Disclosure to Investors in System-wide and Consolidated Bank Debt Obligations of the Farm Credit System, 8179-8181 [2012-3411]
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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Proposed Rules
information on the characteristics of the
coil-only indoor unit for testing and
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429.16(a)(2)(ii).
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Issued in Washington, DC, on February 7,
2012.
Kathleen Hogan,
Deputy Assistant Secretary, Energy Efficiency
and Renewable Energy.
[FR Doc. 2012–3375 Filed 2–13–12; 8:45 am]
BILLING CODE 6450–01–P
FARM CREDIT ADMINISTRATION
12 CFR Part 630
RIN 3052–AC77
Disclosure to Investors in System-wide
and Consolidated Bank Debt
Obligations of the Farm Credit System
Farm Credit Administration.
Proposed rule.
AGENCY:
ACTION:
The Farm Credit
Administration (FCA, us, we, or our)
proposes to amend our regulations
related to the Federal Farm Credit Banks
Funding Corporation (Funding
Corporation) System Audit Committee
(SAC) and the Farm Credit System
(System) annual report to investors. The
proposed rule would remove the
provision that a two-thirds majority vote
of the Funding Corporation board of
directors be required to deny a request
for resources by the SAC to engage
independent legal counsel, outside
advisors or consultants. The proposed
rule would instead require appropriate
funding to the SAC to perform these
duties, quarterly reporting by the SAC to
the Funding Corporation board on
resources used, and annual reporting to
investors.
mstockstill on DSK4VPTVN1PROD with PROPOSALS
SUMMARY:
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16:41 Feb 13, 2012
Jkt 226001
Submit comments on or before
April 16, 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 (fax)
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:
DATES:
I. Objectives
The objectives of this proposed rule
are to:
• Allow the SAC unrestricted access
to resources to engage legal counsel,
consultants and outside advisors,
• Ensure that investors are provided
transparent and complete disclosure on
PO 00000
Frm 00002
Fmt 4702
Sfmt 4702
8179
the safe and sound use of resources by
the SAC, and
• Clarify that the appointment,
compensation, and retention of the
external auditor for the System-wide
reports cannot be changed without the
agreement of both the SAC and the
Funding Corporation board.
II. Background
The Farm Credit Act of 1971, as
amended (Act),1 authorizes the FCA to
issue regulations implementing the
Act’s provisions.2 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. In 2006, we
issued a final rulemaking on the
governance of System institutions.3
Those regulations changed the structure,
responsibilities, and authority of
existing audit committees at the banks
and the SAC, and it required audit
committees at System associations.
We explained in our 2006 rulemaking
that an audit committee is the guardian
of an institution’s financial integrity,
and its independence is essential to
investor confidence in the transparency
of audited financial statements. The
2006 rulemaking required that audit
committees at banks and associations be
comprised solely of well-qualified board
members,4 but made an exception to the
composition of the SAC. Section
630.6(a) requires that only one-third of
the SAC membership be composed of
directors from the Funding Corporation
board. This exception was in response
to comments received on the 2006
rulemaking that audit committee
composition derived solely from the
board of directors may be appropriate
for individual System institutions, but
not for the SAC. Commenters believed
that the duties of the SAC require
broader representation and greater
financial experience of its members due
to its oversight for the preparation of
System combined financial statements.
The 2006 rulemaking required that
the SAC be permitted to contract for
independent legal counsel and expert
advisers and that the Funding
Corporation provide monetary and
nonmonetary resources for these
activities. Also, the rulemaking required
1 Public Law 92–181, 85 Stat. 583 (1971), 12
U.S.C. 2001 et seq.
2 12 U.S.C. 2252(a)(8), (9) and (10).
3 71 FR 5740 (Feb. 2, 2006).
4 Section 620.6 of the FCA’s regulations states,
‘‘[e]ach member of an audit committee must be a
member of the Farm Credit institution’s board of
directors * * * All committee members should be
knowledgeable in at least one of the following:
public and corporate finance, financial reporting
and disclosure, or accounting procedures.’’
