[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2005 Edition]
[From the U.S. Government Printing Office]
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12
Parts 600 to 899
Revised as of January 1, 2005
Banks and Banking
________________________
Containing a codification of documents of general
applicability and future effect
As of January 1, 2005
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
Administration
A Special Edition of the Federal Register
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Table of Contents
Page
Explanation................................................. vi
Title 12:
Chapter VI--Farm Credit Administration 3
Chapter VII--National Credit Union Administration 317
Chapter VIII--Federal Financing Bank 681
Finding Aids:
Table of CFR Titles and Chapters........................ 691
Alphabetical List of Agencies Appearing in the CFR...... 709
List of CFR Sections Affected........................... 719
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 12 CFR 600.1 refers
to title 12, part 600,
section 1.
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EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
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Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
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collection request.
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Many agencies have begun publishing numerous OMB control numbers as
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[[Page vii]]
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Raymond A. Mosley,
Director,
Office of the Federal Register.
January 1, 2005.
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THIS TITLE
Title 12--Banks and Banking is composed of seven volumes. The parts
in these volumes are arranged in the following order: parts 1-199, 200-
219, 220-299, 300-499, 500-599, part 600-899, and 900-end. The first
volume containing parts 1-199 is comprised of chapter I--Comptroller of
the Currency, Department of the Treasury. The second and third volumes
containing parts 200-299 are comprised of chapter II--Federal Reserve
System. The fourth volume containing parts 300-499 is comprised of
chapter III--Federal Deposit Insurance Corporation and chapter IV--
Export-Import Bank of the United States. The fifth volume containing
parts 500-599 is comprised of chapter V--Office of Thrift Supervision,
Department of the Treasury. The sixth volume containing parts 600-899 is
comprised of chapter VI--Farm Credit Administration, chapter VII--
National Credit Union Administration, chapter VIII--Federal Financing
Bank. The seventh volume containing part 900-end is comprised of chapter
IX--Federal Housing Finance Board, chapter XI--Federal Financial
Institutions Examination Council, chapter XIV--Farm Credit System
Insurance Corporation, chapter XV--Department of the Treasury, chapter
XVII--Office of Federal Housing Enterprise Oversight, Department of
Housing and Urban Development and chapter XVIII--Community Development
Financial Institutions Fund, Department of the Treasury. The contents of
these volumes represent all of the current regulations codified under
this title of the CFR as of January 1, 2005.
For this volume, Ruth Green was Chief Editor. The Code of Federal
Regulations publication program is under the direction of Frances D.
McDonald, assisted by Alomha S. Morris.
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TITLE 12--BANKS AND BANKING
(This book contains part 600 to 899)
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Part
chapter vi--Farm Credit Administration...................... 600
chapter vii--National Credit Union Administration........... 700
chapter viii--Federal Financing Bank........................ 810
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CHAPTER VI--FARM CREDIT ADMINISTRATION
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SUBCHAPTER A--ADMINISTRATIVE PROVISIONS
Part Page
600 Organization and functions.................. 5
601 Employee responsibilities and conduct....... 8
602 Releasing information....................... 8
603 Privacy Act regulations..................... 16
604 Farm Credit Administration Board meetings... 19
605 Information................................. 22
606 Enforcement of nondiscrimination on the
basis of handicap in programs or
activities conducted by the Farm Credit
Administration.......................... 25
607 Assessment and apportionment of
administrative expenses................. 30
608 Collection of claims owed the United States. 35
SUBCHAPTER B--FARM CREDIT SYSTEM
609 Electronic commerce......................... 49
611 Organization................................ 52
612 Standards of conduct and referral of known
or suspected criminal violations........ 84
613 Eligibility and scope of financing.......... 94
614 Loan policies and operations................ 100
615 Funding and fiscal affairs, loan policies
and operations, and funding operations.. 145
616 Leasing..................................... 190
617 Borrower rights............................. 192
618 General provisions.......................... 206
619 Definitions................................. 215
620 Disclosure to shareholders.................. 217
621 Accounting and reporting requirements....... 235
622 Rules of practice and procedure............. 242
623 Practice before the Farm Credit
Administration.......................... 256
624 Regulatory accounting practices............. 260
625 Application for award of fees and other
expenses under the Equal Access to
Justice Act............................. 261
626 Nondiscrimination in lending................ 267
627 Title IV conservators, receivers, and
voluntary liquidations.................. 270
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630 Disclosure to investors in systemwide and
consolidated bank debt obligations of
the Farm Credit System.................. 279
650 Federal Agricultural Mortgage Corporation... 293
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SUBCHAPTER A_ADMINISTRATIVE PROVISIONS
PART 600_ORGANIZATION AND FUNCTIONS--Table of Contents
Subpart A_Farm Credit Administration
Sec.
600.1 The Farm Credit Act.
600.2 Farm Credit Administration.
600.3 Farm Credit Administration Board.
600.4 Chairman of the Farm Credit Administration Board.
600.5 Organization of the Farm Credit Administration.
Subpart B_Rules and Procedures for Service Upon the Farm Credit
Administration
600.10 Service of Process.
Authority: Secs. 5.7, 5.8, 5.9, 5.10, 5.11, 5.17, 8.11 of the Farm
Credit Act (12 U.S.C. 2241, 2242, 2243, 2244, 2245, 2252, 2279aa-11).
Source: 53 FR 16693, May 11, 1988, unless otherwise noted.
Subpart A_Farm Credit Administration
Sec. 600.1 The Farm Credit Act.
The Farm Credit Act of 1971, Pub. L. 92-181 recodified and replaced
the prior laws under which the Farm Credit Administration and the
institutions of the Farm Credit System were organized and operated. The
prior laws, which were repealed and superseded by the Act, are
identified in section 5.40(a) of the Act. Subsequent amendments to the
Act and enactment dates are as follows: Pub. L. 94-184, December 31,
1975; Pub. L. 95-443, October 10, 1978; Pub. L. 96-592, December 24,
1980; Pub. L. 99-190, December 19, 1985; Pub. L. 99-198, December 23,
1985; Pub. L. 99-205, December 23, 1985; Pub. L. 99-509, October 21,
1986; Pub. L. 100-233, January 6, 1988; Pub. L. 100-399, August 17,
1988; Pub. L. 100-460, October 1, 1988; Pub. L. 101-73, August 9, 1989;
Pub. L. 101-220, December 12, 1989; Pub. L. 101-624, November 28, 1990;
Pub. L. 102-237, December 13, 1991; Pub. L. 102-552, October 28, 1992.
The law is codified at 12 U.S.C. 2000, et. seq.
[53 FR 16693, May 11, 1988, as amended at 56 FR 2672, Jan. 24, 1991; 59
FR 21641, Apr. 26, 1994]
Sec. 600.2 Farm Credit Administration.
The Farm Credit Administration is an independent, non-appropriated
fund agency in the executive branch of the Federal Government. It is
composed of the Farm Credit Administration Board and such other
personnel as are employed in carrying out the functions, powers, and
duties vested in the Farm Credit Administration. The mailing address of
the central offices of the Farm Credit Administration is McLean,
Virginia 22102-5090. The hours of business in the central offices are
8:30 a.m.-5:00 p.m. (eastern time), Monday through Friday, excluding
Federal holidays.
Sec. 600.3 Farm Credit Administration Board.
(a) Organization. The Farm Credit Administration Board (Board) is a
full-time, three-member board entrusted with the responsibility to
manage the Farm Credit Administration. The Board consists of three
members appointed by the President with the advice and consent of the
Senate. The Board may not contain more than two members of the same
political party. One member is designated by the President as Chairman
of the Board for the duration of such member's term. Each member of the
Board shall serve a single 6-year term and cannot be reappointed except
in the case of such members who are initially appointed for less than a
6-year term on initial formation of the Board or any member who is
appointed to fill an unexpired term of less than 3 years. A member of
the Board shall continue to serve subsequent to the expiration of that
member's term until the point in time at which an eligible successor has
taken his or her oath of office. A person appointed to the Board shall
subscribe to the oath of office within 15 days after having received
notice of appointment. Each Board member is assisted by a staff.
(b) Functions and responsibilities. The Board manages, administers,
and establishes policies for the Farm Credit Administration.
Specifically, the
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Board prescribes the rules and regulations necessary for the
implementation of the Farm Credit Act of 1971, as amended, and provides
for the examination of Farm Credit System institutions and for the
performance of all the powers and duties vested in the Farm Credit
Administration.
Sec. 600.4 Chairman of the Farm Credit Administration Board.
(a) The Chairman of the Board is the Chief Executive Officer of the
Farm Credit Administration. The Chairman is responsible for directing
the implementation of the policies and regulations adopted by the Board
and, after consultation with the Board, the execution of the
administrative functions and duties of the Farm Credit Administration.
In carrying out policies as directed by the Board, the Chairman acts as
the spokesperson for the Board and represents the Board and the Farm
Credit Administration in their official relations within the Federal
Government. Under policies adopted by the Board, the Chairman consults
with the Secretary of Treasury, Board of Governors of the Federal
Reserve System, and the Secretary of Agriculture on specific matters.
(b) The Chairman has the authority to appoint such personnel as may
be necessary to carry out the functions of the Farm Credit
Administration, including the appointment of a Secretary to the Board
and noncareer Office Directors. The Board has the authority to approve
the appointment by the Chairman of a Chief Operating Officer and career
Office Directors. Each Board member has the authority to appoint
personnel employed regularly and full-time in his or her immediate
office. The Chairman may not delegate powers specifically reserved to
the Chairman by the Act without the approval of the Board. In carrying
out authorities and responsibilities, the Chairman is governed by
general policies adopted by the Board and by such regulatory decisions,
findings, and determinations as the Board may by law be authorized to
make.
(c) The Chairman as Chief Executive Officer is responsible for
overseeing the agency's equal employment opportunity programs. An Equal
Employment Opportunity Manager reports directly to the Chairman as Chief
Executive Officer.
(d) The Chairman, as head of the agency, has general supervisory
authority over the Inspector General. The Inspector General has the
authority to select, appoint, and employ such officers and employees as
may be necessary to carry out the functions, powers, and duties of the
Office of Inspector General. The Inspector General is also authorized to
enter into contracts and other arrangements for audits, studies,
analyses, and other services with public agencies and private persons,
and to obtain the temporary or intermittent services of experts or
consultants or an organization of any such professionals. In exercising
these authorities, the Inspector General is subject to applicable
statutory and regulatory constraints, as well as agency and
governmentwide administrative and budgetary limitations.
[53 FR 16693, May 11, 1988, as amended at 59 FR 21641, Apr. 26, 1994]
Sec. 600.5 Organization of the Farm Credit Administration.
(a) Chief Operating Officer. The Chief Operating Officer (COO)
reports to and is subject to the direction of the Chief Executive
Officer (CEO) concerning administrative matters and to the Board
regarding general planning and policy matters, budgetary issues,
rulemaking issues, and other matters for which the Board is responsible.
Within this context, the COO has responsibility for planning,
organizing, directing, coordinating, and controlling agency operations.
(b) Office Directors. Each Office of the Farm Credit Administration
is headed by a Director. The Director of the Office of Congressional and
Public Affairs reports to the CEO. The Director of the Office of
Secondary Market Oversight reports to the CEO on administrative matters
and to the Board concerning general policy and rulemaking issues. The
Directors of the Offices of Examination, Policy Development and Risk
Control, and Resources Management
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report to the COO. The General Counsel reports to the COO on
administrative matters and to the Board on matters of agency policy.
Each Office Director may, with the approval of the CEO or COO, as
appropriate, establish and fix the responsibilities of the divisions and
such other units as the Director deems necessary for the efficient
functioning of the Office.
(c) Inspector General. The Inspector General reports directly to the
Chairman.
(d) Offices and functions--(1) Office of Examination. The Office of
Examination plans and conducts examinations of System institutions and
other institutions as required by law; prepares and issues reports of
examination summarizing examination findings; recommends corrective
action as appropriate; and oversees compliance with the borrower rights
provisions of the Act and agency regulations. The Office of Examination
recommends formal administrative action to correct deficiencies when
System institutions are found to be operating in an unsafe or unsound
manner or are in violation of law or regulation. The Office Director
prepares examination schedules for approval by the Board and advises the
Board on matters affecting policy, regulation, and legislation relating
to examination activities. The Director, Office of Examination, is the
Chief Examiner of the Farm Credit Administration.
(2) Office of Policy Development and Risk Control. The Office of
Policy Development and Risk Control (OPDRC) develops policies and
regulations for the FCA Board's consideration and promotes risk
management policies and practices by the Farm Credit System. The OPDRC
has primary responsibility for developing regulatory proposals and
public policy statements that effectively implement applicable statutes
and promote the safety and soundness of the System. Other major
functions include evaluating requests for regulatory and charter
approvals and managing the FCA's corporate activities; ensuring that
risks associated with chartering activities are properly disclosed to
System shareholders and the FCA Board; managing the FCA's formal
enforcement activities and providing economic and financial analyses
that identify risk and contribute to the effective management of such
risks. The OPDRC also facilitates the FCA's strategic planning function.
(3) Office of Resources Management. The Office of Resources
Management provides agency administrative management for the agency
budget, accounting, human resources, training, procurement, electronic
data processing, document processing, property, supply, facilities,
records and other administrative services. The Chairman and the Board
members have delegated to the Chief of the Human Resources Division the
authority to serve as appointing officer, including the authority to
classify or place positions in the appropriate pay plan and pay ranges.
(4) Office of General Counsel. The Office of General Counsel
provides legal advice and services to the Board, the Chairman, and the
agency staff. The Office interprets the Farm Credit Act of 1971, as
amended, and other applicable laws; participates in the preparation of
agency rules and regulations; and represents the agency in litigation,
in enforcement proceedings brought by the agency, and in proceedings
before other administrative bodies. The Office of General Counsel also
has the responsibility to ensure that the agency meets all statutory and
regulatory ethics requirements. The Director, Office of General Counsel,
is the General Counsel of the Farm Credit Administration.
(5) Office of Congressional and Public Affairs. The Office of
Congressional and Public Affairs coordinates and disseminates all
communication by the agency with the Congress and plans and implements
all public communications. The Office is the first source of information
to the Farm Credit System and borrowers concerning the Farm Credit
Administration and provides other representational services for the
Board and the agency to the public.
(6) Office of Inspector General. The Office of Inspector General is
an independent office established by the Inspector General Act
Amendments of 1988 to:
(i) Conduct and supervise audits and investigations relating to the
programs
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and operations of the Farm Credit Administration;
(ii) Provide leadership and coordination and recommend policies for
activities designed to promote economy, efficiency, and effectiveness in
the administration of the Farm Credit Administration's programs and
operations;
(iii) Prevent and detect fraud and abuse in the Farm Credit
Administration's programs and operations; and
(iv) Provide a means to keep the Chairman and Congress fully and
currently informed about problems and deficiencies relating to the Farm
Credit Administration's programs and operations and the necessity for,
and progress of, corrective actions.
(7) Office of Secondary Market Oversight. The Office of Secondary
Market Oversight, a separate office within the Farm Credit
Administration pursuant to section 8.11 of the Act, provides for:
(i) The examination of the Federal Agricultural Mortgage Corporation
and its affiliates; and
(ii) The general supervision of the safe and sound performance of
the powers, functions, and duties vested in the Federal Agricultural
Mortgage Corporation and its affiliates.
(e) Additional Information. Current information on the organization
of the Farm Credit Administration may be obtained from the Office of
Congressional and Public Affairs, Farm Credit Administration, McLean,
Virginia 22102-5090.
[53 FR 16693, May 11, 1988, as amended at 59 FR 21641, Apr. 26, 1994; 61
FR 67185, Dec. 20, 1996]
Subpart B_Rules and Procedures for Service Upon the Farm Credit
Administration
Sec. 600.10 Service of Process.
(a) Except as otherwise provided in the Farm Credit Administration
regulations, the Federal Rules of Civil Procedure or by order of a court
with jurisdiction over the Farm Credit Administration, any legal process
upon the Farm Credit Administration shall be duly issued and served upon
the Secretary to the Farm Credit Administration Board, 1501 Farm Credit
Drive, McLean, Virginia 22102-5090.
(b) Service of process upon the Secretary to the Farm Credit
Administration Board may be effected by personally delivering a copy of
the documents to the Secretary or by sending a copy of the documents to
the Secretary by registered or certified mail.
(c) The Secretary shall promptly forward a copy of all documents to
the General Counsel and to any Farm Credit Administration personnel
named in the caption of the documents.
[54 FR 50736, Dec. 11, 1989, as amended at 59 FR 21642, Apr. 26, 1994]
PART 601_EMPLOYEE RESPONSIBILITIES AND CONDUCT--Table of Contents
Authority: 5 U.S.C. 7301; 12 U.S.C. 2243, 2252.
Sec. 601.100 Cross-references to employee ethical conduct standards
and financial disclosure regulations.
Board members, officers, and other employees of the Farm Credit
Administration are subject to the Standards of Ethical Conduct for
Employees of the Executive Branch at 5 CFR part 2635, the Farm Credit
Administration regulation at 5 CFR part 4101, which supplements the
Executive Branch-wide Standards, and the executive branch-wide financial
disclosure regulations at 5 CFR part 2634.
[60 FR 30782, June 12, 1995]
PART 602_RELEASING INFORMATION--Table of Contents
Subpart A_Information and Records Generally
Sec.
602.1 Purpose and scope.
602.2 Disclosing reports of examination.
Subpart B_Availability of Records of the Farm Credit Administration
602.3 Definitions.
602.4 How to make a request.
602.5 FCA response to requests for records.
602.6 FOIA exemptions.
602.7 Confidential business information.
602.8 Appeals.
602.9 Current FOIA index.
[[Page 9]]
Subpart C_FOIA Fees
602.10 Definitions.
602.11 Fees by type of requester.
602.12 Fees.
602.13 Fee waiver.
602.14 Advance payments--notice.
602.15 Interest on unpaid fees.
602.16 Combining requests.
Subpart D_Testimony and Production of Documents in Legal Proceedings in
Which FCA is Not a Named Party
602.17 Policy.
602.18 Definitions.
602.19 Request for testimony or production of documents.
602.20 Testimony of FCA employees.
602.21 Production of FCA documents.
602.22 Fees.
602.23 Responses to demands served on FCA employees.
602.24 Responses to demands served on non-FCA employees or entities.
Subpart E_Release of Records in Public Rulemaking Files
602.25 General.
Authority: Secs. 5.9, 5.17; 12 U.S.C. 2243, 2252; 5 U.S.C. 301, 552;
52 FR 10012; E.O. 12600, 52 FR 23781, 3 CFR 1987, p. 235.
Source: 64 FR 41770, Aug. 2, 1999, unless otherwise noted.
Subpart A_Information and Records Generally
Sec. 602.1 Purpose and scope.
This part contains FCA's rules for disclosing our records or
information; processing requests for records under the Freedom of
Information Act (5 U.S.C. 552, as amended)(FOIA); FOIA fees; disclosing
otherwise exempt information in litigation when FCA is not a party; and
getting documents in public rulemaking files. Part 603 of this chapter
tells you how to get records about yourself under the Privacy Act of
1974, 5 U.S.C. 552a.
Sec. 602.2 Disclosing reports of examination.
(a) Disclosure by FCA. Reports of examination are FCA property. We
prepare them for our confidential use and the use of the institution
examined. We do not give reports of examination to the public. Except as
provided in this section, only the Chairman or the Chairman's designee
may consent to disclosing reports of examination of Farm Credit System
institutions and other institutions subject to our examination. You may
send a written request to our General Counsel that explains why we
should give permission.
(b) Disclosure by Farm Credit System institutions. An institution
that we have examined may disclose its report of examination to its
officers, directors, and agents, such as its attorney or accountant, if
they agree to keep the report confidential. In addition, banks may
disclose their reports of examination to their affiliated associations,
associations may disclose their reports to their supervisory bank, and
service corporations may disclose their reports of examination to the
institutions that own them. An institution may not disclose these
institutions' reports of examination to any other person without our
written permission.
(c) Disclosure to governmental entities. Without waiving any
privilege, we will disclose reports of examination to other Federal
government entities:
(1) In response to a Federal court order;
(2) In response to a request of either House or a Committee or
Subcommittee of Congress; or
(3) When requested for confidential use in an official investigation
by authorized representatives of other Federal agencies.
Subpart B_Availability of Records of the Farm Credit Administration
Sec. 602.3 Definitions.
Appeal means a request under the FOIA asking for the reversal of a
decision.
Business information means trade secrets or other commercial or
financial information that is privileged or confidential.
Business submitter means any person or entity that gives business
information to the Government.
FOIA request means a written request for FCA records, made by any
person or entity that either directly or indirectly invokes the FOIA or
this part.
[[Page 10]]
Record means all documentary materials, such as books, papers, maps,
photographs, and machine-readable materials, regardless of physical form
or characteristics (for example, electronic format) in our possession
and control when we receive your FOIA request.
