements,
in light of the circumstances under which they are made, not
misleading.
17. Section 620.5 is amended by:
a. Adding new paragraphs (a)(11) and (e)(4);
b. Revising paragraph (h);
c. Removing paragraphs (i), (j), and (k); and
d. Redesignating existing paragraphs (l), (m), and (n) as
paragraphs (i), (j), and (k), respectively, to read as follows:
Sec. 620.5 Contents of the annual report to shareholders.
* * * * *
(a) Description of business.
* * * * *
(11) The types of advisory votes held during the reporting period
and the results of the vote(s).
* * * * *
(e) Description of liabilities.
* * * * *
(4) Describe any supplemental retirement plans funded by the
institution on behalf of employees whose benefits are not included in
the Pension Benefits Table in Sec. 620.6(c) of this part. Disclose the
present value of the aggregate accumulated benefits of funded,
unfunded, and unvested obligations related to the plan(s).
* * * * *
(h) Directors and senior officers. In a separate section of the
annual report, make the disclosures required in Sec. 620.6 of this
part.
* * * * *
18. Subpart B is amended by adding a new Sec. 620.6 to read as
follows:
Sec. 620.6 Disclosures in the annual report to shareholders relating
to directors and senior officers.
(a) General.
(1) List the names of all directors and senior officers of the
institution, indicating the position title and term of office of each
director, and the position, title, and date each senior officer
commenced employment in his or her current position.
(2) Briefly describe the business experience during the past 5
years of each director and senior officer, including each person's
principal occupation and employment during the past 5 years.
(3) For each director and senior officer, list any other business
interest where the director or senior officer serves on the board of
directors or as a senior officer. Name the position held and state the
principal business in which the business is engaged.
(b) Compensation of directors. Describe the arrangements under
which directors of the institution are compensated for all services as
a director (including total cash compensation and noncash
compensation). Noncash compensation with an annual aggregate value of
less than $5,000 does not have to be reported. State the total cash and
reportable noncash compensation paid to all directors as a group during
the last fiscal year. For the purposes of this paragraph, disclosure of
compensation paid to and days served by directors
[[Page 3179]]
applies to any director who served in that capacity at any time during
the reporting period. If applicable, describe any exceptional
circumstances justifying the additional director compensation as
authorized by Sec. 611.400(c) of this chapter. For each director,
state:
(1) The number of days served at board meetings;
(2) The total number of days served in other official activities,
including any board committee(s);
(3) Any additional compensation paid for service on a board
committee, naming the committee; and
(4) The total cash and noncash compensation paid to each director
during the last fiscal year. Reportable compensation includes cash and
the value of noncash items provided by a third party to a director for
services rendered by the director on behalf of the reporting Farm
Credit institution. Noncash compensation with an annual aggregate value
of less than $5,000 does not have to be reported.
(c) Compensation of senior officers. Disclose the information on
senior officer compensation and compensation plans as required by this
paragraph. The institution must disclose the total amount of
compensation paid to senior officers in substantially the same manner
as the tabular form specified in the Summary Compensation Table
(Compensation Table), located in paragraph (c)(3) of this section.
(1) For each of the last 3 completed fiscal years, report the total
amount of compensation paid and the amount of each component of
compensation paid to the institution's chief executive officer (CEO),
naming the individual. If more than one person served in the capacity
of CEO during any given fiscal year, individual compensation
disclosures must be provided for each CEO.
(2) For each of the last 3 completed fiscal years, report the
aggregate amount of compensation paid, and the components of
compensation paid, to all senior officers as a group, stating the
number of officers in the group without naming them.
(i) If applicable, when any employee who is not a senior officer
has annual compensation at a level that is among the five highest paid
by the institution during the reporting period, include the highly
compensated employee(s) in the aggregate number and amount of
compensation reported in the Compensation Table.
(ii) The report containing the aggregate compensation disclosure
must include a statement that disclosure of information on the total
compensation paid during the last fiscal year to any senior officer, or
to any other employee included in the aggregate, is available and will
be disclosed to shareholders of the institution and shareholders of
related associations (if applicable) upon request. This statement must
be located directly beneath the Compensation Table.