E:\FR\FM\14FEP1.SGM
14FEP1
mstockstill on DSK4VPTVN1PROD with PROPOSALS
8180
Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Proposed Rules
a two-thirds super majority vote, in lieu
of a simple majority vote, of the full
Funding Corporation board to deny an
SAC request for resources. In a petition
dated May 2010, the SAC requested that
we amend § 630.6 to allow it unfettered
ability to engage outside advisors,
consultants and legal counsel in the
performance of its duties. On November
18, 2010, we issued an advance notice
of proposed rulemaking (ANPRM) on
senior officer compensation disclosures
and related topics in order to gather
information for the development of a
proposed rulemaking.5 Part of the
ANPRM discussed the authority of the
SAC to obtain resources. Among the
comment letters received in response to
the ANPRM, several responders,
including the Farm Credit Council
(Council) acting for its membership, and
the Funding Corporation, addressed the
ability of the SAC to have unfettered
ability to access resources. The Council
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
Council also noted that its membership
supported the SAC’s request.
This proposed rule would expand the
authority of the SAC related to its use
of Funding Corporation resources for
consultants, legal counsel and outside
advisors. In its petition, the SAC
asserted that expanding its authority on
the use of resources would:
• Avoid any future potential conflict
that could arise between it and the
Funding Corporation board on SAC
requests for resources,
• Enhance its independence, and
• Promote the integrity of the System
both in fact and perception to investors
in System-wide debt securities.
We considered these views in
proposing this rule. The rule proposes
that the SAC report to the board at least
quarterly on its use of resources, and the
Funding Corporation disclose the uses
and their benefits in the System annual
report to investors. Further, we propose
to clarify that the SAC appoint,
compensate, retain and oversee the
System’s independent accountants with
the agreement of the Funding
Corporation board.
III. Section-by-Section Analysis
We request and encourage any
interested person to submit comments
on this proposed rule and ask that you
support your comments with relevant
data or examples. We are especially
5 75
FR 70619 (Nov. 18, 2010).
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16:41 Feb 13, 2012
Jkt 226001
interested in receiving comments
related to the proposed clarification that
the SAC appoint, compensate, and
retain external auditors with the
agreement of the Funding Corporation
board of directors.
A. System Audit Committee Authority
[§ 630.6(a)]
FCA regulations authorize the
Funding Corporation board of directors
to deny an SAC request for resources by
a two-thirds majority vote of the full
board. The proposed rule would provide
the SAC with the unlimited ability to
engage outside advisors, consultants
and legal counsel in the performance of
its duties. This proposed rule would
require that the SAC use Funding
Corporation resources in a manner that
would not adversely affect the safety
and soundness of the System and that
the use of resources complies with law
and regulation. Also, it would require
that the SAC report to the Funding
Corporation board at least quarterly on
resources used pursuant to this
proposed rule.
This provision would not prevent the
Funding Corporation from developing
its own procedures to address the use of
resources by the SAC. To facilitate an
open and balanced discussion on the
appropriate use of resources, we would
expect the SAC to confer with the
Funding Corporation board on its intent
to use resources. We would also expect
that in performing its fiduciary
responsibilities, the full board would
review the use of resources for any
safety or soundness issues.
B. External Auditors
[§ 630.6(a)(4)(ii)(A)]
The proposed rule would revise our
regulation relating to the appointment,
compensation and retention of the
external auditor. The revision would
clarify that the SAC perform this duty
with the agreement of the Funding
Corporation board. We believe this
clarification will ensure that the SAC’s
appointment, compensation and
retention of the external auditor for the
System-wide report are executed with
the agreement of the full board of the
Funding Corporation. Since the SAC is
a subset of the full board, we believe the
SAC duties related to the external
auditors are of such significance that
they must remain under the direct
oversight of the full board.