Sec. 602.4 How to make a request.
(a) How to make and address a request. Your request for records must
be in writing and addressed to the FOIA Officer, Farm Credit
Administration. You may send it:
(1) By mail to 1501 Farm Credit Drive, McLean, Virginia 22102-5090;
(2) By facsimile to (703) 790-0052; or
(3) By E-mail to ``[email protected].''
(b) Description of requested records. You must describe the
requested records in enough detail to let us find them with a reasonable
effort. If the description is inadequate, we will ask you to provide
more information and the 20-day response period under Sec. 602.5(a)
will not begin until we receive your reply.
(c) Faster response. You may ask for a faster response to your FOIA
request by giving us a statement, certified to be true, that you have a
``compelling need.'' The FOIA Officer will tell you within 10 calendar
days after receiving the request whether we will respond to it faster.
If so, we will respond to your request as soon as we can. A compelling
need means:
(1) Someone's life or physical safety may be in danger if we do not
respond to the request faster; or
(2) You urgently need to tell the public about Federal government
activity as a representative of the news media.
(d) Request for personal information. If you or your representative
requests your personal information, we may require you to give us a
notarized request, identify yourself under penalty of perjury, or
provide other proof of your identity.
(e) Fees. When making a request, you must tell us the most you are
willing to pay. Our charges are in the fee tables in Sec. Sec. 602.11
and 602.12. You may also want to tell us the purpose of your request so
we can classify your request for fee purposes.
(f) Other requests. To ensure the public has timely information
about our activities, the Office of Congressional and Public Affairs
will make available copies of public documents, such as the FCA annual
report and media advisories.
Sec. 602.5 FCA response to requests for records.
(a) Response time. Within 20 business days of receiving your
request, the FOIA Officer will tell you whether we have granted or
denied it. If you send your request to the wrong address, the 20-day
response time will not begin until the FOIA Officer receives your
request.
(b) Extension of response time. In ``unusual circumstances,'' the
FOIA Officer may extend the 20-day response time for up to 10 more
business days by telling you in writing why we need more time and the
date we will mail you our response. As used in this subpart, ``unusual
circumstances'' means our need to:
(1) Search for and get the requested records from field offices or
other locations;
(2) Search for, get, and review many records identified in a single
request;
(3) Consult with another Federal agency having a substantial
interest in the request; or
(4) Consult with two or more FCA offices having a substantial
interest in the request.
(c) Referrals. If you ask for records we have that another Federal
agency originated, we will refer the request to the originating agency
and tell you about the referral. If you should have sent your request to
another Federal agency, we will refer the request to that agency and so
advise you.
Sec. 602.6 FOIA exemptions.
The FOIA allows agencies to withhold documents in certain
categories. For instance, we do not have to give you documents that
relate to our examination of institutions or that would violate the
personal privacy of an individual. If we do not give you a document
because the FOIA does not require us to, we will tell you which FOIA
exemption applies to our decision.
[[Page 11]]
Sec. 602.7 Confidential business information.
(a) FCA disclosure. FCA may disclose business information from a
business submitter only under this section. This section will not apply
if:
(1) We decide the business submitter has no valid basis to object to
disclosure;
(2) The information has been published lawfully or made available to
the public; or
(3) Law (other than the FOIA) requires disclosure of the
information.
(b) Notice by FCA. When we receive a request for confidential
business information, the FOIA Officer will promptly tell the requester
and the business submitter in writing that the responsive records may be
free from disclosure under the FOIA. We will give the business submitter
a reasonable time to object to the proposed disclosure of the responsive
records and tell the requester whenever:
(1) The business submitter has in good faith labeled the information
a trade secret or commercial or financial information that is privileged
or confidential. We will provide such notice for 10 years after
receiving the information unless the business submitter justifies the
need for a longer period; or
(2) We believe that disclosing the information may result in
commercial or financial injury to the business submitter.
(c) Objection to release. A business submitter who objects to our
releasing the requested information should tell us in writing why the
information is a trade secret or commercial or financial information
that is privileged or confidential.
(d) FCA response. (1) We will consider carefully a business
submitter's objections. If we decide to disclose business information
over the submitter's objection, the FOIA Officer will explain to the
submitter in writing why we disagreed with the submitter's objection and
describe the business information to be disclosed.
(2) We will tell the requester and the submitter the proposed
disclosure date at the same time.
(3) If a submitter sues to prevent release, we will promptly tell
the requester and will not disclose the business information until after
the court's decision.
(4) If a requester sues to compel disclosure, we will promptly tell
the business submitter.
Sec. 602.8 Appeals.
(a) How to appeal. You may appeal a total or partial denial of your
FOIA request within 30 calendar days of the date of the denial letter.
Your appeal must be in writing and addressed to the Director, Office of
Resources Management (ORM), Farm Credit Administration. You may send it:
(1) By mail to 1501 Farm Credit Drive, McLean, Virginia 22102-5090;
(2) By facsimile to (703) 893-2608; or
(3) By E-mail to [email protected].
(b) FCA action on appeal. Within 20 business days of receiving your
appeal, the ORM Director will tell you, in writing, whether we have
granted or denied it. If you send your appeal to the wrong address, the
20-day response time will not begin until the ORM Director receives your
appeal.
(c) Unusual circumstances. In unusual circumstances, the ORM
Director may extend the 20-day response time by telling you in writing
why we need more time and the date we will mail you our response. All
extensions, including any extension of the response time for the first
request, may not total more than 10 business days.
Sec. 602.9 Current FOIA index.
FCA will make a current index available for public inspection and
copying, as required by the FOIA. We will give you an index for the cost
of copying it. Because we rarely receive requests for an index, we have
not published one in the Federal Register.
Subpart C_FOIA Fees
Sec. 602.10 Definitions.
Commercial use request means an information request by an individual
or entity seeking information for a use or purpose that furthers the
commercial, trade, or profit interests of that individual or entity.
Direct costs means the costs FCA incurs in searching for and
reproducing documents to respond to a FOIA request. For a commercial use
request, it
[[Page 12]]
also means the costs we incur in reviewing documents to respond to the
request. Direct costs include the pro rated cost of the salary of the
employee performing the work (based on the basic rate of pay plus 16
percent to cover benefits) and the cost of operating reproduction
equipment. They do not include overhead expenses.
Educational institution means a preschool, a public or private
elementary or secondary school, an institution of undergraduate or
graduate higher education, an institution of professional education, or
an institution of vocational education that runs a program of scholarly
research.
Noncommercial scientific institution means a nonprofit institution
that conducts scientific research that is not intended to promote any
particular product or industry.
Pages mean 8-1/2 x 11 inch or 11 x 14 inch paper copies.
Representative of the news media means any person actively gathering
news for an entity that publishes or broadcasts news to the public. News
means information about current events or of current interest to the
public.
Reproduce (or reproduction) means copying a record.
Review means looking at documents found in response to a FOIA
request to decide whether any portion should be withheld. It does not
include the time spent resolving legal or policy issues.
Search means all time spent looking for material responsive to a
FOIA request, including page-by-page or line-by-line identification of
material within documents.
Sec. 602.11 Fees by type of requester.
Depending on your identity and the purpose of your request, the FCA
may charge you the direct costs of searching for responsive records,
reviewing the records, and reproducing them. If necessary, we will seek
clarification before classifying the request.
(a) Educational institutions and noncommercial scientific
institutions. We charge fees for reproduction costs only. The first 100
pages are free. You must show that the request is sanctioned by an
educational or noncommercial scientific institution and that you seek
the records for scholarly or scientific research, not for a commercial
use.
(b) Representatives of the news media. We charge fees for
reproduction costs only. The first 100 pages are free. You must be a
representative of the news media, and the request must not be made for a
commercial use. A request for records supporting news distribution is
not a request for a commercial use.
(c) Commercial use. We charge the direct cost for search, review,
and reproduction. Commercial use requesters are not entitled to free
search time or free reproduction. We will charge you even if we do not
disclose any records.
(d) All others. The first 2 hours of search time and the first 100
pages of reproduction are free. After that, we will charge you for
search and reproduction costs. We will charge you for a search even if
we do not disclose any records.
(e) Fee table. The fee information in paragraphs (a) through (d) of
this section is presented in the table to this paragraph. You may apply
for a waiver if your request is not mostly in your commercial interest
and the disclosure is in the public interest. See Sec. 602.13.
Fee Table
----------------------------------------------------------------------------------------------------------------
Charges for
Type of requester --------------------------------------------------- Reproduction
Search time Review time
----------------------------------------------------------------------------------------------------------------
Educational....... No Charge............... No charge.............. First 100 pages free, $
Noncommercial 0.15 a page after
scientific users. that.
News media........
Commercial Users \1\................ All direct costs........ All direct costs....... $0.15 a page.
All others \1\...................... First 2 hours free, all No charge.............. First 100 pages free,
direct costs after that. $0.15 a page after
that.
----------------------------------------------------------------------------------------------------------------
\1\ You are responsible for fees even if we do not disclose any records.
[64 FR 41770, Aug. 2, 1999; 64 FR 45589, Aug. 20, 1999]
[[Page 13]]
Sec. 602.12 Fees.
(a) FCA may charge:
(1) For manual searches for records and for review, the pro rated
cost of the salary of the employee doing the work.
(2) For computer searches for records, the direct costs of computer
search time and supply or material costs.
(3) For each page made by photocopy or similar method, fifteen cents
a page, and for other forms of copying, the direct costs.
(4) The direct costs of elective services, such as certifying
records as true copies or sending records by special methods.
(b) We will not charge fees when total assessed fees are less than
$15.00.
(c) You must pay by personal check, bank draft drawn on a United
States bank, or postal money order made payable to the Treasury of the
United States.
(d) We treat a request about yourself under Privacy Act fee rules.
(e) The information in paragraphs (a) and (b) of this section is
presented in the table to this paragraph. Direct costs means the costs
FCA incurs in searching for, reviewing, and reproducing documents to
respond to a request. Direct costs include pro rated salary and
reproduction costs. We will not charge fees when they total less than
$15.00.
Fee Amounts Table
------------------------------------------------------------------------
Type of fee Amount of fee
------------------------------------------------------------------------
Manual Search and Review................. Pro rated Salary Costs.
Computer Search.......................... Direct Costs.
Photocopy................................ $0.15 a page.
Other Reproduction Costs................. Direct Costs.
Elective Services........................ Direct Costs.
------------------------------------------------------------------------
Sec. 602.13 Fee waiver.
We may waive or reduce fees if disclosure is not mostly in your
commercial interest but, instead, is in the public interest because it
will advance public understanding of the Federal government's operations
or activities.
Sec. 602.14 Advance payments--notice.
(a) If fees will be more than $25.00 and you have not told us in
advance that you will pay estimated fees, we will tell you the estimated
amount and ask that you agree to pay it. Except as noted in this
section, we will begin processing the FOIA request when we receive your
agreement to pay.
(b) If estimated fees exceed $250.00 and you have a history of
promptly paying fees charged for information requests, we may respond to
your request based on your agreement to pay.
(c) If estimated fees exceed $250.00 and you have no history of
paying fees, we may require you to pay in advance.
(d) If you have previously failed to pay fees for information
requests or paid them late, you must pay any fees still owed, plus
interest calculated under Sec. 602.15, and the estimated fees before we
will respond to a new or a pending request.
(e) If we require advance payment or an advance agreement to pay, we
will not consider your request to be received and will not respond to it
until you meet the requirement.
Sec. 602.15 Interest on unpaid fees.
If you fail to pay fees on time, FCA may charge you interest
starting on the 31st calendar day following the date we bill you. We
will charge you interest at the rate allowed by law (31 U.S.C. 3717) on
the billing date.
Sec. 602.16 Combining requests.
You may not avoid paying fees by filing multiple requests at the
same time. When FCA reasonably believes that you, alone or with others,
are breaking down a request into a series of requests to avoid fees, we
will combine the requests and charge accordingly. We will assume that
multiple requests within a 30-day period have been made to avoid fees.
[[Page 14]]
Subpart D_Testimony and Production of Documents in Legal Proceedings in
Which FCA is Not a Named Party
Sec. 602.17 Policy.
(a) The rules in this subpart preserve the confidentiality of FCA's
documents and information, conserve employees' time for official duties,
uphold fairness in litigation, and help the Chairman decide when to
allow testimony and to produce documents. This subpart does not affect
access to documents under the FOIA or the Privacy Act. See subpart B of
this part and part 603 of this chapter.
(b) Generally, we will not produce documents voluntarily and
employees will not appear as witnesses voluntarily in any legal
proceeding. However, in limited circumstances, the Chairman may allow
the production of documents or testimony when the Chairman decides it
would be in the best interest of FCA or the public. All privileged
documents produced under this subpart remain our property. Any employee
having information or privileged documents may disclose them only as
allowed by the Chairman.
Sec. 602.18 Definitions.
Court means any entity conducting a legal proceeding.
Demand means any order, subpoena, or other legal process for
testimony or documents.
Direct costs means FCA's costs to search for, review, and reproduce
documents to respond to a request. Direct costs include the pro rated
cost of the salary of the employee performing the work (based on the
basic rate of pay plus 16 percent to cover benefits) and the cost of
operating reproduction equipment.
Document means any record or other documentary materials, such as
books, papers, maps, photographs, and machine-readable materials,
regardless of physical form or characteristics (for example, electronic
format) in our possession and control when we receive the request.
Employee means any present or former FCA employee, any present or
former FCA Board member, any former Federal Farm Credit Board member,
any present or former FCA-appointed receiver or conservator, and any
present or former agent or contractor.
FCA Counsel means the General Counsel, a Department of Justice
attorney, or counsel authorized by FCA to act for the FCA or an
employee.
General Counsel means the FCA's General Counsel or designee.
Legal proceeding means any administrative, civil, or criminal
proceeding, including a discovery proceeding, before a court when FCA is
not a named party and has not instituted the legal proceeding.
Sec. 602.19 Request for testimony or production of documents.
(a) How to make and address a request. Your request for an
employee's testimony about official matters or the production of
documents must be in writing and addressed to the General Counsel, 1501
Farm Credit Drive, McLean, Virginia 22102-5090.
(b) Your request must contain the following:
(1) Title of the case;
(2) Forum;
(3) Your interest in the case;
(4) Summary of the litigation issues;
(5) Reasons for the request;
(6) Why the confidential information is important; and
(7) An explanation of why the testimony or document you want is not
reasonably available from another source. If you want testimony, you
must also state how you intend to use the testimony, provide a subject
matter summary of the requested testimony, and explain why a document
could not be used instead.
(c) The General Counsel may ask you to limit your request to make it
less burdensome or to give us information to help us decide if providing
documents or testimony is in the public interest.
Sec. 602.20 Testimony of FCA employees.
(a) An employee may testify only as the Chairman approves in
writing. Generally, an employee may testify only by deposition or
written interrogatory. An employee may give only factual testimony and
may not give opinion testimony.
[[Page 15]]
(b) If, in response to your request, the Chairman decides that an
employee may testify, you must serve the employee with a subpoena under
applicable Federal or State rules of procedure and at the same time send
a copy of the subpoena by registered mail to the General Counsel.
(c) Normally, depositions will be taken at the employee's office, at
a time convenient to the employee and the FCA. FCA counsel may represent
FCA's interests at the deposition.
(d) If you request the deposition, you must give the General Counsel
a copy of the deposition transcript at no charge.
Sec. 602.21 Production of FCA documents.
(a) An FCA employee may produce documents only as the Chairman
allows.
(b) Before we will release any documents, the requesting party must
get an acceptable protective order from the court before which the
action is pending that will preserve the confidentiality of the
documents to be released.
(c) On request, we may provide certified or authenticated copies of
documents.
Sec. 602.22 Fees.
(a) For documents released under this subpart, FCA will charge:
(1) The direct costs of searching for responsive records, including
the use of a computer, reviewing the records, and reproducing them. We
also will charge for the direct costs of any other services and
materials that we provide at your request.
(2) Fifteen cents a copy for each page made by photocopy or similar
process.
(3) The direct costs for each certification or authentication of
documents.
(b) You must pay by personal check, bank draft drawn on a United
States bank, or postal money order made payable to FCA. We will waive
fees of $15.00 or less. We will send the documents after we receive your
payment.
Sec. 602.23 Responses to demands served on FCA employees.
(a) An employee served with a demand or a subpoena in a legal
proceeding must immediately tell the General Counsel of such service,
the testimony or documents described in the demand, and all relevant
facts.
(b) When the Chairman does not allow testimony or production of
documents, FCA Counsel will provide the regulations in this subpart to
the party or court issuing the demand and explain that the employee may
not testify or produce documents without the Chairman's prior approval.
(c) If the court rules the employee must comply with the demand
regardless of the Chairman's instructions not to do so, the employee
must respectfully refuse to comply.
(d) FCA's decision under this subpart to comply or not to comply
with any demand is not a waiver, an assertion of privilege, or an
objection based on relevance, technical deficiency, or any other ground.
We may oppose any demand on any legal ground.
Sec. 602.24 Responses to demands served on non-FCA employees or entities.
If you are not an employee and are served with a demand or a
subpoena in a legal proceeding directing you to produce or testify about
an FCA report of examination, other document created or adopted by FCA,
or any related document, you must object and immediately tell the
General Counsel of such service, the testimony or documents described in
the demand, and all relevant facts. You also must object to the
production of any documents on the basis that they are FCA's property
and cannot be released without FCA's consent. You should tell the
requester the production of documents or testimony must follow the
procedures in this part.
Subpart E_Release of Records in Public Rulemaking Files
Sec. 602.25 General.
FCA has a public rulemaking file for each regulation. You may get
copies of documents in the public rulemaking file by sending a written
request to the Director, Regulation and Policy Division, Office of
Policy and Analysis, Farm Credit Administration, 1501 Farm Credit Drive,
McLean, Virginia 22102-5090. We will charge fifteen cents a
[[Page 16]]
copy for each page. We will waive fees of $15.00 or less.
PART 603_PRIVACY ACT REGULATIONS--Table of Contents
Sec.
603.300 Purpose and scope.
603.305 Definitions.
603.310 Procedures for requests pertaining to individual records in a
record system.
603.315 Times, places, and requirements for identification of
individuals making requests.
603.320 Disclosure of requested information to individuals.
603.325 Special procedures for medical records.
603.330 Request for amendment to record.
603.335 Agency review of request for amendment of record.
603.340 Appeal of an initial adverse determination of a request to amend
a record.
603.345 Fees for providing copies of records.
603.350 Criminal penalties.
603.355 Exemptions.
Authority: Secs. 5.9, 5.17 of the Farm Credit Act (12 U.S.C. 2243,
2252); 5 U.S.C. app. 3, 5 U.S.C. 552a (j)(2) and (k)(2).
Source: 40 FR 40454, Sept. 2, 1975, unless otherwise noted.
Sec. 603.300 Purpose and scope.
(a) This part is published by the Farm Credit Administration
pursuant to the Privacy Act of 1974 (Pub. L. 93-579, 5 U.S.C. 552a)
which requires each Federal agency to promulgate rules to establish
procedures for notification and disclosure to an individual of agency
records pertaining to that person, and for review of such records.
(b) The records covered by this part include:
(1) Personnel and employment records maintained by the Farm Credit
Administration which are not covered by Sec. Sec. 293.101 through
293.108 of the regulations of the Office of Personnel Management (5 CFR
293.101 through 293.108), and
(2) Other records contained in record systems maintained by the Farm
Credit Administration.
[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41941, Nov. 20, 1986]
Sec. 603.305 Definitions.
For the purposes of this part:
(a) Agency means the Farm Credit Administration.
(b) Individual means a citizen of the United States or an alien
lawfully admitted for permanent residence;
(c) Maintain includes maintain, collect, use, or disseminate;
(d) Record means any item, collection, or grouping of information
about an individual that is maintained by an agency including, but not
limited to, that person's education, financial transactions, medical
history, and criminal or employment history, and that contains that
person's name, or the identifying number, symbol, or other identifying
particular assigned to the individual, such as a finger or voice print
or photograph;
(e) Routine use means, with respect to the disclosure of a record,
the use of such record for a purpose that is compatible with the purpose
for which it was collected;
(f) Statistical record means a record in a system of records
maintained for statistical research or reporting purposes only and not
used in whole or in part in making any determination about an
identifiable individual, except as provided by 13 U.S.C. 8;
(g) System of records means a group of any records under the control
of any agency from which information is retrieved by the name of an
individual or by some identifying number, symbol, or other identifying
particular assigned to the individual.
[51 FR 41941, Nov. 20, 1986]
Sec. 603.310 Procedures for requests pertaining to individual records in a record system.
(a) Any present or former employee of the Farm Credit Administration
seeking access to that person's official civil service records
maintained by the Farm Credit Administration shall submit a request in
such manner as is prescribed by the Office of Personnel Management.