(3) The institution must complete the Compensation Table, or
something substantially similar, according to the following
instructions:
Summary Compensation Table
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual
---------------------------------------------------------------------------------------------------------------------------------------------------------
Deferred/
Name of individual or number in group Year Salary Bonus perquisite Other Total
(a) (b) (c) (d) (e) (f) (g)
--------------------------------------------------------------------------------------------------------------------------------------------------------
CEO............................................... 20XX $ $ $ $ $
20XX
20XX
Aggregate number of Senior Officers (& other
highly compensated employees, if applicable):
(X)........................................... 20XX
(X)........................................... 20XX
(X)........................................... 20XX
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Amounts shown as ``Salary'' (column (c)) and ``Bonus'' (column
(d)) must reflect the dollar value of salary and bonus earned by the
senior officer during the fiscal year. Amounts contributed during the
fiscal year by the senior officer pursuant to a plan established under
section 401(k) of the Internal Revenue Code, or similar plan, must be
included in the salary column or bonus column, as appropriate. If the
amount of salary or bonus earned during the fiscal year is not
calculable by the time the report is prepared, the reporting
institution must provide its best estimate of the compensation
amount(s) and disclose that fact in a footnote to the table.
(ii) Amounts shown as ``deferred/perquisites'' (column (e)) must
reflect the dollar value of other annual compensation not properly
categorized as salary or bonus, including but not limited to:
(A) Deferred compensation earned during the fiscal year, whether or
not paid in cash; or
(B) Perquisites and other personal benefits, including the value of
noncash items, unless the annual aggregate value of such perquisites is
less than $5,000. Reportable perquisites include cash and the value of
noncash items provided by a third party to a senior officer for
services rendered by the officer on behalf of the reporting
institution. Reportable other personal benefits include the dollar
value of any tax reimbursement provided by the institution.
(iii) Compensation amounts reported under the category ``Other''
(column (f)) must reflect the dollar value of all other compensation
not properly reportable in any other column. Items reported in this
column must be specifically identified and described in a footnote to
the table, including compensation relating to pensions and defined
benefit plans that may also be reported in the ``Pension Benefits
Table'' at paragraph (c)(4) of this section. ``Other'' compensation
includes, but is not limited to:
(A) The amount paid to the senior officer pursuant to a plan or
arrangement in connection with the resignation, retirement, or
termination of such officer's employment with the institution;
(B) The amount of contributions by the institution on behalf of the
senior officer to a vested or unvested defined contribution plan unless
the plan is
[[Page 3180]]
made available to all employees on the same basis.
(iv) Amounts displayed under ``Total'' (column (g)) shall reflect
the sum total of amounts reported in columns (c), (d), (e), and (f).
(4) If the institution provides a defined benefit plan or a
supplemental executive retirement plan (SERP) to its senior officers,
the institution must complete the following Pension Benefits Table, or
something substantially similar, for each plan according to the
following instructions:
Pension Benefits Table
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual
---------------------------------------------------------------------------------------------------------------------------------------------------------
Years of
Name of individual credited Funded Unfunded Unvested Total
service
--------------------------------------------------------------------------------------------------------------------------------------------------------
CEO................................................................ ............... $ $ $ $
Senior Officers as a Group (& other highly compensated employees,
if applicable).
--------------------------------------------------------------------------------------------------------------------------------------------------------
(i) Report separately the present value of accumulated benefits for
the CEO and the senior officer group.
(ii) Report the number of credited years of service in ``Years of
credited service'' column.
(iii) Report the amount of the plan(s) that is unfunded in
``Unfunded'' column.
(iv) Report any off-balance sheet commitments, such as benefits
earned but not yet vested, in the ``unvested'' column.
(v) Report the sum of the funded, unfunded, and unvested columns in
the ``Total'' column.
(5) Provide a description of all compensation, retirement,
incentive, performance, and other benefit plans (plans) pursuant to
which cash or noncash compensation was paid or distributed during the
last fiscal year, or is proposed to be paid or distributed in the
future for performance during the last fiscal year, to those
individuals included in the Compensation Table. The description of each
plan must include, but not be limited to:
(i) A summary of how each plan operates and who is covered by the
plan. The summary must include the criteria used to determine amounts
payable, including any performance formula or measure, as well as the
time period over which the measurement of compensation will be
determined, payment schedules, and any material amendments to the plan
during the last fiscal year.
(ii) The overall risk and reward structure of the plan as it
relates to senior officers' compensation. The description must include,
at a minimum, how each plan is compatible with and promotes the
institution's goals and business strategy and the mission as a
Government-sponsored enterprise.
(iii) A discussion of the relationship between the CEO and senior
officers' compensation to the reporting institution's overall
performance. The disclosure must also discuss the relationship between
the CEO's and senior officers' compensation to their performance.
(6) In the same vicinity as the Compensation Table, discuss any
advisory votes that were held under the provisions of Sec. 611.410 of
this chapter during the reporting period and the results of the
vote(s). For associations, include a discussion of whether or not the
vote resulted from a shareholder petition. Each association must
disclose in this same location the authority of shareholders to
petition for an advisory vote on CEO and senior officer compensation.