C. Disclosure of System Audit
Committee Expenditures [§ 630.20(n)]
To ensure that investors are provided
transparent and complete disclosure on
the safe and sound use of resources by
the SAC, we propose in § 630.20(n) that
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Frm 00003
Fmt 4702
Sfmt 4702
Funding Corporation resources used by
the SAC be disclosed by category in the
annual report to investors. The
proposed categories would include, at a
minimum, independent legal counsel
and related services, consultants,
actuaries, outside advisors and other
services performed on behalf of the
SAC. We propose that fees paid for the
audit of the combined System-wide
financial statements and any fees under
$5,000 per category need not be
disclosed. In addition to disclosing the
name of SAC members, we propose that
experience and compensation for each
member be included in the annual
report. We propose this change for
consistency with audit committee
disclosures required at the bank and
association level.
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 in 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, part 630 of chapter VI, title 12
of the Code of Federal Regulations are
proposed to be amended as follows:
PART 630—DISCLOSURE TO
INVESTORS IN SYSTEM–WIDE AND
CONSOLIDATED BANK DEBT
OBLIGATIONS OF THE FARM CREDIT
SYSTEM
1. 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
2. Section 630.6 is amended by
revising paragraphs (a)(3) and
(a)(4)(ii)(A) to read as follows:
E:\FR\FM\14FEP1.SGM
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Federal Register / Vol. 77, No. 30 / Tuesday, February 14, 2012 / Proposed Rules
§ 630.6
Funding Corporation committees.
(a) System Audit Committee. * * *
*
*
*
*
*
(3) Resources. The Funding
Corporation must provide the SAC
monetary and nonmonetary resources
the SAC determines necessary to enable
it to perform the duties listed in
paragraph (a)(4) of this section. The
Funding Corporation must permit the
SAC to contract, for reasons directly
related to the duties listed in paragraph
(a)(4), the services of external auditors,
independent legal counsel, and outside
advisors. The SAC must not use the
resources of the Funding Corporation in
a manner that would adversely affect
the safety and soundness of the System
or be contrary to law and regulation.
The SAC must provide the Funding
Corporation board of directors a
quarterly accounting of expenditures
made pursuant to this section.
(4) Duties. * * *
*
*
*
*
*
(ii) External auditors. The external
auditor must report directly to the SAC.
The SAC must:
(A) Determine, with the agreement of
the Funding Corporation board of
directors, the appointment,
compensation, and retention of the
external auditors issuing System-wide
audit reports;
*
*
*
*
*
Subpart B—Annual Report to Investors
3. Section 630.20 is amended by
revising paragraph (n) to read as
follows:
§ 630.20 Contents of the annual report to
investors.
mstockstill on DSK4VPTVN1PROD with PROPOSALS
*
*
*
*
*
(n) System Audit Committee. The
Funding Corporation must include in
the System-wide Report to Investors a
description of the System Audit
Committee and its activities during the
reporting period. At a minimum, the
report must:
(1) List the names of the System Audit
Committee members, including each
member’s term of office and principal
occupation during the past 5 years. For
each member, state the total cash and
noncash compensation paid for services
on the System Audit Committee during
the reporting period.
(2) Categorize and disclose the dollar
value of monetary and nonmonetary
resources used by the System Audit
Committee during the reporting period.
Describe the benefit(s) obtained from
expenditures made under each category.
Disclosures of fees paid for the audit of
the System-wide financial statements
and those categories of expenses having
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16:41 Feb 13, 2012
Jkt 226001
an annual aggregate dollar value of less
than $5,000 are not required. At a
minimum, there must be separate
categories for:
(i) Administrative expenses,
(ii) Contracted legal services,
(iii) Contracted consultants and
advisors, and
(iv) Other contracted services,
identifying the services.