(b) Individuals shall submit their requests in writing to the
Privacy Act Officer, Office of General Counsel, Farm Credit
Administration, McLean, Virginia 22102-5090, when seeking to obtain from
the Farm Credit Administration:
[[Page 17]]
(1) Notification of whether the agency maintains a record pertaining
to that person in a system of records;
(2) Notification of whether the agency has disclosed a record for
which an accounting of disclosure is required to be maintained and made
available to that person;
(3) A copy of a record pertaining to that person or the accounting
of its disclosure;
(4) The review of a record pertaining to that person or the
accounting of its disclosure. The request shall state the full name and
address of the individual, and identify the system or systems of records
believed to contain the information or record sought.
[51 FR 41941, Nov. 20, 1986, as amended at 61 FR 67185, Dec. 20, 1996]
Sec. 603.315 Times, places, and requirements for identification of individuals making requests.
The individual making written requests for information or records
ordinarily will not be required to verify that person's identity. The
signature upon such requests shall be deemed to be a certification by
the requester that he or she is the individual to whom the record
pertains, or the parent of a minor, or the duly appointed legal guardian
of the individual to whom the record pertains. The Privacy Act Officer,
however, may require such additional verification of identity in any
instance in which the Privacy Act Officer deems it advisable.
[51 FR 41941, Nov. 20, 1986]
Sec. 603.320 Disclosure of requested information to individuals.
(a) The Privacy Act Officer shall, within a reasonable period of
time after the date of receipt of a request for information of records:
(1) Determine whether or not such request shall be granted,
(2) Notify the requester of the determination and, if the request is
denied, of the reasons therefor, and
(3) Notify the requester that fees for reproducing copies of records
may be charged as provided in Sec. 603.345 of this part.
(b) If access to a record is denied because the information therein
has been compiled by the Farm Credit Administration in reasonable
anticipation of a civil or criminal action proceeding, the Privacy Act
Officer shall notify the requester of that person's right to judicial
appeal under 5 U.S.C. 552a(g).
(c)(1) If access to a record is granted, the requester shall notify
the Officer whether the requested record is to be copied and mailed to
the requester or whether the record is to be made available for personal
inspection.
(2) A requester who is an individual may be accompanied by an
individual selected by the requester when the record is disclosed, in
which case the requester may be required to furnish a written statement
authorizing the discussion of the record in the presence of the
accompanying person.
(d) If the record is to be made available for personal inspection,
the requester shall arrange with the Privacy Act Officer a mutually
agreeable time in the offices of the Farm Credit Administration for
inspection of the record.
[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41941, Nov. 20, 1986]
Sec. 603.325 Special procedures for medical records.
Medical records in the custody of the Farm Credit Administration
which are not subject to Office of Personnel Management regulations
shall be disclosed either to the individual to whom they pertain or that
person's authorized or legal representative or to a licensed physician
named by the individual.
[51 FR 41942, Nov. 20, 1986]
Sec. 603.330 Request for amendment to record.
(a) If, after disclosure of the requested information, an individual
believes that the record is not accurate, relevant, timely, or complete,
that person may request in writing that the record be amended. Such a
request shall be submitted to the Privacy Act Officer and shall contain
identification of the system of records and the record or information
therein, a brief description of the material requested to be changed,
the requested change or changes, and the reason for such change or
changes.
[[Page 18]]
(b) The Privacy Act Officer shall acknowledge receipt of the request
within 10 days (excluding Saturdays, Sundays, and legal holidays) and,
if a determination has not been made, advise the individual when that
person may expect to be advised of action taken on the request. The
acknowledgment may contain a request for additional information needed
to make a determination.
[51 FR 41942, Nov. 20, 1986]
Sec. 603.335 Agency review of request for amendment of record.
Upon receipt of a request for amendment of a record, the Privacy Act
Officer shall:
(a) Correct any portion of a record which the individual making the
request believes is not accurate, relevant, timely, or complete and
thereafter inform the individual in writing of such correction, or
(b) Inform the individual in writing of refusal to amend the record
and of the reasons therefor, and advise that the individual may appeal
such determination as provided in Sec. 603.340 of this part.
[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41942, Nov. 20, 1986]
Sec. 603.340 Appeal of an initial adverse determination of a request to amend a record.
(a) Not more than 10 days (excluding Saturdays, Sundays, and legal
holidays) after receipt by an individual of an adverse determination on
the individual's request to amend a record or otherwise, the individual
may appeal to the Director, Office of Resources Management.
(b) The appeal shall be by letter, mailed or delivered to the
Director, Office of Resources Management, Farm Credit Administration,
McLean, Virginia 22102-5090. The letter shall identify the records
involved in the same manner they were identified to the Privacy Act
Officer, shall specify the dates of the request and adverse
determination, and shall indicate the expressed basis for that
determination. Also, the letter shall state briefly and succinctly the
reasons why the adverse determination should be reversed.
(c) The review shall be completed and a final determination made by
the Director not later than 30 days (excluding Saturdays, Sundays, and
legal holidays) from receipt of the request for such review, unless the
Director extends such 30-day period for good cause. If the 30-day period
is extended, the individual shall be notified of the reasons therefor.
(d) If the Director refuses to amend the record in accordance with
the request, the individual shall be notified of the right to file a
concise statement setting forth that person's disagreement with the
final determination and that person's right under 5 U.S.C. 552a(g)(1)(A)
to a judicial review of the final determination.
(e) If an amendment of a record as requested upon review is refused,
there shall be included in the disputed portion of the record a copy of
the concise statement filed by the individual together with a concise
statement of the reasons for not amending the record as requested. Such
statements will be included when disclosure of the disputed record is
made to persons and agencies as authorized under 5 U.S.C. 552a.
[40 FR 40454, Sept. 2, 1975, as amended at 51 FR 41942, Nov. 20, 1986;
56 FR 2673, Jan. 24, 1991]
Sec. 603.345 Fees for providing copies of records.
Fees for providing copies of records shall be charged in accordance
with Sec. Sec. 602.267 and 602.269 of this chapter.
[40 FR 40454, Sept. 2, 1975, as amended at 56 FR 28479, June 21, 1991]
Sec. 603.350 Criminal penalties.
Section 552a (l) (3) of the Privacy Act (5 U.S.C. 552a (i) (3))
makes it a misdemeanor, subject to a maximum fine of $5,000, to
knowingly and willfully request or obtain any record concerning any
individual from an agency under false pretenses. Sections 552a (i) (1)
and (2) of the Act (5 U.S.C. 552a (i) (1), (2)) provide penalties for
violation by agency employees of the Act or regulations established
thereunder.
Sec. 603.355 Exemptions.
(a) Specific. Pursuant to 5 U.S.C. 552a(k)(2), the investigatory
material
[[Page 19]]
compiled for law enforcement purposes in the following systems of
records is exempt from subsections (c)(3), (d), (e)(1), (e)(4) (G), (H),
and (I) and (f) of 5 U.S.C. 552a and from the provisions of this part:
Farm Credit Bank loans--FCA.
Production Credit Association loans--FCA.
Agricultural Credit Association loans--FCA.
Federal Land Credit Association loans--FCA.
Agricultural Credit Bank loans--FCA.
Office of Inspector General Investigative Files--FCA.
(b) General. (1) In addition, pursuant to 5 U.S.C. 552a (j)(2),
investigatory materials compiled for criminal law enforcement in the
system of records described in (b)(2) are exempt from all subsections of
5 U.S.C. 552a, except (b), (c) (1) and (2), (e)(4) (A) through (F), (e)
(6), (7), (9), (10), and (11), and (i). Exemptions from the particular
subsections are justified for the following reasons:
(i) From subsection (c)(3) because making available to a record
subject the accounting of disclosures from records concerning him/her
would reveal investigative interest on the part of the OIG. This would
enable record subjects to impede the investigation by, for example,
destroying evidence, intimidating potential witnesses, or fleeing the
area to avoid inquiries or apprehension by law enforcement personnel.
(ii) From subsection (c)(4) because this system is exempt from the
access provisions of subsection (d) pursuant to subsection (j)(2) of the
Privacy Act.
(iii) From subsection (d) because the records contained in this
system relate to official Federal investigations. Individual access to
those records might compromise ongoing investigations, reveal
confidential informants or constitute unwarranted invasions of the
personal privacy of third parties who are involved in a certain
investigation. Amendment of the records would interfere with ongoing
criminal law enforcement proceedings and impose an impossible
administrative burden by requiring criminal investigations to be
continuously reinvestigated.
(iv) From subsections (e) (1) and (5) because in the course of law
enforcement investigations, information may occasionally be obtained or
introduced the accuracy of which is unclear or which is not strictly
relevant or necessary to a specific investigation. In the interests of
effective law enforcement, it is appropriate to retain all information
that may aid in establishing patterns of criminal activity. Moreover, it
would impede the specific investigative process if it were necessary to
assure the relevance, accuracy, timeliness and completeness of all
information obtained.
(v) From subsection (e)(2) because in a law enforcement
investigation the requirement that information be collected to the
greatest extent possible from the subject individual would present a
serious impediment to law enforcement in that the subject of the
investigation would be informed of the existence of the investigation
and would therefore be able to avoid detection, apprehension, or legal
obligations or duties.
(vi) From subsection (e)(3) because to comply with the requirements
of this subsection during the course of an investigation could impede
the information gathering process, thus hampering the investigation.
(vii) From subsections (e)(4) (G), and (H), and (I), (e)(8), (f),
(g) and (h) because this system is exempt from the access provisions of
subsection (d) pursuant to subsection (j) of the Privacy Act.
(2) Office of Inspector General Investigative Files--FCA.
[56 FR 2673, Jan. 24, 1991, as amended at 57 FR 32421, July 22, 1992]
PART 604_FARM CREDIT ADMINISTRATION BOARD MEETINGS--Table of Contents
Sec.
604.400 Definitions.
604.405 Notice of public observation.
604.410 Scope of application.
604.415 Open meetings.
604.420 Exemptive provisions.
604.425 Announcement of meetings.
604.430 Closure of meetings.
604.435 Record of closed meetings or closed portion of a meeting.
604.440 Requests for information.
Authority: Secs. 5.9, 5.17 of the Farm Credit Act; 12 U.S.C. 2243,
2252.
[[Page 20]]
Sec. 604.400 Definitions.
For purposes of this part:
(a) Agency means the Farm Credit Administration.
(b) Board means the Farm Credit Administration Board.
(c) Exempt meeting and exempt portion of a meeting mean,
respectively, a meeting or that part of a meeting designated as provided
in Sec. 604.430 of this part as closed to the public by reason of one
or more of the exemptive provisions listed in Sec. 604.420 of this
part.
(d) Meeting means the deliberations of at least two (quorum) members
of the Board where such deliberations determine or result in joint
conduct or disposition of official Farm Credit Administration business.
(e) Member means any one of the members of the Board.
(f) Open meeting means a meeting or portion of a meeting which is
not an exempt meeting or an exempt portion of a meeting.
(g) Public observation means the right of any member of the public
to attend and observe, but not participate or interfere in any way in,
an open meeting of the Board, within the limits of reasonable and
comfortable accommodations made available for such purpose by the Farm
Credit Administration.
[51 FR 41942, Nov. 20, 1986]
Sec. 604.405 Notice of public observation.
(a) A member of the public is not required to give advance notice to
the Farm Credit Administration of an intention to exercise the right of
public observation of an open meeting of the Board. However, in order to
permit the Farm Credit Administration to determine the amount of space
and number of seats which must be made available to accommodate
individuals who desire to exercise the right of public observation, such
individuals are requested to give notice to the Farm Credit
Administration at least two business days before the start of the open
meeting of the intention to exercise such right.
(b) Notice of intention to exercise the right of public observation
may be given in writing, in person, or by telephone to the official
designated in Sec. 604.440 of this part.
(c) Individuals who have not given advance notice of intention to
exercise the right of public observation will not be permitted to attend
and observe the open meeting of the Board if the available space and
seating are necessary to accommodate individuals who gave advance notice
of such intention to the Farm Credit Administration.
[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41942,
Nov. 20, 1986]
Sec. 604.410 Scope of application.
The provisions of this part apply to meetings of the Board, and do
not apply to conferences or other gatherings of employees of the Farm
Credit Administration who meet or join with others, except at meetings
of the Board, to deliberate official agency business.
[51 FR 41942, Nov. 20, 1986]
Sec. 604.415 Open meetings.
Every meeting and portion of a meeting of the Board shall be open to
public observation unless the Board determines that such meeting or
portion of a meeting will involve the discussion of matters which are
within one or more of the exemptive provisions listed in Sec. 604.420
of this part, and that the public interest is not served by the
discussion of such matters in an open meeting.
[51 FR 41943, Nov. 20, 1986]
Sec. 604.420 Exemptive provisions.
Except in a case where the Board determines that the public interest
requires otherwise, a meeting or portion of a meeting may be closed to
public observation where the Board determines that the meeting or
portion of the meeting is likely to:
(a) Disclose matters that are:
(1) Specifically authorized under criteria established by an
Executive order to be kept secret in the interests of national defense
or foreign policy, and
(2) In fact properly classified pursuant to such Executive order;
(b) Relate solely to the internal personnel rules and practices of
the Farm Credit Administration;
(c) Disclose matters specifically exempted from disclosure by
statute
[[Page 21]]
(other than 5 U.S.C. 552): Provided, That such statute:
(1) Requires that the matters be withheld from the public in such a
manner as to leave no discretion on the issue, or
(2) Establishes particular types of matters to be withheld;
(d) Disclose trade secrets and privileged or confidential commercial
or financial information obtained from a person;
(e) Involve accusing any person of a crime, or formally censuring
any person;
(f) Disclose information of a personal nature where disclosure would
constitute a clearly unwarranted invasion of personal privacy;
(g) Disclose investigator records compiled for law enforcement
purposes, or information which if written would be contained in such
records, but only to the extent that the production of such records or
information would:
(1) Interfere with enforcement proceedings;
(2) Deprive a person of a right to a fair trial or an impartial
adjudication;
(3) Constitute an unwarranted invasion of personal privacy;
(4) Disclose the identity of a confidential source and, in the case
of a record compiled by a criminal law enforcement authority in the
course of a criminal investigation, or by an agency conducting a lawful
national security intelligence investigation, confidential information
furnished only by the confidential source;
(5) Disclose investigative techniques and procedures; or
(6) Endanger the life or physical safety of law enforcement
personnel;
(h) Disclose information contained in or related to examination,
supervision, operating, or condition reports prepared by, on behalf of,
or for the use of the Farm Credit Administration;
(i) Disclose information the premature disclosure of which would:
(1) Significantly endanger the stability of any Farm Credit System
institution, including banks, associations, service organizations, the
Funding Corporation, the Farm Credit System Assistance Board, or the
Farm Credit System Financial Assistance Corporation; or
(2) Be likely to significantly frustrate implementation of a
proposed action of the Farm Credit Administration: Provided, said
Administration has not already disclosed to the public the content or
nature of its proposed action, or is not required by law to make such
disclosure on its own initiative prior to taking final action on such
proposal; or
(j) Specifically concern participation by the Farm Credit
Administration in a civil action or proceeding otherwise involving a
determination on the record before an opportunity for a hearing.
[51 FR 41943, Nov. 20, 1986, as amended at 56 FR 2673, Jan. 24, 1991]
Sec. 604.425 Announcement of meetings.
(a) The Board meets in the offices of the Farm Credit
Administration, McLean, Virginia 22102-5090, on the second Thursday of
each month.
(b) At any duly called meeting held previous to any meeting
scheduled as provided in paragraph (a) of this section, the Board may
fix a different time and place for a subsequent meeting.
(c) At the earliest practicable time, which is estimated to be not
later than 8 days before the beginning of a meeting of the Board, the
Farm Credit Administration shall make available for public inspection by
posting notice on its public notice board in its offices, or pursuant to
telephonic or written requests, the time, place, and subject matter of
the meeting except to the extent that such information is exempt from
disclosure under the provisions of Sec. 604.420 of this part.
[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41943,
Nov. 20, 1986; 56 FR 9611, Mar. 7, 1991]
Sec. 604.430 Closure of meetings.
(a) A majority of the meetings or portions of a majority of the
meetings of the board are exempt by reason of Sec. 604.420 (d), (h),
(i)(1), or (j) of this part. An exempt meeting or an exempt portion of a
meeting shall be closed to the public when at least two members of the
Board vote by a recorded vote of the Board at the beginning of the
exempt meeting or exempt portion of a
[[Page 22]]
meeting to close such meeting or such exempt portion, and the General
Counsel, Farm Credit Administration, publicly certifies that, in his or
her opinion, the meeting or portion of the meeting may be closed to the
public stating each relevant exemptive provision listed in Sec. 604.420
of this part.
(b) A copy of the vote of the Board to close a meeting or an exempt
portion thereof reflecting the vote of each member on the question, and
a copy of the certification of General Counsel, shall be made available
for public inspection in the offices of the Farm Credit Administration,
or pursuant to telephonic or written requests.
(c) A copy of the certification of the General Counsel, together
with a statement from the presiding officer of the meeting setting forth
the time and place of an exempt meeting or an exempt portion of a
meeting which was closed and the persons present, shall be retained by
the Farm Credit Administration for a period of at least 2 years after
the date of such closed meeting or closed portion of a meeting.
[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41943,
Nov. 20, 1986]
Sec. 604.435 Record of closed meetings or closed portion of a meeting.
(a) The Farm Credit Administration shall maintain a complete
transcript or electronic recording adequate to record fully the
proceedings of each closed meeting or closed portion of a meeting,
except that in the case of a meeting or portion of a meeting closed to
the public pursuant to Sec. 604.420 (d), (h), (i)(1), or (j) of this
part, the Farm Credit Administration shall maintain either such
transcript, recording, or a set of minutes.
(b) Any minutes so maintained shall fully and clearly describe all
matters discussed and shall provide a full and accurate summary of any
actions taken, and the reasons therefor, including a description of each
of the views expressed on any item and the record of any roll call vote.
All documents considered in connection with any action shall be
identified in the minutes.
(c) The Farm Credit Administration shall promptly make available to
the public, in its offices, the transcript, electronic recording, or
minutes, of the discussion of any item on the agenda of a closed
meeting, or closed portion of a meeting, except for such item or items
of discussion which the Farm Credit Administration determines to contain
information which may be withheld under Sec. 604.420 of this part.
Copies of such transcript or minutes, or a transcription of such
recording disclosing the identity of each speaker, shall be furnished to
any person at the actual cost of duplication or transcription.
(d) The Farm Credit Administration shall maintain a complete
verbatim copy of the transcript, a complete copy of the minutes, or a
complete electronic recording of each closed meeting or closed portion
of a meeting for a period of 2 years after the date of such closed
meeting or closed portion of a meeting.
(e) All actions required or permitted by this section to be
undertaken by the Farm Credit Administration shall be by or under the
authority of the Director, Office of Resources Management.
[42 FR 12161, Mar. 3, 1977. Redesignated and amended at 51 FR 41943,
Nov. 20, 1986; 56 FR 2673, Jan. 24, 1991]
Sec. 604.440 Requests for information.
Requests to the Farm Credit Administration for information about the
time, place, and subject matter of a meeting, whether it or any portion
thereof is closed to the public, and any requests for copies of the
transcript or minutes, or of a transcript of an electronic recording of
a closed meeting, or closed portion of a meeting, to the extent not
exempt from disclosure by the provisions of Sec. 604.420 of this part,
shall be addressed to the Secretary to the Board, Farm Credit
Administration, McLean, Virginia 22102-5090.
[51 FR 41944, Nov. 20, 1986, as amended at 59 FR 21642, Apr. 26, 1994]
PART 605_INFORMATION--Table of Contents
Sec.
605.500 Policy.
605.501 Information Security Officer.
605.502 Program and procedures.
Authority: Secs. 5.9, 5.12, 5.17 of the Farm Credit Act; 12 U.S.C.
2243, 2246, 2252.
[[Page 23]]
Sec. 605.500 Policy.
It is the policy of the Farm Credit Administration to act in matters
relating to national security information in accordance with Executive
Order 12356 and directives issued thereunder by the Information Security
Oversight Office (ISOO).
[49 FR 9859, Mar. 16, 1984]
Sec. 605.501 Information Security Officer.
(a) The Information Security Officer of the Farm Credit
Administration shall be responsible for implementation and oversight of
the information security program and procedures adopted by the Agency
pursuant to the Executive order. This officer shall be the recipient of
questions, suggestions, and complaints regarding all elements of this
program and shall be solely responsible for changes to it and for the
assurance that it is at all times consistent with the Executive order
and ISOO directive.