(7) Associations may disclose the information required by paragraph
(c) of this section in the Annual Meeting Information Statement (AMIS)
pursuant to subpart E of this part. Associations exercising this option
must include a reference in the annual report stating that the senior
officer compensation information is included in the AMIS and that the
AMIS is available for public inspection at the reporting association
offices pursuant to Sec. 620.2(b).
(d) Travel, subsistence, and other related expenses.
(1) Briefly describe your policy addressing reimbursements for
travel, subsistence, and other related expenses as it applies to
directors and senior officers. The report shall include a statement
that a copy of the policy is available to shareholders of the
institution and shareholders of related associations (if applicable)
upon request.
(2) For each of the last 3 fiscal years, state the aggregate amount
of reimbursement for travel, subsistence, and other related expenses
for all directors as a group.
(e) Transactions with senior officers and directors.
(1) State the institution's policies, if any, on loans to and
transactions with officers and directors of the institution.
(2) Transactions other than loans. For each person who served as a
senior officer or director on January 1 of the year following the
fiscal year of which the report is filed, or at any time during the
fiscal year just ended, describe briefly any transaction or series of
transactions other than loans that occurred at any time since the last
annual meeting between the institution and such person, any member of
the immediate family of such person, or any organization with which
such person is affiliated.
(i) For transactions relating to the purchase or retirement of
preferred stock issued by the institution, state the name of each
senior officer or director that held preferred stock issued by the
institution during the reporting period, the current amount of
preferred stock held by the senior officer or director, the average
dividend rate on the preferred stock currently held, and the amount of
purchases and retirements by the individual during the reporting
period.
(ii) For all other transactions, state the name of the senior
officer or director who entered into the transaction or whose immediate
family member or affiliated organization entered into the transaction,
the nature of the person's interest in the transaction, and the terms
of the transaction. No information need be given where the purchase
price, fees, or charges involved were determined by competitive bidding
or where the amount involved in the transaction (including the total of
all periodic payments) does not exceed $5,000, or the interest of the
person arises solely as a result of his or her status as a stockholder
of the institution and the benefit received is not a special or extra
benefit not available to all stockholders.
(3) Loans to senior officers and directors.
[[Page 3181]]
(i) To the extent applicable, state that the institution (or in the
case of an association that does not carry loans to its senior officers
and directors on its books, its related bank) has had loans outstanding
during the last full fiscal year to date to its senior officers and
directors, their immediate family members, and any organizations with
which such senior officers or directors are affiliated that:
(A) Were made in the ordinary course of business; and
(B) Were made on the same terms, including interest rate,
amortization schedule, and collateral, as those prevailing at the time
for comparable transactions with other persons.
(ii) To the extent applicable, state that no loan to a senior
officer or director, or to any organization affiliated with such
person, or to any immediate family member who resides in the same
household as such person or in whose loan or business operation such
person has a material financial or legal interest, involved more than
the normal risk of collectability; provided that no such statement need
be made with respect to any director or senior officer who has resigned
before the time for filing the applicable report with the Farm Credit
Administration (but in no case later than the actual filing), or whose
term of office will expire or terminate no later than the date of the
meeting of stockholders to which the report relates.
(iii) If the conditions stated in paragraphs (e)(3)(i) and (ii) of
this section do not apply to the loans of the persons or organizations
specified therein, with respect to such loans state:
(A) The name of the officer or director to whom the loan was made
or to whose relative or affiliated organization the loan was made.
(B) The largest aggregate amount of each indebtedness outstanding
at any time during the last fiscal year.
(C) The nature of the loan(s).
(D) The amount outstanding as of the latest practicable date.
(E) The reasons the loan does not comply with the criteria
contained in paragraphs (e)(3)(i) and (e)(3)(ii) of this section.
(F) If the loan does not comply with paragraph (e)(3)(i)(B) of this
section, the rate of interest payable on the loan and the repayment
terms.
(G) If the loan does not comply with paragraph (e)(3)(ii) of this
section, the amount past due, if any, and the reason the loan is deemed
to involve more than a normal risk of collectability.
(f) Involvement in certain legal proceedings. Describe any of the
following events that occurred during the past 5 years and that are
material to an evaluation of the ability or integrity of any person who
served as director or senior officer on January 1 of the year following
the fiscal year for which the report is filed or at any time during the
fiscal year just ended:
(1) A petition under the Federal bankruptcy laws or any State
insolvency law was filed by or against, or a receiver, fiscal agent, or
similar officer was appointed by a court for the business or property
of such person, or any partnership in which such person was a general
partner at or within 2 years before the time of such filing, or any
corporation or business association of which such person was a senior
officer at or within 2 years before the time of such filing;
(2) Such person was convicted in