*
*
*
*
*
Dated: February 9, 2012.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2012–3411 Filed 2–13–12; 8:45 am]
BILLING CODE 6705–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2012–0141; Directorate
Identifier 2011–NM–092–AD]
RIN 2120–AA64
Airworthiness Directives; Fokker
Services B.V. Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
We propose to adopt a new
airworthiness directive (AD) for all
Fokker Services B.V. Model F.28 Mark
0070 and 0100 airplanes. This proposed
AD was prompted by an in-flight failure
of the hydraulic control panel, which
resulted in the absence of pressure and
quantity indication of the hydraulic
system and accompanying alerts for
‘‘hydraulic system 1 low quantity’’ and
‘‘hydraulic system 2 low quantity.’’ This
proposed AD would require
implementing new abnormal procedures
for hydraulics in the airplane flight
manual (AFM). We are proposing this
AD to prevent loss of control of the
airplane due to incorrect hydraulic
system failure information being
provided to the flightcrew, followed by
application of inappropriate procedures.
DATES: We must receive comments on
this proposed AD by March 30, 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.
SUMMARY:
PO 00000
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Fmt 4702
Sfmt 4702
8181
• 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.
For service information identified in
this proposed AD, contact Fokker
Services B.V., Technical Services Dept.,
P.O. Box 231, 2150 AE Nieuw-Vennep,
the Netherlands; telephone +31 (0)252–
627–350; fax +31 (0)252–627–211; email
technicalservices.fokkerservices@
stork.com; Internet https://
www.myfokkerfleet.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: Tom
Rodriguez, Aerospace Engineer,
International Branch, ANM–116,
Transport Airplane Directorate, FAA,
1601 Lind Avenue SW., Renton,
Washington 98057–3356; telephone
(425) 227–1137; fax (425) 227–1149.
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–2012–0141; Directorate Identifier
2011–NM–092–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.
E:\FR\FM\14FEP1.SGM
14FEP1
]]>Agencies
[Federal Register Volume 77, Number 30 (Tuesday, February 14, 2012)]
[Proposed Rules]
[Pages 8179-8181]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3411]
=======================================================================
-----------------------------------------------------------------------
FARM CREDIT ADMINISTRATION
12 CFR Part 630
RIN 3052-AC77
Disclosure to Investors in System-wide and Consolidated Bank Debt
Obligations of the Farm Credit System
AGENCY: Farm Credit Administration.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Farm Credit Administration (FCA, us, we, or our) proposes
to amend our regulations related to the Federal Farm Credit Banks
Funding Corporation (Funding Corporation) System Audit Committee (SAC)
and the Farm Credit System (System) annual report to investors. The
proposed rule would remove the provision that a two-thirds majority
vote of the Funding Corporation board of directors be required to deny
a request for resources by the SAC to engage independent legal counsel,
outside advisors or consultants. The proposed rule would instead
require appropriate funding to the SAC to perform these duties,
quarterly reporting by the SAC to the Funding Corporation board on
resources used, and annual reporting to investors.
DATES: Submit comments on or before April 16, 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 (fax) 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. Objectives
The objectives of this proposed rule are to:
Allow the SAC unrestricted access to resources to engage
legal counsel, consultants and outside advisors,
Ensure that investors are provided transparent and
complete disclosure on the safe and sound use of resources by the SAC,
and
Clarify that the appointment, compensation, and retention
of the external auditor for the System-wide reports cannot be changed
without the agreement of both the SAC and the Funding Corporation
board.
II. Background
The Farm Credit Act of 1971, as amended (Act),\1\ authorizes the
FCA to issue regulations implementing the Act's provisions.\2\ 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. In 2006,
we issued a final rulemaking on the governance of System
institutions.\3\ Those regulations changed the structure,
responsibilities, and authority of existing audit committees at the
banks and the SAC, and it required audit committees at System
associations.
---------------------------------------------------------------------------
\1\ Public Law 92-181, 85 Stat. 583 (1971), 12 U.S.C. 2001 et
seq.
\2\ 12 U.S.C. 2252(a)(8), (9) and (10).
\3\ 71 FR 5740 (Feb. 2, 2006).
---------------------------------------------------------------------------
We explained in our 2006 rulemaking that an audit committee is the
guardian of an institution's financial integrity, and its independence
is essential to investor confidence in the transparency of audited
financial statements. The 2006 rulemaking required that audit
committees at banks and associations be comprised solely of well-
qualified board members,\4\ but made an exception to the composition of
the SAC. Section 630.6(a) requires that only one-third of the SAC
membership be composed of directors from the Funding Corporation board.