(b) The Information Security Officer shall be the Farm Credit
Administration's official contact for requests for declassification of
materials submitted under the Executive order, regardless of the point
of origin of such requests, and shall assure that such requests for
records in the Farm Credit Administration's possession that were
originated by another agency shall be forwarded to the originating
agency. The Farm Credit Administration shall include a copy of the
records requested together with its recommendation for action. Upon
receipt, the originating agency shall process the request in accordance
with 32 CFR 2001.32(a)(2)(i). Upon request, the originating agency shall
communicate its declassification determination to the Farm Credit
Administration. The Farm Credit Administration shall inform the
requester of the determination within 1 year from the date of receipt,
except in unusual circumstances. If an appeal is made on a denial of a
mandatory declassification review request, the originating agency's
appellate authority shall normally make a determination within 30
working days following the receipt of an appeal. If additional time is
required to make a determination, the originating appellate authority
shall notify the requester of the additional time needed and provide the
requester with the reason for extension. The originating agency's
appellate authority shall notify the requester in writing of the final
determination and of the reasons for any denial. Such officer shall also
assure that requests for declassification submitted under the Freedom of
Information Act are handled in accordance with that Act.
[49 FR 9859, Mar. 16, 1984]
Sec. 605.502 Program and procedures.
(a) The Farm Credit Administration has no authority for the original
classification of information for national security purposes. Only those
agencies described in the Executive order may so classify information.
(b) Derivative classification. ``Derivative Classification'' means a
determination that information is in substance the same information that
is currently classified under a designated level of classification.
Derivative application of classification markings shall be the
responsibility of the Information Security Officer who shall assure that
the use of this authority is in accordance with ISOO directives.
(c) Mandatory review. All requests for review under the mandatory
review provisions of the Executive order shall be handled by the
Information Security Officer or his/her designee. Under no circumstances
shall such official refuse to confirm the existence or nonexistence of a
document requested under the Executive order or the Freedom of
Information Act unless the fact of its existence or nonexistence would
itself be classified under the Executive order.
(d) Handling of classified documents. All documents bearing the
terms ``Top Secret,'' ``Secret,'' and ``Confidential'' shall be
delivered to the Information Security Officer or his/her designee
immediately upon receipt. All potential recipients of such documents
shall be advised of the names of such designees. In the event that the
Information Security Officer or his/her designee is not available to
receive such documents, they shall be sent to the FCA mailroom and
stored in the combination safe located in the Agency Services Branch and
secured unopened until the
[[Page 24]]
Information Security Officer is available. Under no cirumstances shall
classified materials that cannot be delivered be stored other than in
the designated safe. All materials not immediately deliverable or able
to be secured in the designated safe shall be returned to the sender,
under appropriate cover, for redelivery to the FCA at the next earliest
opportunity.
(e) Reproduction. Reproduction of classified materials shall take
place only in accordance with section 4.1(b) of the Executive order and
any limitations imposed by the originator. Should copies be made, they
shall be subject to the same controls as the original document. Records
showing the number and distribution of copies shall be maintained by the
Information Security Officer or his/her designee, and the log stored
with the original documents. These measures shall not restrict
reproduction for the purposes of Mandatory Review.
(f) Storage. In accordance with 32 CFR 2001.43, all classified
documents shall be stored in combination safes located at the primary
headquarters and/or a Field Office, Office of Examination, Farm Credit
Administration. The combinations shall be changed as required by
directives issued by ISOO. The combinations shall be known only to the
Information Security Officer and his/her designees who have appropriate
security clearances.
(g) Employee education. All employees who have been granted a
security clearance and who have occasion to handle classified materials
shall be advised of handling, reproduction, and storage procedures and
shall be required to review the Executive order and appropriate ISOO
directives.
(h) Agency terminology. No official of the Farm Credit
Administration shall use the terms ``Top Secret'', ``Secret'', or
``Confidential'' except in relation to materials classified for national
security purposes. As a Federal regulatory agency, the Farm Credit
Administration maintains certain internal documents that relate to its
examination and supervision of the institutions of the Farm Credit
System. Such documents are limited in use and distribution. Material
that is of a sensitive nature to the Farm Credit Administration may be
designated ``Executive Document.''
(i) Nondisclosure agreement. In accordance with 32 CFR 2003.20, the
Farm Credit Administration requires that any person whose position
requires access to classified information must execute a nondisclosure
agreement on Standard Form 189--Classified Information Nondisclosure
Agreement. Persons not executing such nondisclosure agreements are
subject to sanctions of Executive Order 12356. It is the policy of the
Farm Credit Administration that any employee authorized access to
classified information holds a personal responsibility for safeguarding
against unlawful disclosures, and such employees are prohibited from
disclosure without consent of the FCA Information Security Officer. Any
such unauthorized disclosure will be reported to the Information
Security Oversight Office, the Department of Justice, the Department of
State, the Federal Emergency Management Agency, and to any other Federal
agency for which the Farm Credit Administration has access to classified
information, as such reportings are subject to interpretation as
required by statute and Executive order. Any employee who knowingly
disclosed classified information or who refuses to cooperate with an
investigation may be subject to mandatory administrative sanctions,
including as a minimum, denial of further access to classified
information. Further sanctions could include demotion or dismissal
depending on the circumstances of a particular case.
(j) Freedom of Information request. All inquiries regarding requests
for classified information under the Freedom of Information Act (5
U.S.C. 552), including those from the news media, shall be referred to
the FCA FOI Officer, Office of Congressional and Public Affairs, Farm
Credit Administration, and shall be handled in accordance with
provisions of that statute and applicable regulations.
[49 FR 9859, Mar. 16, 1984, as amended at 52 FR 18200, May 14, 1987; 59
FR 21643, Apr. 26, 1994]
[[Page 25]]
PART 606_ENFORCEMENT OF NONDISCRIMINATION ON THE BASIS OF HANDICAP IN
PROGRAMS OR ACTIVITIES CONDUCTED BY THE FARM CREDIT ADMINISTRATION
--Table of Contents
Sec.
606.601 Purpose.
606.602 Application.
606.603 Definitions.
606.604-606.609 [Reserved]
606.610 Self-evaluation.
606.611 Notice.
606.612-606.629 [Reserved]
606.630 General prohibitions against discrimination.
606.631-606.639 [Reserved]
606.640 Employment.
606.641-606.648 [Reserved]
606.649 Program accessibility: Discrimination prohibited.
606.650 Program accessibility: Existing facilities.
606.651 Program accessibility: New construction and alterations.
606.652-606.659 [Reserved]
606.660 Communications.
606.661-606.669 [Reserved]
606.670 Compliance procedures.
606.671-606.999 [Reserved]
Authority: 29 U.S.C. 794.
Source: 53 FR 19889, June 1, 1988, unless otherwise noted.
Sec. 606.601 Purpose.
The purpose of this part is to effectuate section 119 of the
Rehabilitation Comprehensive Services, and Developmental Disabilities
Amendments of 1978, which amended section 504 of the Rehabilitation Act
of 1973 to prohibit discrimination on the basis of handicap in programs
or activities conducted by Executive agencies or the United States
Postal Service.
Sec. 606.602 Application.
(a) This part applies to all programs or activities conducted by the
agency. For example, members of the public may participate in the
following ``programs and activities'' of the FCA:
(1) Attending open meetings of the Farm Credit Board.
(2) Making inquiries or filing complaints.
(3) Using the FCA library in McLean, Virginia.
(4) Seeking employment with FCA.
(5) Attending any meeting, conference, seminar, or other program
open to the public.
This list is illustrative only and failure to include an activity does
not necessarily mean that it is not covered by this regulation.
(b) This regulation does not apply to the institutions that are
regulated or examined by the FCA. However, this regulation governs the
conduct of FCA personnel, in their interaction with employees of such
institutions and employees of other Federal agencies, while discharging
their official FCA duties.
Sec. 606.603 Definitions.
For purposes of this part, the term:
(a) Agency means the Farm Credit Administration.
(b) Assistant Attorney General means the Assistant Attorney General,
Civil Rights Division, United States Department of Justice.
(c) Auxiliary aids means services or devices that enable persons
with impaired sensory, manual, or speaking skills to have an equal
opportunity to participate in, and enjoy the benefits of, programs or
activities conducted by the agency. For example, auxiliary aids useful
for persons with impaired vision include readers, Brailled materials,
audio recordings, and other similar services and devices. Auxiliary aids
useful for persons with impaired hearing include telephone handset
amplifiers, telephones compatible with hearing aids, telecommunication
devices for deaf persons (TDDs), interpreters, note-takers, written
materials, and other similar services and devices.
(d) Complete complaint means a written statement that contains the
complainant's name and address and describes the agency's alleged
discriminatory action in sufficient detail to inform the agency of the
nature and date of the alleged violation of section 504. It shall be
signed by the complainant or by someone authorized to do so on his or
her behalf. Complaints filed on behalf of classes or third parties shall
describe or identify (by name, if possible) the alleged victims of
discrimination.
(e) Facility means all or any portion of buildings, structures,
equipment,
[[Page 26]]
roads, walks, parking lots, rolling stock or other conveyances, or other
real or personal property.
(f) Individual with handicaps means any person who has a physical or
mental impairment that substantially limits one or more major life
activities, has a record of such an impairment, or is regarded as having
such an impairment. As used in this definition, the phrase:
(1) Physical or mental impairment includes:
(i) Any physiological disorder or condition, cosmetic disfigurement,
or anatomical loss affecting one or more of the following body systems:
Neurological; musculoskeletal; special sense organs; respiratory,
including speech organs; cardiovascular; reproductive; digestive;
genitourinary; hemic and lymphatic; skin; and endocrine; or
(ii) Any mental or psychological disorder, such as mental
retardation, organic brain syndrome, emotional or mental illness, and
specific learning disabilities. The term physical or mental impairment
includes, but is not limited to, such diseases and conditions as
orthopedic, visual, speech, and hearing impairments, cerebral palsy,
epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease,
diabetes, mental retardation, emotional illness, and drug addiction and
alcoholism.
(2) Major life activities includes functions such as caring for
oneself, performing manual tasks, walking, seeing, hearing, speaking,
breathing, learning, and working.
(3) Has a record of such an impairment means has a history of, or
has been misclassified as having, a mental or physical impairment that
substantially limits one more major life activities.
(4) Is regarded as having an impairment means:
(i) Has a physical or mental impairment that does not substantially
limit major life activities but is treated by the agency as constituting
such a limitation;
(ii) Has a physical or mental impairment that substantially limits
major life activities only as a result of the attitudes of others toward
such impairment; or
(iii) Has none of the impairments defined in paragraph (f)(1) of
this definition but is treated by the agency as having such an
impairment.
(g) Qualified individual with handicaps means an individual with
handicaps who meets the essential eligibility requirements for
participation in the program or activity conducted by the agency. With
respect to employment, a qualified individual with handicaps is one who
meets the definition of qualified handicapped person set forth in 29 CFR
1613.702(f), which is made applicable to this part by Sec. 606.640 of
this rule.
(h) Section 504 means section 504 of the Rehabilitation Act of 1973
(Pub. L. 93-112, 87 Stat. 394 (29 U.S.C. 794)), as amended by the
Rehabilitation Act Amendments of 1974 (Pub. L. 93-516, 88 Stat. 1617);
the Rehabilitation, Comprehensive Services, and Developmental
Disabilities Amendments of 1978 (Pub. L. 95-602, 92 Stat. 2955); and the
Rehabilitation Act Amendments of 1986 (Pub. L. 99-506, 100 Stat. 1810).
Sec. Sec. 606.604-606.609 [Reserved]
Sec. 606.610 Self-evaluation.
(a) The agency shall, within one year of the effective date of this
part, evaluate its current policies and practices, and the effects
thereof, that do not or may not meet the requirements of this part, and,
to the extent modification of any such policies and practices is
required, the agency shall proceed to make the necessary modifications.
(b) The agency shall provide an opportunity to interested persons,
including individuals with handicaps or organizations representing
individuals with handicaps, to participate in the self-evaluation
process by submitting comments (both oral and written).
(c) The agency shall, for at least three years following completion
of the evaluation required under paragraph (a) of this section, maintain
on file and make available for public inspection:
(1) A list of the interested persons who commented, with copies of
comments received;
(2) A description of areas examined and any problems identified; and
(3) A description of any modifications made.
[[Page 27]]
Sec. 606.611 Notice.
The agency shall make available to employees, applicants,
participants, beneficiaries, and other interested persons such
information regarding the provisions of this part and its applicability
to the programs or activities conducted by the agency, and make such
information available to them in such manner as the agency head finds
necessary to apprise such persons of the protections against
discrimination assured them by section 504 and this regulation.
Sec. Sec. 606.612-606.629 [Reserved]
Sec. 606.630 General prohibitions against discrimination.
(a) No qualified individual with handicaps, on the basis of
handicap, shall be excluded from participation in, be denied the
benefits of, or otherwise be subjected to discrimination under any
program or activity of the agency.
(b)(1) The agency, in providing any aid, benefit, or service, may
not, directly or through contractual or other arrangements, on the basis
of handicap:
(i) Deny a qualified individual with handicaps the oportunity to
participate in or benefit from the activity, aid, benefit, or service;
(ii) Afford a qualified individual with handicaps an opportunity to
participate in or benefit from the aid, benefit, or service that is not
equal to that afforded others;
(iii) Provide a qualified individual with handicaps with an aid,
benefit, or service that is not as effective in affording equal
opportunity to obtain the same result, to gain the same benefit, or to
reach the same level of achievement as that provided to others;
(iv) Provide different or separate aid, benefits, or services to
individuals with handicaps or to any class of individuals with handicaps
than is provided to others unless such action is necessary to provide
qualified individuals with handicaps with aid, benefits, or services
that are as effective as those provided to others;
(v) Deny a qualified individual with handicaps the opportunity to
participate as a member of planning or advisory boards;
(vi) Otherwise limit a qualified individual with handicaps in the
enjoyment of any right, privilege, advantage, or opportunity enjoyed by
others receiving the aid, benefit, or service.
(2) The agency may not deny a qualified individual with handicaps
the opportunity to participate in programs or activities that are not
separate or different, despite the existence of permissibly separate or
different programs or activities.
(3) The agency may not, directly or through contractual or other
arrangements, utilize criteria or methods of administration the purpose
or effect of which would:
(i) Subject qualified individuals with handicaps to discrimination
on the basis of handicap; or
(ii) Defeat or substantially impair accomplishment of the objectives
of a program or activity with respect to individuals with handicaps.
(4) The agency may not, in determining the site or location of a
facility, make selections the purpose or effect of which would:
(i) Exclude individuals with handicaps from, deny them the benefits
of, or otherwise subject them to discrimination under any program or
activity conducted by the agency; or
(ii) Defeat or substantially impair the accomplishment of the
objectives of a program or activity with respect to individuals with
handicaps.
(5) The agency, in the selection of procurement contractors, may not
use criteria that subject qualified individuals with handicaps to
discrimination on the basis of handicap.
(c) The exclusion of nonhandicapped persons from the benefits of a
program limited by Federal statute or Executive order to individuals
with handicaps or the exclusion of a specific class of individuals with
handicaps from a program limited by Federal statute or Executive order
to a different class of individuals with handicaps is not prohibited by
this part.
(d) The agency shall administer programs and activities in the most
integrated setting appropriate to the needs of qualified individuals
with handicaps.
[[Page 28]]
Sec. Sec. 606.631-606.639 [Reserved]
Sec. 606.640 Employment.
No qualified individual with handicaps shall, on the basis of
handicap, be subjected to discrimination in employment under any program
or activity conducted by the agency. The definitions, requirements, and
procedures of section 501 of the Rehabilitation Act of 1973 (29 U.S.C.
791), as established by the Equal Employment Opportunity Commission in
29 CFR part 1613, shall apply to employment in the agency.
Sec. Sec. 606.641-606.648 [Reserved]
Sec. 606.649 Program accessibility: Discrimination prohibited.
Except as otherwise provided in Sec. 606.650, no qualified
individual with handicaps shall, because the agency's facilities are
inaccessible to or unusable by individuals with handicaps, be denied the
benefits of, be excluded from participation in, or otherwise be
subjected to discrimination under any program or activity conducted by
the agency.
Sec. 606.650 Program accessibility: Existing facilities.
(a) General. The agency shall operate each program or activity so
that the program or activity, when viewed in its entirety, is readily
accessible to and usable by individuals with handicaps. This paragraph
does not:
(1) Necessarily require the agency to make each of its existing
facilities accessible to and usable by individuals with handicaps;
(2) Require the agency to take any action that it can demonstrate
would result in a fundamental alteration in the nature of a program or
activity or in undue financial and administrative burdens. In those
circumstances where agency personnel believe that the proposed action
would fundamentally alter the program or activity or would result in
undue financial and administrative burdens, the agency has the burden of
proving that compliance with paragraph (a) of this section would result
in such alteration or burdens. The decision that compliance would result
in such alteration or burdens must be made by the agency head or his or
her designee after considering all agency resources available for use in
the funding and operation of the conducted program or activity, and must
be accompanied by a written statement of the reasons for reaching that
conclusion. In preparing the report, the agency shall make reasonable
efforts to ensure that the person(s) to be accommodated has an
opportunity to provide relevant information. If an action would result
in such an alteration or such burdens, the agency shall take any other
action that would not result in such an alteration or such burdens but
would nevertheless ensure that individuals with handicaps receive the
benefits and services of the program or activity.
(b) Methods. The agency may comply with the requirements of this
section through such means as redesign of equipment, reassignment of
services to accessible buildings, assignment of aides to beneficiaries,
home visits, delivery of services at alternate accessible sites,
alteration of existing facilities and construction of new facilities, or
any other methods that result in making its programs or activities
readily accessible to and usable by individuals with handicaps. The
agency is not required to make structural changes in existing facilities
where other methods are effective in achieving compliance with this
section. The agency, in making alterations to existing buildings, shall
meet accessibility requirements to the extent compelled by the
Architectural Barriers Act of 1968, as amended (42 U.S.C. 4151 through
4157), and any regulations implementing it. In choosing among available
methods for meeting the requirements of this section, the agency shall
give priority to those methods that offer programs and activities to
qualified individuals with handicaps in the most integrated setting
appropriate.
(c) Time period for compliance. The agency shall comply with the
obligations established under this section within sixty days of the
effective date of this part except that where structural changes in
facilities are undertaken, such changes shall be made within three years
of the effective date of this part, but in any event as expeditiously as
possible.
[[Page 29]]
(d) Transition plan. In the event that structural changes to
facilities will be undertaken to achieve accessibility, the agency shall
develop, within six months of the effective date of this part, a
transition plan setting forth the steps necessary to complete such
changes. The agency shall provide an opportunity to interested persons,
including individuals with handicaps or organizations representing
individuals with handicaps, to participate in the development of the
transition plan by submitting comments (both oral and written). A copy
of the transition plan shall be made available for public inspection.
The plan shall, at a minimum:
(1) Identify physical obstacles in the agency's facilities that
limit the accessibility of its programs or activities to individuals
with handicaps;
(2) Describe in detail the methods that will be used to make the
facilities accessible;
(3) Specify the schedule for taking the steps necessary to achieve
compliance with this section, and if the time period of the transition
plan is longer than one year, identify steps that will be taken during
each year of the transition period;
(4) Indicate the official responsible for implementation of the
plan; and
(5) Identify the persons or groups who commented on the plan.
Sec. 606.651 Program accessibility: New construction and alterations.
Each building or part of a building that is constructed or altered
by, on behalf of, or for the use of the agency shall be designed,
constructed, or altered so as to be readily accessible to and usable by
individuals with handicaps. The definitions, requirements, and standards
of the Architectural Barriers Act (42 U.S.C. 4151 through 4157), as
established in 41 CFR 101-19.600 to 101-19.607, apply to buildings
covered by this section.
Sec. Sec. 606.652-606.659 [Reserved]
Sec. 606.660 Communications.
(a) The agency shall take appropriate steps to ensure effective
communication with applicants, participants, personnel of other Federal
entities, and members of the public.
(1) The agency shall furnish appropriate auxiliary aids where
necessary to afford an individual with handicaps an equal opportunity to
participate in and enjoy the benefits of a program or activity conducted
by the agency.
(i) In determining what type of auxiliary aid is necessary, the
agency shall give primary consideration to the requests of the
individual with handicaps.
(ii) The agency need not provide individually prescribed devices,
readers for personal use or study, or other devices of a personal
nature.
(2) Where the agency communicates with applicants and beneficiaries
by telephone, telecommunication devices for deaf persons (TDDs) or
equally effective telecommunication systems shall be used.
(b) The agency shall ensure that interested persons, including
persons with impaired vision or hearing, can obtain information as to
the existence and location of accessible services, activities, and
facilities.
(c) The agency shall provide signage at a primary entrance to each
of its inaccessible facilities directing users to a location at which
they can obtain information about accessible facilities. The
international symbol for accessibility shall be used at each primary
entrance of an accessible facility.
(d) This section does not require the agency to take any action that
it can demonstrate would result in a fundamental alteration in the
nature of a program or activity or in undue financial and administrative
burdens. In those circumstances where agency personnel believe that the
proposed action would fundamentally alter the program or activity or
would result in undue financial and administrative burdens, the agency
has the burden of proving that compliance with this section would result
in such alteration or burdens. The decision that compliance would result
in such alteration or burdens must be made by the agency head or his or
her designee after considering all agency resources available for use in
the funding and operation of the conducted program or activity, and must
be accompanied by a written
[[Page 30]]
statement of the reasons for reaching that conclusion. In preparing the
report, the agency shall make reasonable efforts to ensure that the
person(s) to be accommodated has an opportunity to provide relevant
information. If an action required to comply with this section would
result in such an alteration or such burdens, the agency shall take any
other action that would not result in such an alteration or such burdens
but would nevertheless ensure that, to the maximum extent possible,
individuals with handicaps receive the benefits and services of the
program or activity.
Sec. Sec. 606.661-606.669 [Reserved]
Sec. 606.670 Compliance procedures.
(a) Except as provided in paragraph (b) of this section, this
section applies to all allegations of discrimination on the basis of
handicap in programs and activities conducted by the agency.
(b) The agency shall process complaints alleging violations of
section 504 with respect to employment according to the procedures
established by the Equal Employment Opportunity Commission in 29 CFR
part 1613 pursuant to section 501 of the Rehabilitation Act of 1973 (29
U.S.C. 791).
(c) Responsibility for implementation and operation of this section
shall be vested in the Director, Office of Resources Management, Farm
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
(d) The agency shall accept and investigate all complete complaints
for which it has jurisdiction. All complete complaints must be filed
within 180 days of the alleged act of discrimination. The agency may
extend this time period for good cause.
(e) If the agency receives a complaint over which it does not have
jurisdiction, it shall promptly notify the complainant and shall make
reasonable efforts to refer the complaint to the appropriate Government
entity.
(f) The agency shall notify the Architectural and Transportation
Barriers Compliance Board upon receipt of any complaint alleging that a
building or facility that is subject to the Architectural Barriers Act
of 1968, as amended (42 U.S.C. 4151 through 4157), is not readily
accessible to and usable by individuals with handicaps.
(g) Within 180 days of the receipt of a complete complaint for which
it has jurisdiction, the agency shall notify the complainant of the
results of the investigation in a letter containing:
(1) Findings of fact and conclusions of law;
(2) A description of a remedy for each violation found; and
(3) A notice of the right to appeal.
(h) Appeals of the findings of fact and conclusions of law or
remedies must be filed by the complainant within 90 days of receipt from
the agency of the letter required by this paragraph. The agency may
extend this time for good cause.
(i) Timely appeals shall be accepted and processed by the Equal
Employment Opportunity Manager, or his/her designee, Farm Credit
Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
(j) The head of the agency shall notify the complainant of the
results of the appeal within 60 days of the receipt of the request. If
the head of the agency determines that additional information is needed
from the complainant, he or she shall have 60 days from the date of
receipt of the additional information to make his or her determination
on the appeal.
(k) The time limits cited in paragraphs (g) and (j) of this section
may be extended with the permission of the Assistant Attorney General.
(l) The agency may delegate its authority for conducting complaint
investigations to other Federal agencies, except that the authority for
making the final determination may not be delegated to another agency.
[53 FR 19889, June 1, 1988, as amended at 56 FR 2674, Jan. 24, 1991]
Sec. Sec. 606.671-606.999 [Reserved]
PART 607_ASSESSMENT AND APPORTIONMENT OF ADMINISTRATIVE EXPENSES
--Table of Contents
Sec.
607.1 Purpose and scope.
607.2 Definitions.
607.3 Assessment of banks, associations, and designated other System
entities.
607.4 Assessment of other System entities.
[[Page 31]]
607.5 Notice of assessment.
607.6 Payment of assessment.
607.7 Late-payment charges on assessments.
607.8 Reimbursements for services to non-System entities.
607.9 Reimbursable billings.
607.10 Adjustments for overpayment or underpayment of assessments.
607.11 Report of assessments and expenses.
Authority: Secs. 5.15, 5.17 of the Farm Credit Act (12 U.S.C. 2250,
2252) and 12 U.S.C. 3025.
Source: 58 FR 10942, Feb. 23, 1993, unless otherwise noted.
Sec. 607.1 Purpose and scope.
The regulations in part 607 implement the provisions of section 5.15
of the Farm Credit Act of 1971, 12 U.S.C. 2001 et seq. (Act) relating to
Farm Credit Administration (FCA) assessments. The regulations prescribe
the procedures for the equitable apportionment of FCA annual
administrative expenses and necessary reserves among Farm Credit System
(System) institutions. Pursuant to section 5.15(a) of the Act, the
regulations also provide for the separate assessment of the FCA's costs
of supervising and examining the Federal Agricultural Mortgage
Corporation (FAMC). The regulations further provide for the
reimbursement of expenses incurred in performing statutorily required
examinations of non-System entities.
Sec. 607.2 Definitions.
For the purpose of this part, the following definitions shall apply:
(a) Assessment means the annual amount to be paid by each System
institution to the Farm Credit Administration in accordance with section
5.15 of the Act.
(b) Average risk-adjusted asset base means the average of the risk-
adjusted asset base (as determined in accordance with Sec. 615.5210(f)
of this chapter) of banks, associations, and designated other System
entities, calculated as follows:
(1) For banks, associations, and designated other System entities
with four quarters of risk-adjusted assets as of June 30 of each year,
the sum of the average daily risk-adjusted assets as of the last day of
the quarter as reported on each quarterly Call Report Schedule RC-G to
the FCA for the most recent four quarters immediately preceding each
September 15, divided by four;
(2) Except as provided in paragraphs (b)(3) and (b)(4) of this
section, for banks, associations, and designated other System entities
with less than four quarters of risk-adjusted assets as of June 30 of
each year, the sum of the average daily risk-adjusted assets as of the
last day of the quarter reported on each quarterly Call Report Schedule
RC-G to the FCA for the quarters in which it was in existence
immediately preceding September 15, divided by the number of quarters
for which the Call Report Schedule RC-G was received;
(3) For banks, associations, and designated other System entities
that were formed through mergers, consolidations, or transfers of direct
lending authority, and have less than four quarters of risk-adjusted
assets as of June 30, the sum of the average daily risk-adjusted assets
as of the last day of the quarter for the most recent four quarters
immediately preceding September 15 as reported on each quarterly Call
Report Schedule RC-G filed by the newly chartered institution and the
institutions that were merged or consolidated or that received direct
lending authority, divided by four;
(4) For banks, associations, and designated other System entities
chartered during the period July 1 through September 30 of each year
that were not formed by the merger or consolidation of existing System
institutions or the transfer of direct lending authority from another
System institution, the total of the average daily risk-adjusted assets
as of the last day of the quarter as reported on Call Report Schedule
RC-G for the quarter ending September 30.
(c) Composite Financial Institution Rating System (FIRS) rating
means the composite numerical assessment of the financial condition of
an institution assigned to the institution by the FCA based on its most
recent examination of the institution. The FIRS factors are generally
considered to be important indicators of an institution's financial
health. Institutions are rated on each of the factors during an
examination. The composite FIRS rating
[[Page 32]]
ranges from 1 to 5, with a lower number indicating a better financial
condition than a higher number.
(d) Delinquent amount means an amount owed to the FCA that has not
been paid by the date specified in the FCA's Notice of Assessment or
billing.
(e) Designated other System entities means other System entities
designated by the FCA in Sec. 607.3(c) to be assessed on the same basis
as banks and associations under Sec. 607.3.
(f) Direct expenses means the expenses of the FCA attributable to
the performance of examinations.
(g) Indirect expenses means all FCA expenses that are not
attributable to the performance of examinations.
(h) Non-System entities means the National Consumer Cooperative
Bank, the National Cooperative Bank Development Corporation, and any
other entity that is required to be examined, supervised, or otherwise
regulated by the FCA that is not a System institution.
(i) Notice of Assessment means a written notice to each System
institution showing the total amount assessed and owing, the fiscal year
covered by the assessment, the amounts of installment payments, and the
due dates for such payments. For banks, associations, and designated
other System entities, the Notice of Assessment shall also include an
individualized assessment table showing the assessment under Sec.
607.3(b)(2), where applicable.
(j) Other System entities means any service corporation chartered
under section 4.25 of the Act, the Farm Credit System Financial
Assistance Corporation, FAMC, the Federal Farm Credit Banks Funding
Corporation, the Farm Credit Finance Corporation of Puerto Rico, and any
other entity statutorily designated as a System institution that is not
a bank or association.
(k) System institutions means banks, associations, and other System
entities.
[58 FR 10942, Feb. 23, 1993, as amended at 59 FR 37403, July 22, 1994;
63 FR 34268, June 24, 1998]
Sec. 607.3 Assessment of banks, associations, and designated other System entities.
(a) Banks, associations, and other System entities designated in
paragraph (c) of this section will be assessed annually pursuant to this
section for funds to cover a portion of the FCA's administrative
expenses and for such funds as may be required to maintain a necessary
reserve. The total amount of the annual assessment of banks,
associations, and designated other System entities shall be based on the
FCA budget for each fiscal year plus such amount as may be required to
maintain a necessary reserve, excluding amounts to be assessed against
other System entities and reimbursements received from non-System
entities.
(b) The assessment shall be apportioned among the banks,
associations, and designated other System entities as follows:
(1) Thirty (30) percent of the assessment under this section shall
be apportioned to each bank, association, and designated other System
entity on the basis of each institution's pro rata share of the total
average risk-adjusted asset base.
(2) Seventy (70) percent of the assessment under this section shall
be apportioned to each bank, association, and designated other System
entity based upon the amounts of the institution's average risk-adjusted
assets that fall within the graduated risk-adjusted asset tiers
contained in the following table. An institution's total assessment
under this paragraph is the sum of the amounts assessed for risk-
adjusted assets falling into each applicable tier, subject to adjustment
for its FIRS rating as required in paragraphs (b)(2)(i) and (b)(2)(ii)
of this section. The same assessment rate (designated as X1
or a declining percentage of X1 in the following table) will
be applied to each dollar value of risk-adjusted assets falling within
each tier, increased where applicable, by the amounts prescribed in
paragraphs (b)(2)(i) and (b)(2)(ii) of this section. The actual
assessment rate under this paragraph shall be determined annually based
on relative average risk-adjusted asset bases, the FIRS ratings of
individual institutions, and the FCA budget as adjusted pursuant to
paragraph (a) of this section, but the relationship between
[[Page 33]]
the rates applied to each tier shall remain constant as set forth in the
following table.
------------------------------------------------------------------------
Average risk-adjusted asset size range (in
millions)
-------------------------------------------------- Assessment rate
Over To
------------------------------------------------------------------------
$0.................................. $25 X1
25.................................. 50 .85X1
50.................................. 100 .75X1
100................................. 500 .60X1
500................................. 1,000 .50X1
1,000............................... 7,000 .35X1
7,000............................... 10,000 .20X1
10,000.............................. ........... .10X1
------------------------------------------------------------------------
Example: XYZ association has a FIRS rating of 2 and average risk-
adjusted assets of $500.4 million. The value of X1 has been
determined to be .000917, based on an FCA budget of $40.29 million.
X1=.000917 therefore $25,000,000x.0917%................... = $22,925
.85X1=.000780 therefore $25,000,000x.0780%................ = 19,500
.75X1=.000688 therefore $50,000,000x.0688%................ = 34,400
.60X1=.000550 therefore $400,000,000x.0550%............... = 220,000
.50X1=.000458 therefore $400,000x.0458%................... = 183
---------
Total Assessment under Sec. 607.3(b)(2)............. = 297,008
(i) If the FCA assigns a bank, association, or designated other
System entity a composite FIRS rating of 3 following its most recent
examination of the institution prior to the date of assessment, the
assessment provided for in paragraph (b)(2) of this section shall be
increased by 20 percent.
(ii) If the FCA assigns a bank, association, or designated other
System entity a composite FIRS rating of 4 or 5 following its most
recent examination of the institution prior to the date of assessment,
the assessment provided for in paragraph (b)(2) of this section shall be
increased by 40 percent.
(iii) Banks, associations, and designated other System entities that
were formed through mergers or consolidations and have not been examined
before their initial assessment under this section shall be deemed to
have a composite FIRS rating equivalent to the best composite FIRS
rating assigned to the merged or consolidated institutions in the FCA's
most recent examination of the individual institutions prior to the date
of merger or consolidation. Newly chartered institutions not formed
through mergers or consolidations that have not been examined before
their initial assessment under this section shall be deemed to have a
composite FIRS rating of 2.
(3) Each bank, association, and designated other System entity shall
pay a minimum assessment of $20,000 regardless of the result of the
application of the assessment formula established by paragraphs (b)(1)
and (b)(2) of this section. If such a minimum assessment is apportioned
to an institution, that institution's average risk-adjusted asset base
shall be deducted from the total average risk-adjusted asset base, and
$20,000 shall be deducted from the total assessment amount for purposes
of determining the assessments of banks, associations, and designated
other System entities paying more than the $20,000 minimum assessment.
(c) Other System entities designated to be assessed in accordance
with this section are:
The Farm Credit Services Leasing Corporation.
(d) Assessments may be adjusted periodically to reflect:
(1) Changes in the FCA budget and necessary reserve; and
(2) Any overpayment or underpayment by a bank, association, or
designated other System entity in the prior fiscal year.
[58 FR 10942, Feb. 23, 1993, as amended at 63 FR 34268, June 24, 1998]
Sec. 607.4 Assessment of other System entities.
(a)(1) Unless otherwise designated to be assessed under Sec. 607.3,
and with the exception of FAMC as provided in paragraph (b) of this
section, other System entities will be assessed for estimated direct
expenses plus an allocated portion of FCA indirect expenses and such
amount as may be required to maintain a necessary reserve. The estimate
for direct expenses shall take into account the direct expenses incurred
in the most recent examination of the entity preceding each September 15
and expected increases or decreases in examination work for the next
fiscal year. A proportional amount of FCA indirect expenses will be
allocated to
[[Page 34]]
each entity based on the estimated direct expenses related to the
particular entity as a percentage of the total budgeted direct expenses
of the agency (excluding direct expenses under paragraph (b) of this
section) for the fiscal year covered by the assessment.
(2) Assessments of other System entities under paragraph (a)(1) of
this section may be adjusted periodically to reflect:
(i) Changes in the FCA budget and necessary reserve; and
(ii) Any overpayment or underpayment by such other System entity in
the prior fiscal year.
(b) Assessment of Federal Agricultural Mortgage Corporation. The FCA
shall assess FAMC for the estimated cost of FCA's regulation,
supervision, and examination of FAMC, including reasonably related
administrative and overhead expenses. FAMC's assessment may be adjusted
periodically to reflect changes in the FCA budget and to reconcile
differences between FAMC's assessment and FCA's actual expenditures for
regulation of FAMC in the prior fiscal year.
Sec. 607.5 Notice of assessment.
(a) Except as provided in paragraph (b) of this section, prior to
September 15 of each year, the FCA shall determine the amount of
assessment to be collected from each System institution for the next
fiscal year under Sec. Sec. 607.3 and 607.4 and shall provide each
System institution with a Notice of Assessment. The total amount
assessed each System institution in the Notice of Assessment shall be an
obligation of each institution on October 1 of each fiscal year. The
total amount assessed each System institution shall be payable not less
often than quarterly in equal installments during each fiscal year,
subject to adjustment pursuant to Sec. Sec. 607.3(d), 607.4(a)(2),
607.4(b), and 607.10.
(b) For banks, associations and designated other System entities
chartered during the period July 1 through September 30 of each year,
the FCA shall, prior to December 15, determine the amount of assessment
to be collected from each such institution for the remainder of the
fiscal year and provide the institution with a Notice of Assessment. The
total amount of the assessment becomes an obligation of the institution
on January 1 and shall be payable in equal installments, subject to
adjustment pursuant to Sec. Sec. 607.3(d) and 607.10, not less often
than quarterly for the remainder of the fiscal year. The first
installment shall be due on January 1. This paragraph shall not apply to
banks, associations, and designated other System entities formed by
merger, consolidation, or transfer of direct lending authority.
(c) In the event of the proposed cancellation of the charter of a
System institution, the unpaid installments of the total amount of the
institution's assessment shall be provided for prior to the cancellation
of the charter.
Sec. 607.6 Payment of assessment.
(a) System institutions shall pay the amounts due as scheduled in
the FCA Notice of Assessment. Payment shall be made by electronic funds
transfer (EFT) for credit to the FCA's account in the Department of the
Treasury, by check to the FCA for deposit, or by such other means as the
FCA may authorize.
(b) Payments made by EFT that are not received by the close of
business on the due date shall be considered delinquent in accordance
with Sec. 607.7.
(c) Payments made by check that are not received by the FCA before
the close of business on the third workday preceding the due date shall
be considered delinquent in accordance with Sec. 607.7.
Sec. 607.7 Late-payment charges on assessments.
(a) If any portion of a scheduled installment of a System
institution's total assessment or the reimbursement billed to a non-
System entity is not paid by the due date, the overdue amount shall be
considered delinquent.
(b) Delinquent amounts shall be charged late-payment interest at the
United States Treasury Department's current value of funds rate
published in the Federal Register. Late payment interest shall be
expressed as an annual rate of interest and shall accrue on a daily
basis starting on the due date of the delinquent amount and continuing
through the date payment is received by the FCA.
[[Page 35]]
(c) The FCA shall waive the collection of interest on the delinquent
amounts if such amounts are paid within 30 days of the date interest
begins to accrue. The FCA may waive interest due on delinquent amounts
upon finding no fault with the performance of the remitter.
(d) The FCA shall charge an amount necessary to cover the
administrative costs incurred as a result of collection of any
delinquent amount.
(e) The FCA shall charge a penalty of 6 percent per annum on any
portion of a delinquent amount that is more than 90 days past due. Such
penalty shall accrue from the date the amount became delinquent.
Sec. 607.8 Reimbursements for services to non-System entities.
Non-System entities shall be assessed for direct expenses plus an
amount for FCA indirect expenses reasonably related to the services
rendered to the non-System entity. Such related indirect expenses shall
be calculated as a percentage of the FCA's overall indirect expenses
based on the extent of FCA activities with respect to the non-System
entity during the period since the entity's most recent assessment.
Sec. 607.9 Reimbursable billings.
The FCA shall bill the amounts due for services to non-System
entities each year subsequent to the issuance of their respective
Reports of Examination. Amounts billed are due in full within 30 days
from the date billed. If the billed amount or any portion thereof
remains unpaid at close of business on the due date, such amount or
portion shall be considered delinquent in accordance with Sec. 607.7.
Sec. 607.10 Adjustments for overpayment or underpayment of assessments.
Where adjustments for overpayment or underpayment of assessments are
made pursuant to Sec. Sec. 607.3(d), 607.4(a)(2), and 607.4(b), credits
for overpayments or charges for underpayments shall be based on FCA
administrative operating expenses incurred in the applicable fiscal year
and on funds required to be maintained pursuant to section 5.15 of the
Act. Such credits or charges shall be applied to the next applicable
assessment payment due during the current or subsequent fiscal year.
Where such adjustments are made, the FCA shall provide the institution
with a statement of adjustment at least 15 days prior to the date when
the institution's next assessment payment is due. Adjustments in
assessments shall be made in principal amount only. Overdue amounts
under Sec. 607.7 are not underpayments for assessment adjustment
purposes.
Sec. 607.11 Report of assessments and expenses.
By January 15 of each calendar year, the FCA shall provide each
assessed System institution with a report of assessments and expenses
for the preceding fiscal year showing total assessments and other income
received as applied to expenses incurred by major budget category and
amounts set aside for a necessary reserve.
PART 608_COLLECTION OF CLAIMS OWED THE UNITED STATES--Table of Contents
Subpart A_Administrative Collection of Claims
Sec.
608.801 Authority.
608.802 Applicability.
608.803 Definitions.
608.804 Delegation of authority.
608.805 Responsibility for collection.
608.806 Demand for payment.
608.807 Right to inspect and copy records.
608.808 Right to offer to repay claim.
608.809 Right to agency review.
608.810 Review procedures.
608.811 Special review.
608.812 Charges for interest, administrative costs, and penalties.
608.813 Contracting for collection services.
608.814 Reporting of credit information.
608.815 Credit report.
Subpart B_Administrative Offset
608.820 Applicability.
608.821 Collection by offset.
608.822 Notice requirements before offset.
608.823 Right to review of claim.
608.824 Waiver of procedural requirements.
608.825 Coordinating offset with other Federal agencies.
608.826 Stay of offset.
608.827 Offset against amounts payable from Civil Service Retirement and
Disability Fund.
[[Page 36]]
Subpart C_Offset Against Salary
608.835 Purpose.
608.836 Applicability of regulations.
608.837 Definitions.
608.838 Waiver requests and claims to the General Accounting Office.
608.839 Procedures for salary offset.
608.840 Refunds.
608.841 Requesting current paying agency to offset salary.
608.842 Responsibility of the FCA as the paying agency.
608.843 Nonwaiver of rights by payments.
Authority: Sec. 5.17 of the Farm Credit Act; 12 U.S.C. 2252; 31
U.S.C. 3701-3719; 5 U.S.C. 5514; 4 CFR parts 101-105; 5 CFR part 550.