This exception was in response to comments received on the 2006
rulemaking that audit committee composition derived solely from the
board of directors may be appropriate for individual System
institutions, but not for the SAC. Commenters believed that the duties
of the SAC require broader representation and greater financial
experience of its members due to its oversight for the preparation of
System combined financial statements.
---------------------------------------------------------------------------
\4\ Section 620.6 of the FCA's regulations states, ``[e]ach
member of an audit committee must be a member of the Farm Credit
institution's board of directors * * * All committee members should
be knowledgeable in at least one of the following: public and
corporate finance, financial reporting and disclosure, or accounting
procedures.''
---------------------------------------------------------------------------
The 2006 rulemaking required that the SAC be permitted to contract
for independent legal counsel and expert advisers and that the Funding
Corporation provide monetary and nonmonetary resources for these
activities. Also, the rulemaking required
[[Page 8180]]
a two-thirds super majority vote, in lieu of a simple majority vote, of
the full Funding Corporation board to deny an SAC request for
resources. In a petition dated May 2010, the SAC requested that we
amend Sec. 630.6 to allow it unfettered ability to engage outside
advisors, consultants and legal counsel in the performance of its
duties. On November 18, 2010, we issued an advance notice of proposed
rulemaking (ANPRM) on senior officer compensation disclosures and
related topics in order to gather information for the development of a
proposed rulemaking.\5\ Part of the ANPRM discussed the authority of
the SAC to obtain resources. Among the comment letters received in
response to the ANPRM, several responders, including the Farm Credit
Council (Council) acting for its membership, and the Funding
Corporation, addressed the ability of the SAC to have unfettered
ability to access resources. The Council 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 Council also noted that its membership
supported the SAC's request.
---------------------------------------------------------------------------
\5\ 75 FR 70619 (Nov. 18, 2010).
---------------------------------------------------------------------------
This proposed rule would expand the authority of the SAC related to
its use of Funding Corporation resources for consultants, legal counsel
and outside advisors. In its petition, the SAC asserted that expanding
its authority on the use of resources would:
Avoid any future potential conflict that could arise
between it and the Funding Corporation board on SAC requests for
resources,
Enhance its independence, and
Promote the integrity of the System both in fact and
perception to investors in System-wide debt securities.
We considered these views in proposing this rule. The rule proposes
that the SAC report to the board at least quarterly on its use of
resources, and the Funding Corporation disclose the uses and their
benefits in the System annual report to investors. Further, we propose
to clarify that the SAC appoint, compensate, retain and oversee the
System's independent accountants with the agreement of the Funding
Corporation board.
III. Section-by-Section Analysis
We request and encourage any interested person to submit comments
on this proposed rule and ask that you support your comments with
relevant data or examples. We are especially interested in receiving
comments related to the proposed clarification that the SAC appoint,
compensate, and retain external auditors with the agreement of the
Funding Corporation board of directors.
A. System Audit Committee Authority [Sec. 630.6(a)]
FCA regulations authorize the Funding Corporation board of
directors to deny an SAC request for resources by a two-thirds majority
vote of the full board. The proposed rule would provide the SAC with
the unlimited ability to engage outside advisors, consultants and legal
counsel in the performance of its duties. This proposed rule would
require that the SAC use Funding Corporation resources in a manner that
would not adversely affect the safety and soundness of the System and
that the use of resources complies with law and regulation. Also, it
would require that the SAC report to the Funding Corporation board at
least quarterly on resources used pursuant to this proposed rule.
This provision would not prevent the Funding Corporation from
developing its own procedures to address the use of resources by the
SAC. To facilitate an open and balanced discussion on the appropriate
use of resources, we would expect the SAC to confer with the Funding
Corporation board on its intent to use resources. We would also expect
that in performing its fiduciary responsibilities, the full board would
review the use of resources for any safety or soundness issues.