Source: 59 FR 13187, Mar. 21, 1994, unless otherwise noted.
Subpart A_Administrative Collection of Claims
Sec. 608.801 Authority.
The regulations of this part are issued under the Federal Claims
Collection Act of 1966, as amended by the Debt Collection Act of 1982,
31 U.S.C. 3701-3719 and 5 U.S.C. 5514, and in conformity with the joint
regulations issued under that Act by the General Accounting Office and
the Department of Justice (joint regulations) prescribing standards for
administrative collection, compromise, suspension, and termination of
agency collection actions, and referral to the General Accounting Office
and to the Department of Justice for litigation of civil claims for
money or property owed to the United States (4 CFR parts 101-105).
Sec. 608.802 Applicability.
This part applies to all claims of indebtedness due and owing to the
United States and collectible under procedures authorized by the Federal
Claims Collection Act of 1966, as amended by the Debt Collection Act of
1982. The joint regulations and this part do not apply to conduct in
violation of antitrust laws, tax claims, claims between Federal
agencies, or to any claim which appears to involve fraud, presentation
of a false claim, or misrepresentation on the part of the debtor or any
other party having an interest in the claim, unless the Justice
Department authorizes the Farm Credit Administration, pursuant to 4 CFR
101.3, to handle the claim in accordance with the provisions of 4 CFR
parts 101-105. Additionally, this part does not apply to Farm Credit
Administration assessments under part 607 of this chapter.
Sec. 608.803 Definitions.
In this part (except where the term is defined elsewhere in this
part), the following definitions shall apply:
(a) Administrative offset or offset, as defined in 31 U.S.C.
3701(a)(1), means withholding money payable by the United States
Government to, or held by the Government for, a person to satisfy a debt
the person owes the Government.
(b) Agency means a department, agency, or instrumentality in the
executive or legislative branch of the Government.
(c) Claim or debt means money or property owed by a person or entity
to an agency of the Federal Government. A ``claim'' or ``debt'' includes
amounts due the Government from loans insured by or guaranteed by the
United States and all other amounts due from fees, leases, rents,
royalties, services, sales of real or personal property, overpayment,
penalties, damages, interest, and fines.
(d) Claim certification means a creditor agency's written request to
a paying agency to effect an administrative offset.
(e) Creditor agency means an agency to which a claim or debt is
owed.
(f) Debtor means the person or entity owing money to the Federal
Government.
(g) FCA means the Farm Credit Administration.
(h) Hearing official means an individual who is responsible for
reviewing a claim under Sec. 608.810 of this part.
(i) Paying agency means an agency of the Federal Government owing
money to a debtor against which an administrative or salary offset can
be effected.
(j) Salary offset means an administrative offset to collect a debt
under 5 U.S.C. 5514 by deductions at one or more officially established
pay intervals from the current pay account of a debtor.
[[Page 37]]
Sec. 608.804 Delegation of authority.
The FCA official(s) designated by the Chairman of the Farm Credit
Administration are authorized to perform all duties which the Chairman
is authorized to perform under these regulations, the Federal Claims
Collection Act of 1966, as amended, and the joint regulations issued
under that Act.
Sec. 608.805 Responsibility for collection.
(a) The collection of claims shall be aggressively pursued in
accordance with the provisions of the Federal Claims Collection Act of
1966, as amended, the joint regulations issued under that Act, and these
regulations. Debts owed to the United States, together with charges for
interest, penalties, and administrative costs, should be collected in
one lump sum unless otherwise provided by law. If a debtor requests
installment payments, the debtor, as requested by the FCA, shall provide
sufficient information to demonstrate that the debtor is unable to pay
the debt in one lump sum. When appropriate, the FCA shall arrange an
installment payment schedule. Claims which cannot be collected directly
or by administrative offset shall be either written off as
administratively uncollectible or referred to the General Counsel for
further consideration.
(b) The Chairman, or designee of the Chairman, may compromise claims
for money or property arising out of the activities of the FCA, where
the claim (exclusive of charges for interest, penalties, and
administrative costs) does not exceed $100,000. When the claim exceeds
$100,000 (exclusive of charges for interest, penalties, and
administrative costs), the authority to accept a compromise rests solely
with the Department of Justice. The standards governing the compromise
of claims are set forth in 4 CFR part 103.
(c) The Chairman, or designee of the Chairman, may suspend or
terminate the collection of claims which do not exceed $100,000
(exclusive of charges for interest, penalties, and administrative costs)
after deducting the amount of any partial payments or collections. If,
after deducting the amount of any partial payments or collections, a
claim exceeds $100,000 (exclusive of charges for interest, penalties,
and administrative costs), the authority to suspend or terminate rests
solely with the Department of Justice. The standards governing the
suspension or termination of claim collections are set forth in 4 CFR
part 104.
(d) The FCA shall refer claims to the Department of Justice for
litigation or to the General Accounting Office (GAO) for claims arising
from audit exceptions taken by the GAO to payments made by the FCA in
accordance with 4 CFR part 105.
Sec. 608.806 Demand for payment.
(a) A total of three progressively stronger written demands at not
more than 30-day intervals should normally be made upon a debtor, unless
a response or other information indicates that additional written
demands would either be unnecessary or futile. When necessary to protect
the Government's interest, written demands may be preceded by other
appropriate actions under Federal law, including immediate referral for
litigation and/or administrative offset.
(b) The initial demand for payment shall be in writing and shall
inform the debtor of the following:
(1) The amount of the debt, the date it was incurred, and the facts
upon which the determination of indebtedness was made;
(2) The payment due date, which shall be 30 calendar days from the
date of mailing or hand delivery of the initial demand for payment;
(3) The right of the debtor to inspect and copy the records of the
agency related to the claim or to receive copies if personal inspection
is impractical. The debtor shall be informed that the debtor may be
assessed for the cost of copying the documents in accordance with Sec.
608.807;
(4) The right of the debtor to obtain a review of the FCA's
determination of indebtedness;
(5) The right of the debtor to offer to enter into a written
agreement with the agency to repay the amount of the claim. The debtor
shall be informed that the acceptance of such an agreement is
discretionary with the agency;
(6) That charges for interest, penalties, and administrative costs
will be
[[Page 38]]
assessed against the debtor, in accordance with 31 U.S.C. 3717, if
payment is not received by the payment due date;
(7) That if the debtor has not entered into an agreement with the
FCA to pay the debt, has not requested the FCA to review the debt, or
has not paid the debt by the payment due date, the FCA intends to
collect the debt by all legally available means, which may include
initiating legal action against the debtor, referring the debt to a
collection agency for collection, collecting the debt by offset, or
asking other Federal agencies for assistance in collecting the debt by
offset;
(8) The name and address of the FCA official to whom the debtor
shall send all correspondence relating to the debt; and
(9) Other information, as may be appropriate.
(c) If, prior to, during, or after completion of the demand cycle,
the FCA determines to collect the debt by either administrative or
salary offset, the FCA shall follow, as applicable, the requirements for
a Notice of Intent to Collect by Administrative Offset or a Notice of
Intent to Collect by Salary Offset set forth in Sec. 608.822.
(d) If no response to the initial demand for payment is received by
the payment due date, the FCA shall take further action under this part,
under the Federal Claims Collection Act of 1966, as amended, under the
joint regulations (4 CFR parts 101-105), or under any other applicable
State or Federal law. These actions may include reports to credit
bureaus, referrals to collection agencies, termination of contracts,
debarment, and salary or administrative offset.
Sec. 608.807 Right to inspect and copy records.
The debtor may inspect and copy the FCA records related to the
claim. The debtor shall give the FCA reasonable advance notice that it
intends to inspect and copy the records involved. The debtor shall pay
copying costs unless they are waived by the FCA. Copying costs shall be
assessed pursuant to Sec. 602.267 of this chapter.
Sec. 608.808 Right to offer to repay claim.
(a) The debtor may offer to enter into a written agreement with the
FCA to repay the amount of the claim. The acceptance of such an offer
and the decision to enter into such a written agreement is at the
discretion of the FCA.
(b) If the debtor requests a repayment arrangement because payment
of the amount due would create a financial hardship, the FCA shall
analyze the debtor's financial condition. The FCA may enter into a
written agreement with the debtor permitting the debtor to repay the
debt in installments if the FCA determines, in its sole discretion, that
payment of the amount due would create an undue financial hardship for
the debtor. The written agreement shall set forth the amount and
frequency of installment payments and shall, in accordance with Sec.
608.812, provide for the imposition of charges for interest, penalties,
and administrative costs unless waived by the FCA.
(c) The written agreement may require the debtor to execute a
confess-judgment note when the total amount of the deferred installments
will exceed $750. The FCA shall provide the debtor with a written
explanation of the consequences of signing a confess-judgment note. The
debtor shall sign a statement acknowledging receipt of the written
explanation. The statement shall recite that the written explanation was
read and understood before execution of the note and that the debtor
signed the note knowingly and voluntarily. Documentation of these
procedures will be maintained in the FCA's file on the debtor.
Sec. 608.809 Right to agency review.
(a) If the debtor disputes the claim, the debtor may request a
review of the FCA's determination of the existence of the debt or of the
amount of the debt. If only part of the claim is disputed, the
undisputed portion should be paid by the payment due date.
(b) To obtain a review, the debtor shall submit a written request
for review to the FCA official named in the initial demand letter,
within 15 calendar days after receipt of the letter. The debtor's
request for review shall
[[Page 39]]
state the basis on which the claim is disputed.
(c) The FCA shall promptly notify the debtor, in writing, that the
FCA has received the request for review. The FCA shall conduct its
review of the claim in accordance with Sec. 608.810.
(d) Upon completion of its review of the claim, the FCA shall notify
the debtor whether the FCA's determination of the existence or amount of
the debt has been sustained, amended, or canceled. The notification
shall include a copy of the written decision issued by the hearing
official pursuant to Sec. 608.810(e). If the FCA's determination is
sustained, this notification shall contain a provision which states that
the FCA intends to collect the debt by all legally available means,
which may include initiating legal action against the debtor, referring
the debt to a collection agency for collection, collecting the debt by
offset, or asking other Federal agencies for assistance in collecting
the debt by offset.
Sec. 608.810 Review procedures.
(a) Unless an oral hearing is required by Sec. 608.823(d), the
FCA's review shall be a review of the written record of the claim.
(b) If an oral hearing is required under Sec. 608.823(d), the FCA
shall provide the debtor with a reasonable opportunity for such a
hearing. The oral hearing, however, shall not be an adversarial
adjudication and need not take the form of a formal evidentiary hearing.
All significant matters discussed at the hearing, however, will be
carefully documented.
(c) Any review required by this part, whether a review of the
written record or an oral hearing, shall be conducted by a hearing
official. In the case of a salary offset, the hearing official shall not
be under the supervision or control of the Chairman of the Farm Credit
Administration.
(d) The FCA may be represented by legal counsel. The debtor may
represent himself or herself or may be represented by an individual of
the debtor's choice and at the debtor's expense.
(e) The hearing official shall issue a final written decision based
on documentary evidence and, if applicable, information developed at an
oral hearing. The written decision shall be issued as soon as
practicable after the review but not later than 60 days after the date
on which the request for review was received by the FCA, unless the
debtor requests a delay in the proceedings. A delay in the proceedings
shall be granted if the hearing official determines, in his or her sole
discretion, that there is good cause to grant the delay. If a delay is
granted, the 60-day decision period shall be extended by the number of
days by which the review was postponed.
(f) Upon issuance of the written opinion, the FCA shall promptly
notify the debtor of the hearing official's decision. Said notification
shall include a copy of the written decision issued by the hearing
official pursuant to paragraph (e) of this section.
Sec. 608.811 Special review.
(a) An employee subject to salary offset, under subpart C of this
part, or a voluntary repayment agreement, may, at any time, request a
special review by the FCA of the amount of the salary offset or
voluntary repayment, based on materially changed circumstances such as,
but not limited to, catastrophic illness, divorce, death, or disability.
(b) To determine whether an offset would prevent the employee from
meeting essential subsistence expenses (costs incurred for food,
housing, clothing, transportation, and medical care), the employee shall
submit a detailed statement and supporting documents for the employee,
his or her spouse, and dependents indicating:
(1) Income from all sources;
(2) Assets;
(3) Liabilities;
(4) Number of dependents;
(5) Expenses for food, housing, clothing, and transportation;
(6) Medical expenses; and
(7) Exceptional expenses, if any.
(c) If the employee requests a special review under this section,
the employee shall file an alternative proposed offset or payment
schedule and a statement, with supporting documents, showing why the
current salary offset or payments result in an extreme financial
hardship to the employee.
[[Page 40]]
(d) The FCA shall evaluate the statement and supporting documents,
and determine whether the original offset or repayment schedule imposes
an undue financial hardship on the employee. The FCA shall notify the
employee in writing of such determination, including, if appropriate, a
revised offset or payment schedule.
Sec. 608.812 Charges for interest, administrative costs, and penalties.
(a) Except as provided in paragraph (d) of this section, the FCA
shall:
(1) Assess interest on unpaid claims;
(2) Assess administrative costs incurred in processing and handling
overdue claims; and
(3) Assess penalty charges not to exceed 6 percent a year on any
part of a debt more than 90 days past due. The imposition of charges for
interest, administrative costs, and penalties shall be made in
accordance with 31 U.S.C. 3717.
(b)(1) Interest shall accrue from the date of mailing or hand
delivery of the initial demand for payment or the Notice of Intent to
Collect by either Administrative or Salary Offset if the amount of the
claim is not paid within 30 days from the date of mailing or hand
delivery of the initial demand or notice.
(2) The 30-day period may be extended on a case-by-case basis if the
FCA reasonably determines that such action is appropriate. Interest
shall only accrue on the principal of the claim and the interest rate
shall remain fixed for the duration of the indebtedness, except, as
provided in paragraph (c) of this section, in cases where a debtor has
defaulted on a repayment agreement and seeks to enter into a new
agreement, or if the FCA reasonably determines that a higher rate is
necessary to protect the interests of the United States.
(c) If a debtor defaults on a repayment agreement and seeks to enter
into a new agreement, the FCA may assess a new interest rate on the
unpaid claim. In addition, charges for interest, administrative costs,
and penalties which accrued but were not collected under the original
repayment agreement shall be added to the principal of the claim to be
paid under the new repayment agreement. Interest shall accrue on the
entire principal balance of the claim, as adjusted to reflect any
increase resulting from the addition of these charges.
(d) The FCA may waive charges for interest, administrative costs,
and/or penalties if it determines that:
(1) The debtor is unable to pay any significant sum toward the claim
within a reasonable period of time;
(2) Collection of charges for interest, administrative costs, and/or
penalties would jeopardize collection of the principal of the claim;
(3) Collection of charges for interest, administrative costs, or
penalties would be against equity and good conscience; or
(4) It is otherwise in the best interest of the United States,
including the situation where an installment payment agreement or offset
is in effect.
Sec. 608.813 Contracting for collection services.
The Chairman, or designee of the Chairman, may contract for
collection services in accordance with 31 U.S.C. 3718 and 4 CFR 102.6 to
recover debts.
Sec. 608.814 Reporting of credit information.
The Chairman, or designee of the Chairman, may disclose to a
consumer reporting agency information that an individual is responsible
for a debt owed to the United States. Information will be disclosed to
reporting agencies in accordance with the terms and conditions of
agreements entered into between the FCA and the reporting agencies. The
terms and conditions of such agreements shall specify that all of the
rights and protection afforded to the debtor under 31 U.S.C. 3711(f)
have been fulfilled. The FCA shall notify each consumer reporting
agency, to which a claim was disclosed, when the debt has been
satisfied.
Sec. 608.815 Credit report.
In order to aid the FCA in making appropriate determinations
regarding the collection and compromise of claims; the collection of
charges for interest, administrative costs, and penalties; the use of
administrative offset; the use of other collection methods;
[[Page 41]]
and the likelihood of collecting the claim, the FCA may institute,
consistent with the provisions of the Fair Credit Reporting Act (15
U.S.C. 1681, et seq.), a credit investigation of the debtor immediately
following a determination that the claim exists.
Subpart B_Administrative Offset
Sec. 608.820 Applicability.
(a) The provisions of this subpart shall apply to the collection of
debts by administrative [or salary] offset under 31 U.S.C. 3716, 5
U.S.C. 5514, or other statutory or common law.
(b) Offset shall not be used to collect a debt more than 10 years
after the Government's right to collect the debt first accrued, unless
facts material to the Government's right to collect the debt were not
known and could not reasonably have been known by the official or
officials of the Government who were charged with the responsibility of
discovering and collecting such debt.
(c) Offset shall not be used with respect to:
(1) Debts owed by other agencies of the United States or by any
State or local government;
(2) Debts arising under or payments made under the Social Security
Act, the Internal Revenue Code of 1986, as amended, or tariff laws of
the United States; or
(3) Any case in which collection by offset of the type of debt
involved is explicitly provided for or prohibited by another statute.
(d) Unless otherwise provided by contract or law, debts or payments
which are not subject to offset under 31 U.S.C. 3716 or 5 U.S.C. 5514
may be collected by offset if such collection is authorized under common
law or other applicable statutory authority.
Sec. 608.821 Collection by offset.
(a) Collection of a debt by administrative [or salary] offset shall
be accomplished in accordance with the provisions of these regulations,
of 4 CFR 102.3, and 5 CFR part 550, subpart K. It is not necessary for
the debt to be reduced to judgment or to be undisputed for offset to be
used.
(b) The Chairman, or designee of the Chairman, may determine that it
is feasible to collect a debt to the United States by offset against
funds payable to the debtor.
(c) The feasibility of collecting a debt by offset will be
determined on a case-by-case basis. This determination shall be made by
considering all relevant factors, including the following:
(1) The degree to which the offset can be accomplished in accordance
with law. This determination should take into consideration relevant
statutory, regulatory, and contractual requirements;
(2) The degree to which the FCA is certain that its determination of
the existence and amount of the debt is correct;
(3) The practicality of collecting the debt by offset. The cost, in
time and money, of collecting the debt by offset and the amount of money
which can reasonably be expected to be recovered through offset will be
relevant to this determination; and
(4) Whether the use of offset will substantially interfere with or
defeat the purpose of a program authorizing payments against which the
offset is contemplated. For example, under a grant program in which
payments are made in advance of the grantee's performance, the
imposition of offset against such a payment may be inappropriate.
(d) The collection of a debt by offset may not be feasible when
there are circumstances which would indicate that the likelihood of
collection by offset is less than probable.
(e) The offset will be effected 31 days after the debtor receives a
Notice of Intent to Collect by Administrative Offset (or Notice of
Intent to Collect by Salary Offset if the offset is a salary offset), or
upon the expiration of a stay of offset, unless the FCA determines under
Sec. 608.824 that immediate action is necessary.
(f) If the debtor owes more than one debt, amounts recovered through
offset may be applied to them in any order. Applicable statutes of
limitation would be considered before applying the amounts recovered to
any debts owed.
Sec. 608.822 Notice requirements before offset.
(a) Except as provided in Sec. 608.824, the FCA will provide the
debtor with 30
[[Page 42]]
calendar days' written notice that unpaid debt amounts shall be
collected by administrative [or salary] offset (Notice of Intent to
Collect by Administrative [or Salary] Offset) before the FCA imposes
offset against any money that is to be paid to the debtor.
(b) The Notice of Intent to Collect by Administrative [or Salary]
Offset shall be delivered to the debtor by hand or by mail and shall
provide the following information:
(1) The amount of the debt, the date it was incurred, and the facts
upon which the determination of indebtedness was made;
(2) In the case of an administrative offset, the payment due date,
which shall be 30 calendar days from the date of mailing or hand
delivery of the Notice;
(3) In the case of a salary offset: (i) The FCA's intention to
collect the debt by means of deduction from the employee's current
disposable pay account until the debt and all accumulated interest is
paid in full; and
(ii) The amount, frequency, proposed beginning date, and duration of
the intended deductions;
(4) The right of the debtor to inspect and copy the records of the
FCA related to the claim or to receive copies if personal inspection is
impractical. The debtor shall be informed that the debtor shall be
assessed for the cost of copying the documents in accordance with Sec.
608.807;
(5) The right of the debtor to obtain a review of, and to request a
hearing, on the FCA's determination of indebtedness, the propriety of
collecting the debt by offset, and, in the case of salary offset, the
propriety of the proposed repayment schedule (i.e., the percentage of
disposable pay to be deducted each pay period). The debtor shall be
informed that to obtain a review, the debtor shall deliver a written
request for a review to the FCA official named in the Notice, within 15
calendar days after the debtor's receipt of the Notice. In the case of a
salary offset, the debtor shall also be informed that the review shall
be conducted by an official arranged for by the FCA who shall be a
hearing official not under the control of the Chairman of the Farm
Credit Administration, or an administrative law judge;
(6) That the filing of a petition for hearing within 15 calendar
days after receipt of the Notice will stay the commencement of
collection proceedings;
(7) That a final decision on the hearing (if one is requested) will
be issued at the earliest practical date, but not later than 60 days
after the filing of the written request for review unless the employee
requests, and the hearing official grants, a delay in the proceedings;
(8) The right of the debtor to offer to enter into a written
agreement with the FCA to repay the amount of the claim. The debtor
shall be informed that the acceptance of such an agreement is
discretionary with the FCA;
(9) That charges for interest, penalties, and administrative costs
shall be assessed against the debtor, in accordance with 31 U.S.C. 3717,
if payment is not received by the payment due date. The debtor shall be
informed that such assessments must be made unless excused in accordance
with the Federal Claims Collection Standards (4 CFR parts 103 and 104);
(10) The amount of accrued interest and the amount of any other
penalties or administrative costs which may have been added to the
principal debt;
(11) That if the debtor has not entered into an agreement with the
FCA to pay the debt, has not requested the FCA to review the debt, or
has not paid the debt prior to the date on which the offset is to be
imposed, the FCA intends to collect the debt by administrative [or
salary] offset or by requesting other Federal agencies for assistance in
collecting the debt by offset. The debtor shall be informed that the
offset shall be imposed against any funds that might become available to
the debtor, until the principal debt and all accumulated interest and
other charges are paid in full;
(12) The date on which the offset will be imposed, which shall be 31
calendar days from the date of mailing or hand delivery of the Notice.
The debtor shall be informed that the FCA reserves the right to impose
an offset prior to this date if the FCA determines that immediate action
is necessary;
[[Page 43]]
(13) That any knowingly false or frivolous statements,
representations, or evidence may subject the debtor to:
(i) Penalties under the False Claims Act, sections 3729 through 3731
of title 31, United States Code, or any other applicable statutory
authority;
(ii) Criminal penalties under sections 286, 287, 1001, and 1002 of
title 18, United States Code, or any other applicable statutory
authority; and, with regard to employees,
(iii) Disciplinary procedures appropriate under chapter 75 of title
5, United States Code; part 752 of title 5, Code of Federal Regulations,
or any other applicable statute or regulation;
(14) The name and address of the FCA official to whom the debtor
shall send all correspondence relating to the debt or the offset;
(15) Any other rights and remedies available to the debtor under
statutes or regulations governing the program for which the collection
is being made;
(16) That unless there are applicable contractual or statutory
provisions to the contrary, amounts paid on or deducted for the debt,
which are later waived or found not owed to the United States, will be
promptly refunded to the employee; and
(17) Other information, as may be appropriate.
(c) When the procedural requirements of this section have been
provided to the debtor in connection with the same debt or under some
other statutory or regulatory authority, the FCA is not required to
duplicate those requirements before effecting offset.
Sec. 608.823 Right to review of claim.
(a) If the debtor disputes the claim, the debtor may request a
review of the FCA's determination of the existence of the debt, the
amount of the debt, the propriety of collecting the debt by offset, and
in the case of salary offset, the propriety of the proposed repayment
schedule. If only part of the claim is disputed, the undisputed portion
should be paid by the payment due date.
(b) To obtain a review, the debtor shall submit a written request
for review to the FCA official named in the Notice of Intent to Collect
by Administrative [or Salary] Offset within 15 calendar days after
receipt of the notice. The debtor's written request for review shall
state the basis on which the claim is disputed and shall specify whether
the debtor requests an oral hearing or a review of the written record of
the claim. If an oral hearing is requested, the debtor shall explain in
the request why the matter cannot be resolved by a review of the
documentary evidence alone.
(c) The FCA shall promptly notify the debtor, in writing, that the
FCA has received the request for review. The FCA shall conduct its
review of the claim in accordance with Sec. 608.810.
(d) The FCA's review of the claim, under this section, shall include
providing the debtor with a reasonable opportunity for an oral hearing
if:
(1) An applicable statute authorizes or requires the FCA to consider
waiver of the indebtedness, the debtor requests waiver of the
indebtedness, and the waiver determination turns on an issue of
credibility or veracity; or
(2) The debtor requests reconsideration of the debt and the FCA
determines that the question of the indebtedness cannot be resolved by
reviewing the documentary evidence; for example, when the validity of
the debt turns on an issue of credibility or veracity.
(e) A debtor waives the right to a hearing and will have his or her
debt offset in accordance with the proposed offset schedule if the
debtor:
(1) Fails to file a written request for review within the timeframe
set forth in paragraph (b) of this section, unless the FCA determines
that the delay was the result of circumstances beyond his or her
control; or
(2) Fails to appear at an oral hearing of which he or she was
notified unless the hearing official determines that the failure to
appear was due to circumstances beyond the employee's control.
(f) Upon completion of its review of the claim, the FCA shall notify
the debtor whether the FCA's determination of the existence or amount of
the debt has been sustained, amended, or canceled. The notification
shall include a copy of the written decision issued by the hearing
official, pursuant to Sec. 608.810(e). If the FCA's determination is
sustained, this notification shall
[[Page 44]]
contain a provision which states that the FCA intends to collect the
debt by offset or by requesting other Federal agencies for assistance in
collecting the debt.
(g) When the procedural requirements of this section have been
provided to the debtor in connection with the same debt or under some
other statutory or regulatory authority, the FCA is not required to
duplicate those requirements before effecting offset.
Sec. 608.824 Waiver of procedural requirements.
(a) The FCA may impose offset against a payment to be made to a
debtor prior to the completion of the procedures required by this part,
if:
(1) Failure to impose the offset would substantially prejudice the
Government's ability to collect the debt; and
(2) The timing of the payment against which the offset will be
imposed does not reasonably permit the completion of those procedures.
(b) The procedures required by this part shall be complied with
promptly after the offset is imposed. Amounts recovered by offset, which
are later found not to be owed to the Government, shall be promptly
refunded to the debtor.
Sec. 608.825 Coordinating offset with other Federal agencies.
(a)(1) Any creditor agency which requests the FCA to impose an
offset against amounts owed to the debtor shall submit to the FCA a
claim certification which meets the requirements of this paragraph. The
FCA shall submit the same certification to any agency that the FCA
requests to effect an offset.
(2) The claim certification shall be in writing. It shall certify
the debtor owes the debt and that all of the applicable requirements of
31 U.S.C. 3716 and 4 CFR part 102 have been met. If the intended offset
is to be a salary offset, a claim certification shall instead certify
that the debtor owes the debt and that the applicable requirements of 5
U.S.C. 5514 and 5 CFR part 550, subpart K, have been met.
(3) A certification that the debtor owes the debt shall state the
amount of the debt, the factual basis supporting the determination of
indebtedness, and the date on which payment of the debt was due. A
certification that the requirements of 31 U.S.C. 3716 and 4 CFR part 102
have been met shall include a statement that the debtor has been sent a
notice of Intent to Collect by Administrative Offset at least 31
calendar days prior to the date of the intended offset or a statement
that pursuant to 4 CFR 102.3(b)(5) said Notice was not required to be
sent. A certification that the requirements of 5 U.S.C. 5514 and 5 CFR
part 550, subpart K, have been met shall include a statement that the
debtor has been sent a Notice of Intent to Collect by Salary Offset at
least 31 calendar days prior to the date of the intended offset or a
statement that pursuant to 4 CFR 102.3(b)(5) said Notice was not
required to be sent.
(b)(1) The FCA shall not effect an offset requested by another
Federal agency without first obtaining the claim certification required
by paragraph (a) of this section. If the FCA receives an incomplete
claim certification, the FCA shall return the claim certification with
notice that a claim certification which complies with the requirements
of paragraph (a) of this section must be submitted to the FCA before the
FCA will consider effecting an offset.
(2) The FCA may rely on the information contained in the claim
certification provided by a requesting creditor agency. The FCA is not
authorized to review a creditor agency's determination of indebtedness.
(c) Only the creditor agency may agree to enter into an agreement
with the debtor for the repayment of the claim. Only the creditor agency
may agree to compromise, suspend, or terminate collection of the claim.
(d) The FCA may decline, for good cause, a request by another agency
to effect an offset. Good cause includes that the offset might disrupt,
directly or indirectly, essential FCA operations. The refusal and the
reasons shall be sent in writing to the creditor agency.
Sec. 608.826 Stay of offset.
(a)(1) When a creditor agency receives a debtor's request for
inspection of agency records, the offset is stayed
[[Page 45]]
for 10 calendar days beyond the date set for the record inspection.
(2) When a creditor agency receives a debtor's offer to enter into a
repayment agreement, the offset is stayed until the debtor is notified
as to whether the proposed agreement is acceptable.
(3) When a review is conducted, the offset is stayed until the
creditor agency issues a final written decision.
(b) When offset is stayed, the amount of the debt and the amount of
any accrued interest or other charges will be withheld from payments to
the debtor. The withheld amounts shall not be applied against the debt
until the stay expires. If withheld funds are later determined not to be
subject to offset, they will be promptly refunded to the debtor.
(c) If the FCA is the creditor agency and the offset is stayed, the
FCA will immediately notify an offsetting agency to withhold the payment
pending termination of the stay.
Sec. 608.827 Offset against amounts payable from Civil Service
Retirement and Disability Fund.
The FCA may request that monies payable to a debtor from the Civil
Service Retirement and Disability Fund be administratively offset to
collect debts owed to the FCA by the debtor. The FCA must certify that
the debtor owes the debt, the amount of the debt, and that the FCA has
complied with the requirements set forth in this part, 4 CFR 102.3, and
the Office of Personnel Management regulations. The request shall be
submitted to the official designated in the Office of Personnel
Management regulations to receive the request.
Subpart C_Offset Against Salary
Sec. 608.835 Purpose.
The purpose of this subpart is to implement section 5 of the Debt
Collection Act of 1982 (Pub. L. 97-365)(5 U.S.C. 5514), which authorizes
the collection of debts owed by Federal employees to the Federal
Government by means of salary offsets. These regulations provide
procedures for the collection of a debt owed to the Government by the
imposition of a salary offset against amounts payable to a Federal
employee as salary. These regulations are consistent with the
regulations on salary offset published by the Office of Personnel
Management, codified in 5 CFR part 550, subpart K. Since salary offset
is a type of administrative offset, this subpart supplements subpart B.
Sec. 608.836 Applicability of regulations.
(a) These regulations apply to the following cases:
(1) Where the FCA is owed a debt by an individual currently employed
by another agency;
(2) Where the FCA is owed a debt by an individual who is currently
employed by the FCA; or
(3) Where the FCA currently employs an individual who owes a debt to
another Federal agency. Upon receipt of proper certification from the
creditor agency, the FCA will offset the debtor-employee's salary in
accordance with these regulations.
(b) These regulations do not apply to the following:
(1) Debts or claims rising under the Internal Revenue Code of 1986,
as amended (26 U.S.C. 1 et seq.); the Social Security Act (42 U.S.C. 301
et seq.); the tariff laws of the United States; or to any case where
collection of a debt by salary offset is explicitly provided for or
prohibited by another statute (e.g., travel advances in 5 U.S.C. 5705
and employee training expenses in 5 U.S.C. 4108).
(2) Any adjustment to pay arising from an employee's election of
coverage or a change in coverage under a Federal benefits program
requiring periodic deductions from pay if the amount to be recovered was
accumulated over four pay periods or less.
(3) A claim which has been outstanding for more than 10 years after
the creditor agency's right to collect the debt first accrued, unless
facts material to the Government's right to collect were not known and
could not reasonably have been known by the official or officials
charged with the responsibility for discovery and collection of such
debts.
[[Page 46]]
Sec. 608.837 Definitions.
In this subpart, the following definitions shall apply:
(a) Agency means:
(1) An executive agency as defined by 5 U.S.C. 105, including the
United States Postal Service and the United States Postal Rate
Commission;
(2) A military department as defined in 5 U.S.C. 102;
(3) An agency or court of the judicial branch, including a court as
defined in 28 U.S.C. 610, the District Court for the Northern Mariana
Islands, and the Judicial Panel on Multi-district Litigation;
(4) An agency of the legislative branch, including the United States
Senate and the United States House of Representatives; or
(5) Other independent establishments that are entities of the
Federal Government.
(b) Disposable pay means, for an officially established pay
interval, that part of current basic pay, special pay, incentive pay,
retired pay, retainer pay, or, in the case of an employee not entitled
to basic pay, other authorized pay, remaining after the deduction of any
amount required by law to be withheld. The FCA shall allow the
deductions described in 5 CFR 581.105 (b) through (f).
(c) Employee means a current employee of the FCA or other agency,
including a current member of the Armed Forces or Reserve of the Armed
Forces of the United States.
(d) Waiver means the cancellation, remission, forgiveness, or
nonrecovery of a debt allegedly owed by an employee to the FCA or
another agency as permitted or required by 5 U.S.C. 5584 or 8346(b), 10
U.S.C. 2774, 32 U.S.C. 716, or any other law.
Sec. 608.838 Waiver requests and claims to the General Accounting Office.
(a) The regulations contained in this subpart do not preclude an
employee from requesting a waiver of an overpayment under 5 U.S.C. 5584
or 8346(b), 10 U.S.C. 2774, 32 U.S.C. 716, or in any way questioning the
amount or validity of a debt by submitting a subsequent claim to the
General Accounting Office in accordance with the procedures prescribed
by the General Accounting Office.
(b) These regulations also do not preclude an employee from
requesting a waiver pursuant to other statutory provisions pertaining to
the particular debts being collected.
Sec. 608.839 Procedures for salary offset.
(a) The Chairman, or designee of the Chairman, shall determine the
amount of an employee's disposable pay and the amount to be deducted
from the employee's disposable pay at regular pay intervals.
(b) Deductions shall begin within three official pay periods
following the date of mailing or delivery of the Notice of Intent to
Collect by Salary Offset.
(c)(1) If the amount of the debt is equal to or is less than 15
percent of the employee's disposable pay, such debt should be collected
in one lump-sum deduction.
(2) If the amount of the debt is not collected in one lump-sum
deduction, the debt shall be collected in installment deductions over a
period of time not greater than the anticipated period of employment.
The size and frequency of installment deductions will bear a reasonable
relation to the size of the debt and the employee's ability to pay.
However, the amount deducted from any pay period will not exceed 15
percent of the employee's disposable pay for that period, unless the
employee has agreed in writing to the deduction of a greater amount.
(3) A deduction exceeding the 15-percent disposable pay limitation
may be made from any final salary payment pursuant to 31 U.S.C. 3716 in
order to liquidate the debt, whether the employee is being separated
voluntarily or involuntarily.
(4) Whenever an employee subject to salary offset is separated from
the FCA and the balance of the debt cannot be liquidated by offset of
the final salary check pursuant to 31 U.S.C. 3716, the FCA may offset
any later payments of any kind against the balance of the debt.
(d) In instances where two or more creditor agencies are seeking
salary offsets against current employees of the FCA or where two or more
debts
[[Page 47]]
are owed to a single creditor agency, the FCA, at its discretion, may
determine whether one or more debts should be offset simultaneously
within the 15-percent limitation. Debts owed to the FCA should generally
take precedence over debts owed to other agencies.
Sec. 608.840 Refunds.
(a) In instances where the FCA is the creditor agency, it shall
promptly refund any amounts deducted under the authority of 5 U.S.C.
5514 when:
(1) The debt is waived or otherwise found not to be owed to the
United States (unless expressly prohibited by statute or regulations);
or
(2) An administrative or judicial order directs the FCA to make a
refund.
(b) Unless required or permitted by law or contract, refunds under
this section shall not bear interest.
Sec. 608.841 Requesting current paying agency to offset salary.
(a) To request a paying agency to impose a salary offset against
amounts owed to the debtor, the FCA shall provide the paying agency with
a claim certification which meets the requirements set forth in Sec.
608.825(a). The FCA shall also provide the paying agency with a
repayment schedule determined under the provisions of Sec. 608.839 or
in accordance with a repayment agreement entered into with the debtor.
(b) If the employee separates from the paying agency before the debt
is paid in full, the paying agency shall certify the total amount
collected on the debt. A copy of this certification shall be sent to the
employee and a copy shall be sent to the FCA. If the paying agency is
aware that the employee is entitled to payments from the Civil Service
Retirement and Disability Fund, or other similar payments, it must
provide written notification to the agency responsible for making such
payments that the debtor owes a debt (including the amount) and that the
provisions of this section have been fully complied with. However, the
FCA must submit a properly certified claim to the agency responsible for
making such payments before the collection can be made.
(c) When an employee transfers to another paying agency, the FCA is
not required to repeat the due process procedures set forth in 5 U.S.C.
5514 and this part to resume the collection. The FCA shall, however,
review the debt upon receiving the former paying agency's notice of the
employee's transfer to make sure the collection is resumed by the new
paying agency.
(d) If a special review is conducted pursuant to Sec. 608.811 and
results in a revised offset or repayment schedule, the FCA shall provide
a new claim certification to the paying agency.
Sec. 608.842 Responsibility of the FCA as the paying agency.
(a) When the FCA receives a claim certification from a creditor
agency, deductions should be scheduled to begin at the next officially
established pay interval. The FCA shall send the debtor written notice
which provides:
(1) That the FCA has received a valid claim certification from the
creditor agency;
(2) The date on which salary offset will begin;
(3) The amount of the debt; and
(4) The amount of such deductions.
(b) If, after the creditor agency has submitted the claim
certification to the FCA, the employee transfers to a different agency
before the debt is collected in full, the FCA must certify the total
amount collected on the debt. The FCA shall send a copy of this
certification to the creditor agency and a copy to the employee. If the
FCA is aware that the employee is entitled to payments from the Civil
Service Retirement Fund and Disability Fund, or other similar payments,
it shall provide written notification to the agency responsible for
making such payments that the debtor owes a debt (including the amount).
Sec. 608.843 Nonwaiver of rights by payments.
An employee's involuntary payment of all or any portion of a debt
being collected under this subpart shall not be construed as a waiver of
any rights the employee may have under 5 U.S.C. 5514 or any other
provisions of a written contract or law unless there are
[[Page 48]]
statutory or contractual provisions to the contrary.
[[Page 49]]
SUBCHAPTER B_FARM CREDIT SYSTEM
PART 609_ELECTRONIC COMMERCE--Table of Contents
Subpart A_General Rules
Sec.
609.905 Background.
609.910 Compliance with the Electronic Signatures in Global and National
Commerce Act (Public Law 106-229) (E-SIGN).
609.915 Compliance with Federal Reserve Board Regulations B, M, and Z.
Subpart B_Interpretations and Definitions
609.920 Interpretations.
609.925 Definitions.
Subpart C_Standards for Boards and Management
609.930 Policies and procedures.
609.935 Business planning.
609.940 Internal systems and controls.
609.945 Records retention.
Subpart D_General Requirements for Electronic Communications
609.950 Electronic communications.
Authority: Sec. 5.9 of the Farm Credit Act (12 U.S.C. 2243); 5
U.S.C. 301; Pub. L. 106-229 (114 Stat. 464).
Source: 67 FR 16631, Apr. 8, 2002, unless otherwise noted.
Subpart A_General Rules
Sec. 609.905 Background.
The Farm Credit Administration (FCA) wants to create a flexible
regulatory environment that facilitates electronic commerce (E-commerce)
and allows Farm Credit System (System) institutions and their customers
to use new technologies. System institutions may use E-commerce but must
establish good business practices that ensure safety and soundness while
doing so.
Sec. 609.910 Compliance with the Electronic Signatures in Global
and National Commerce Act (Public Law 106-229) (E-SIGN).
(a) General. E-SIGN makes it easier to conduct E-commerce. With some
exceptions, E-SIGN permits the use and establishes the legal validity of
electronic contracts, electronic signatures, and records maintained in
electronic rather than paper form. It governs transactions relating to
the conduct of business, consumer, or commercial affairs between two or
more persons. E-commerce is optional; all parties to a transaction must
agree before it can be used.
(b) Consumer transactions. E-SIGN contains extensive consumer
disclosure provisions that apply whenever another consumer protection
law, such as the Equal Credit Opportunity Act, requires the disclosure
of information to a consumer in writing. Consumer means an individual
who obtains, through a transaction, products or services, including
credit, used primarily for personal, family, or household purposes. You
must follow E-SIGN's specific procedures to make the required consumer
disclosures electronically. E-SIGN's special disclosure rules for
consumer transactions do not apply to business transactions. Under E-
SIGN, some System loans qualify as consumer transactions, while others
are business transactions. You will need to distinguish between the two
types of transactions to comply with E-SIGN.
(c) Specific exceptions. E-SIGN does not permit electronic
notification for notices of default, acceleration, repossession,
foreclosure, eviction, or the right to cure, under a credit agreement
secured by, or a rental agreement for, a person's primary residence.