B. External Auditors [Sec. 630.6(a)(4)(ii)(A)]
The proposed rule would revise our regulation relating to the
appointment, compensation and retention of the external auditor. The
revision would clarify that the SAC perform this duty with the
agreement of the Funding Corporation board. We believe this
clarification will ensure that the SAC's appointment, compensation and
retention of the external auditor for the System-wide report are
executed with the agreement of the full board of the Funding
Corporation. Since the SAC is a subset of the full board, we believe
the SAC duties related to the external auditors are of such
significance that they must remain under the direct oversight of the
full board.
C. Disclosure of System Audit Committee Expenditures [Sec. 630.20(n)]
To ensure that investors are provided transparent and complete
disclosure on the safe and sound use of resources by the SAC, we
propose in Sec. 630.20(n) that Funding Corporation resources used by
the SAC be disclosed by category in the annual report to investors. The
proposed categories would include, at a minimum, independent legal
counsel and related services, consultants, actuaries, outside advisors
and other services performed on behalf of the SAC. We propose that fees
paid for the audit of the combined System-wide financial statements and
any fees under $5,000 per category need not be disclosed. In addition
to disclosing the name of SAC members, we propose that experience and
compensation for each member be included in the annual report. We
propose this change for consistency with audit committee disclosures
required at the bank and association level.
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 in 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, part 630 of chapter VI,
title 12 of the Code of Federal Regulations are proposed to be amended
as follows:
PART 630--DISCLOSURE TO INVESTORS IN SYSTEM-WIDE AND CONSOLIDATED
BANK DEBT OBLIGATIONS OF THE FARM CREDIT SYSTEM
1. 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
2. Section 630.6 is amended by revising paragraphs (a)(3) and
(a)(4)(ii)(A) to read as follows:
[[Page 8181]]
Sec. 630.6 Funding Corporation committees.
(a) System Audit Committee. * * *
* * * * *
(3) Resources. The Funding Corporation must provide the SAC
monetary and nonmonetary resources the SAC determines necessary to
enable it to perform the duties listed in paragraph (a)(4) of this
section. The Funding Corporation must permit the SAC to contract, for
reasons directly related to the duties listed in paragraph (a)(4), the
services of external auditors, independent legal counsel, and outside
advisors. The SAC must not use the resources of the Funding Corporation
in a manner that would adversely affect the safety and soundness of the
System or be contrary to law and regulation. The SAC must provide the
Funding Corporation board of directors a quarterly accounting of
expenditures made pursuant to this section.
(4) Duties. * * *
* * * * *
(ii) External auditors. The external auditor must report directly
to the SAC. The SAC must:
(A) Determine, with the agreement of the Funding Corporation board
of directors, the appointment, compensation, and retention of the
external auditors issuing System-wide audit reports;
* * * * *
Subpart B--Annual Report to Investors
3. Section 630.20 is amended by revising paragraph (n) to read as
follows:
Sec. 630.20 Contents of the annual report to investors.
* * * * *
(n) System Audit Committee. The Funding Corporation must include in
the System-wide Report to Investors a description of the System Audit
Committee and its activities during the reporting period. At a minimum,
the report must:
(1) List the names of the System Audit Committee members, including
each member's term of office and principal occupation during the past 5
years. For each member, state the total cash and noncash compensation
paid for services on the System Audit Committee during the reporting
period.
(2) Categorize and disclose the dollar value of monetary and
nonmonetary resources used by the System Audit Committee during the
reporting period. Describe the benefit(s) obtained from expenditures
made under each category. Disclosures of fees paid for the audit of the
System-wide financial statements and those categories of expenses
having an annual aggregate dollar value of less than $5,000 are not
required. At a minimum, there must be separate categories for:
(i) Administrative expenses,
(ii) Contracted legal services,
(iii) Contracted consultants and advisors, and
(iv) Other contracted services, identifying the services.
* * * * *
Dated: February 9, 2012.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2012-3411 Filed 2-13-12; 8:45 am]
BILLING CODE 6705-01-P