These notices require paper notification. The law also requires paper
notification to cancel or terminate life insurance. Thus, System
institutions cannot use electronic notification to deliver some notices
that must be provided under part 617, subparts A, D, E, and G of this
chapter. In addition, E-SIGN does not apply to the writing or signature
requirements imposed under the Uniform Commercial Code, other than
sections 1-107 and 1-206 and Articles 2 and 2A.
(d) Promissory notes. E-SIGN establishes special technological and
business process standards for electronic promissory notes secured by
real estate. To treat an electronic version of
[[Page 50]]
such a promissory note as the equivalent of a paper promissory note, you
must conform to E-SIGN's detailed requirements for transferable records.
A transferable record is an electronic record that:
(1) Would be a note under Article 3 of the Uniform Commercial Code
if the electronic record were in writing;
(2) The issuer of the electronic record has expressly agreed is a
transferable record; and
(3) Relates to a loan secured by real property.
(e) Effect on State and Federal law. E-SIGN preempts most State and
Federal statutes or regulations, including the Farm Credit Act of 1971,
as amended (Act), and its implementing regulations, that require
contracts or other business, consumer, or commercial records to be
written, signed, or in non-electronic form. Under E-SIGN, an electronic
record or signature generally satisfies any provision of the Act, or its
implementing regulations that requires such records and signatures to be
written, signed, or in paper form. Therefore, unless an exception
applies or a necessary condition under E-SIGN has not been met, an
electronic record or signature satisfies any applicable provision of the
Act or its implementing regulations.
(f) Document integrity and signature authentication. Each System
institution must verify the legitimacy of an E-commerce communication,
transaction, or access request. Document integrity ensures that the same
document is provided to all parties. Signature authentication proves the
identities of all parties. The parties to the transaction may determine
how to ensure document integrity and signature authentication.
(g) Records retention. Each System institution may maintain all
records electronically even if originally they were paper records. The
stored electronic record must accurately reflect the information in the
original record. The electronic record must be accessible and capable of
being reproduced by all persons entitled by law or regulations to review
the original record.
[67 FR 16631, Apr. 8, 2002, as amended at 69 FR 10906, Mar. 9, 2004]
Sec. 609.915 Compliance with Federal Reserve Board Regulations B,
M, and Z.
The regulations in this part require fair practices and meaningful
disclosures for certain lending and leasing activities. System
institutions must comply with Federal Reserve Board Regulations B (Equal
Credit Opportunity), M (Consumer Leasing), and Z (Truth in Lending) (12
CFR parts 202, 213, and 226).
Subpart B_Interpretations and Definitions
Sec. 609.920 Interpretations.
(a) E-SIGN preempts most statutes and regulations, including the Act
and its implementing regulations that require paper copies and
handwritten signatures in business, consumer, or commercial
transactions. E-SIGN requires that statutes and regulations be
interpreted to allow E-commerce as long as the safeguards of E-SIGN are
met and its exceptions recognized. Generally, an electronic record or
signature satisfies any provision of the Act or its implementing
regulations that require such records and signatures to be written,
signed, or in paper form.
(b) System institutions may interpret the Act and its implementing
regulations broadly to allow electronic transmissions, communications,
records, and submissions, as provided by E-SIGN. This means that the
terms address, copy, distribute, document, file, mail, notice, notify,
record, provide, send, signature, sent, written, writing, and similar
words generally should be interpreted to permit electronic
transmissions, communications, records, and submissions in business,
consumer, or commercial transactions.
Sec. 609.925 Definitions.
We provide the following definitions that apply to the Act and its
implementing regulations:
(a) Electronic means relating to technology having electrical,
digital, magnetic, wireless, optical, electromagnetic, or similar
capabilities.
(b) Electronic communication means a message that can be transmitted
electronically and displayed on equipment
[[Page 51]]
as visual text. An example is a message displayed on a personal computer
monitor screen. This does not include audio- and voice-response
telephone systems.
(c) Electronic business (E-business) or electronic commerce (E-
commerce) means buying, selling, producing, or working in an electronic
medium.
(d) Electronic mail (E-mail) means:
(1) To send or submit information electronically; or
(2) A communication received electronically.
(e) Electronic signature means an electronic sound, symbol, or
process, attached to or logically associated with a contract or other
record and executed or adopted by a person with the intent to sign the
record. Electronic signature describes a category of electronic
processes that can be substituted for a handwritten signature.
Subpart C_Standards for Boards and Management
Sec. 609.930 Policies and procedures.
The FCA supports E-commerce and wants to facilitate it and other new
technologies and innovations to enhance the efficient conduct of
business and the delivery of safe and sound credit and closely related
services. Through E-commerce, System institutions can enhance customer
service, access information, and provide alternate communication
systems. At the same time, E-commerce presents challenges and risks that
your board must carefully consider in advance. Before engaging in E-
commerce, you must weigh its business risks against its benefits. You
must also adopt E-commerce policies and procedures to ensure your
institution's safety and soundness and compliance with law and
regulations. Among other concerns, the policies and procedures must
address, when applicable:
(a) Security and integrity of System institution and borrower data;
(b) The privacy of your customers as well as visitors to your Web
site;
(c) Notices to customers or visitors to your Web site when they link
to an affiliate or third party Web site;
(d) Capability of vendor or application providers;
(e) Business resumption after disruption;
(f) Fraud and money laundering;
(g) Intrusion detection and management;
(h) Liability insurance; and
(i) Prompt reporting of known or suspected criminal violations
associated with E-commerce to law enforcement authorities and FCA under
part 612, subpart B of this chapter.
[67 FR 16631, Apr. 8, 2002; 69 FR 42853, July 19, 2004]
Sec. 609.935 Business planning.
When engaging in E-commerce, the business plan required under part
618 of this chapter, subpart J, must describe the E-commerce initiative,
including intended objectives, business risks, security issues, relevant
markets, and legal compliance.
Sec. 609.940 Internal systems and controls.
When applicable, internal systems and controls must provide
reasonable assurances that System institutions will:
(a) Follow and achieve business plan objectives and policies and
procedures requirements regarding E-commerce; and
(b) Prevent and detect material deficiencies on a timely basis.
Sec. 609.945 Records retention.
Records stored electronically must be accurate, accessible, and
reproducible for later reference.
Subpart D_General Requirements for Electronic Communications
Sec. 609.950 Electronic communications.
(a) Agreement. In accordance with E-SIGN, System institutions may
communicate electronically in business, consumer, or commercial
transactions. E-commerce transactions require the agreement of all
parties when you do business.
(b) Communications with consumers. E-SIGN and Federal Reserve Board
Regulations B, M, and Z (12 CFR parts 202, 213, and 226) outline
specific disclosure requirements for communications with consumers.
[[Page 52]]
(c) Communications with parties other than consumers. The consumer
disclosure requirements of E-SIGN and of Federal Reserve Board
Regulation B (12 CFR part 202) do not apply to your communications with
parties other than consumers. (Federal Reserve Board Regulations M and Z
(12 CFR parts 213 and 226) apply to consumers only.) Nonetheless, you
must ensure that your communications, including those disclosures
required under the Act and the regulations in this part, demonstrate
good business practices in the delivery of credit and closely related
services and in your obtaining goods and services.
PART 611_ORGANIZATION--Table of Contents
Subparts A-B [Reserved]
Subpart C_Election of Directors and Other Voting Procedures
Sec.
611.310 Eligibility for membership on bank and association boards and
subsequent employment.
611.320 Impartiality in the election of directors.
611.330 Confidentiality in voting.
611.340 Security in voting.
611.350 Application of cooperative principles to the election of
directors.
Subpart D_Rules for Compensation of Board Members
611.400 Compensation of bank board members.
Subpart E_Transfer of Authorities
611.500 General.
611.501 Procedures.
611.505 Farm Credit Administration review.
611.510 Approval procedures.
611.515 Information statement.
611.520 Plan of transfer.
611.525 Stockholder reconsideration.
Subpart F_Bank Mergers, Consolidations and Charter Amendments
611.1000 General authority.
611.1010 Bank charter amendment procedures.
611.1020 Requirements for mergers or consolidations of banks.
611.1030 Board of directors of an agricultural credit bank.
611.1040 Creation of new associations.
Subpart G_Mergers, Consolidations, and Charter Amendments of
Associations
611.1120 General authority.
611.1121 Charter amendment procedures.
611.1122 Requirements for mergers or consolidations.
611.1123 Merger or consolidation agreements.
611.1124 Territorial adjustments.
611.1125 Treatment of associations not approving districtwide mergers.
Subpart H_Rules for Inter-System Fund Transfers
611.1130 Inter-System transfer of funds and equities.
Subpart I_Service Organizations
611.1135 Incorporation of service corporations.
611.1136 Regulation and examination of service organizations.
611.1137 Title VIII service corporations.
Subpart J-O [Reserved]
Subpart P_Termination of System Institution Status
611.1200 Applicability of this subpart.
611.1205 Definitions that apply in this subpart.
611.1210 Commencement resolution and advance notice.
611.1215 Prohibited acts.
611.1220 Filing of termination application.
611.1221 Filing of termination application--timing.
611.1222 Plan of termination--contents.
611.1223 Information statement--contents.
611.1230 FCA review and approval.
611.1240 Voting record date and stockholder approval.
611.1245 Stockholder reconsideration.
611.1250 Preliminary exit fee estimate.
611.1255 Exit fee calculation.
611.1260 Payment of debts and assessments--terminating association.
611.1265 Retirement of a terminating association's investment in its
affiliated bank.
611.1270 Repayment of obligations--terminating bank.
611.1275 Retirement of equities held by other System institutions.
611.1280 Dissenting stockholders' rights.
611.1285 Loan refinancing by borrowers.
611.1290 Continuation of borrower rights.
Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0, 3.21, 4.12, 4.15, 4.20,
4.21, 5.9, 5.10, 5.17, 6.9, 6.26, 7.0-7.13, 8.5(e) of the Farm Credit
Act (12 U.S.C. 2011, 2021, 2071, 2091, 2121, 2142, 2183, 2203, 2208,
2209, 2243, 2244, 2252, 2278a-9, 2278b-6, 2279a--2279f-1, 2279aa-5(e));
secs. 411 and 412 of Pub.
[[Page 53]]
L. 100-233, 101 Stat. 1568, 1638; secs. 409 and 414 of Pub. L. 100-399,
102 Stat. 989, 1003, and 1004.
Source: 37 FR 11415, June 7, 1972, unless otherwise noted.
Subparts A-B [Reserved]
Subpart C_Election of Directors and Other Voting Procedures
Source: 53 FR 50392, Dec. 15, 1988, unless otherwise noted.
Sec. 611.310 Eligibility for membership on bank and association
boards and subsequent employment.
(a) No person shall be eligible for membership on a bank or
association board who is or has been, within 1 year preceding the date
the term of office begins, a salaried officer or employee of any bank or
association in the System.
(b) No bank or association director shall be eligible to continue to
serve in that capacity and his or her office shall become vacant if
after election as a member of the board, he or she becomes legally
incompetent or is convicted of a felony or held liable in damages for
fraud.
(c) No bank director shall, within 1 year after the date when he or
she ceases to be a member of the board, serve as a salaried officer or
employee of such bank, or any association with which the bank has a
discount or agent relationship.
(d) No director of an association shall, within 1 year after he or
she ceases to be a member of the board, serve as a salaried officer or
employee of such association.
[53 FR 50392, Dec. 15, 1988, as amended at 54 FR 37095, Sept. 7, 1989]
Sec. 611.320 Impartiality in the election of directors.
(a) Each System institution shall adopt policies and procedures that
are designed to assure that the elections of board members are conducted
in an impartial manner.
(b) No employee or agent of a System institution shall take any
part, directly or indirectly, in the nomination or election of members
to the board of directors of a System institution, or make any
statement, either orally or in writing, which may be construed as
intended to influence any vote in such nominations, or elections. This
paragraph shall not prohibit employees or agents from providing
biographical and other similar information or engaging in other
activities pursuant to policies and procedures for nominations and
elections. This paragraph does not affect the right of an employee or
agent to nominate or vote for directors of an institution in which the
employee or agent is a voting member.
(c) No property, facilities, or resources of any System institution
shall be used by any candidate for nomination or election or by any
other person for the benefit of any candidate for nomination or
election, unless the same property, facilities, or resources are
simultaneously available and made known to be available for use by all
declared candidates.
(d) No director, employee, or agent of a System institution shall,
for the purpose of furthering the interests of any candidates for
nomination or election, furnish or make use of records that are not made
available for use by all declared candidates.
(e) No System institution shall distribute or mail either directly
or at the expense of the institution, any campaign materials for
director candidates. Institutions shall request biographical information
from all declared candidates who certify that they are eligible, restate
such information in a standard format, and distribute or mail it with
ballots or proxy ballots.
Sec. 611.330 Confidentiality in voting.
(a) No bank or association may use signed ballots in stockholder
votes. Each bank and association must adopt policies and procedures to
ensure that all information and materials regarding how or whether an
individual stockholder has voted remain confidential, including with
respect to the institution, its directors, stockholders, or employees,
or any other person except:
(1) An independent third party tabulating the vote; or
(2) The Farm Credit Administration.
[[Page 54]]
(b) A bank or association may use balloting procedures, such as an
identity code on the ballot, that can be used to identify how or whether
an individual stockholder has voted only if the votes are tabulated by
an independent third party. In weighted voting, the votes must be
tabulated by an independent third party. An independent third party that
tabulates the votes must certify in writing that such party will not
disclose to any person (including the institution, its directors,
stockholders, or employees) any information about how or whether an
individual stockholder has voted, except that the information must be
disclosed to the Farm Credit Administration if requested.
(c) Once a bank or association receives a ballot, the vote of that
stockholder is final, except that a stockholder may withdraw a proxy
ballot before balloting begins at a stockholders' meeting.
(d) A bank or association may give a stockholder voting by proxy an
opportunity to give voting discretion to the proxy of the stockholder's
choice, provided that the proxy is also a stockholder eligible to vote.
[63 FR 64843, Nov. 24, 1998]
Sec. 611.340 Security in voting.
(a) Each bank and association must adopt policies and procedures
that assure the security of all records and materials related to a
stockholder vote including, but not limited to, ballots, proxy ballots,
and other related materials.
(b) Bank and association procedures must assure that ballots and
proxy ballots are provided only to stockholders who are eligible to
vote.
(c) Ballots and proxy ballots must be safeguarded before the time of
distribution or mailing to voting stockholders and after the time of
receipt by the bank or association until disposal. In an election of
directors, ballots, proxy ballots and election records must be retained
at least until the end of the term of office of the director. In other
stockholder votes, ballots, proxy ballots, and records must be retained
for at least 3 years after the vote.
(d) The voting procedures of each institution must provide for the
establishment of a tellers committee or other designated group of
persons which must be responsible for validating ballots and proxies and
tabulating voting results. An institution and its officers, directors,
and employees may not make any public announcement of the results of a
stockholder vote before the tellers committee or other designated
persons have validated the results of the vote.
[53 FR 50392, Dec. 15, 1988, as amended at 63 FR 64843, Nov. 24, 1998]
Sec. 611.350 Application of cooperative principles to the election
of directors.
In the election of directors, each System institution shall comply
with the applicable cooperative principles set forth in Sec. 615.5230
of this chapter.
[63 FR 39225, July 22, 1998]
Subpart D_Rules for Compensation of Board Members
Sec. 611.400 Compensation of bank board members.
(a) Farm Credit System banks are authorized to pay fair and
reasonable compensation to directors for services performed in an
official capacity at a rate not to exceed the level established in
section 4.21 of the Farm Credit Act of 1971, as amended, unless the FCA
determines that such a level adversely affects the safety and soundness
of the institution.
(b) The bank director compensation level established in section 4.21
of the Act shall be adjusted to reflect changes in the Consumer Price
Index (CPI) for all urban consumers, as published by the Bureau of Labor
Statistics, in the following manner: Current year's maximum compensation
= Prior year's maximum compensation adjusted by the prior year's annual
average percent change in the CPI for all urban consumers. Adjustments
will be made to the bank director statutory compensation limit beginning
from October 28, 1992 (the date of enactment of the Farm Credit Banks
and Associations Safety and Soundness Act of 1992). Additionally, each
year the FCA will distribute a bookletter to all FCS banks that
communicates the CPI adjusted
[[Page 55]]
bank director statutory compensation limit.
(c)(1) A Farm Credit bank is authorized to pay a director up to 30
percent more than the statutory compensation limit in exceptional
circumstances where the director contributes extraordinary time and
effort in the service of the bank and its shareholders.
(2) Banks must document the exceptional circumstances justifying
additional director compensation. The documentation must describe:
(i) The exceptional circumstances justifying the additional director
compensation, including the extraordinary time and effort the director
devoted to bank business; and
(ii) The amount and the terms and conditions of the additional
director compensation.
(d) Each bank board shall adopt a written policy regarding
compensation of bank directors. The policy shall address, at a minimum,
the following areas:
(1) The activities or functions for which attendance is necessary
and appropriate and may be compensated, except that a Farm Credit System
bank shall not compensate any director for rendering services on behalf
of any other Farm Credit System institution or a cooperative of which
the director is a member, or for performing other assignments of a non-
official nature;
(2) The methodology for determining each director's rate of
compensation; and
(3) The exceptional circumstances under which the board would pay
additional compensation for any of its directors as authorized by
paragraph (c) of this section.
(e) Directors may also be reimbursed for reasonable travel,
subsistence, and other related expenses in accordance with the bank's
policy.
[59 FR 37411, July 22, 1994, as amended at 64 FR 16618, Apr. 6, 1999; 65
FR 8023, Feb. 17, 2000]
Subpart E_Transfer of Authorities
Source: 53 FR 50393, Dec. 15, 1988, unless otherwise noted.
Sec. 611.500 General.
Each Farm Credit Bank or Agricultural Credit Bank is authorized, in
accordance with section 7.6 of the Act, to transfer certain authorities
to Federal land bank associations. The regulations in this subpart set
forth the procedures and voting and approval requirements applicable to
such transfers.
Sec. 611.501 Procedures.
(a) The boards of directors of a bank and an association which seek
to transfer authorities may adopt appropriate resolutions approving such
transfer and providing for the submission of such a proposal to their
respective stockholders for a vote.
(b) The resolutions accompanied by the following information shall
be submitted to the Farm Credit Administration for review and approval:
(1) Any proposed amendments to the charters of the institutions;
(2) A copy of the transfer plan as required under Sec. 611.520 of
this part;
(3) An information statement that complies with the requirements of
Sec. 611.515;
(4) The proposed bylaws of the bank and the association, as
applicable; and
(5) Any additional information the boards of directors wish to
submit in support of the request or that the Farm Credit Administration
requests.
Sec. 611.505 Farm Credit Administration review.
(a) Upon receipt of the board of directors resolution and the
accompanying documents, the Farm Credit Administration shall review the
request and either deny or give its preliminary approval to the request.
(b) If the request is denied, written notice stating the reasons for
the denial shall be transmitted to the chief executive officer of the
bank and the association who shall promptly notify their respective
boards of directors.
(c) Upon approval of the proposed transfer of authorities by the
stockholders as provided in Sec. 611.510, the secretary of the bank and
the secretary of the association shall forward to the Farm Credit
Administration a certified record of the results of the stockholder
votes.
[[Page 56]]
(d) Each institution shall notify its stockholders not later than 30
days after the stockholder vote of the final results of the vote. If no
petition for reconsideration is filed with the Farm Credit
Administration in accordance with Sec. 611.525, the transfer shall be
effective on the date specified in the transfer plan, or at such later
date as may be required by the Farm Credit Administration to grant final
approval. Notice of final approval shall be transmitted to the
institutions involved.
(e) The effective date of a transfer may not be less than 35 days
after mailing of the notification to stockholders of the results of the
stockholder vote, or 15 days after the date of submission to the Farm
Credit Administration of all required documents for the Agency's
consideration of final approval, whichever occurs later. If a petition
for reconsideration is filed within 35 days after the date of mailing of
the notification of stockholder vote, the constituent institutions must
agree on a second effective date to be used in the event the transfer is
approved on reconsideration. The second effective date may not be less
than 60 days after stockholder notification of the results of the first
vote, or 15 days after the date of the reconsideration vote, whichever
occurs later.
[53 FR 50393, Dec. 15, 1988, as amended at 63 FR 64844, Nov. 24, 1998]
Sec. 611.510 Approval procedures.
(a) Upon receipt of approval of a resolution by the Farm Credit
Administration, the bank and the association shall call a meeting of
their voting stockholders. Each institution shall notify each
stockholder that the resolution has been filed and that a meeting will
be held in accordance with the institution's bylaws. The stockholders
meeting of the bank and the association shall be held within 60 days of
receipt of the approval from the Farm Credit Administration.
(b) The notice of meeting to consider and act upon the directors'
resolution shall be accompanied by an information statement that
complies with the requirements of Sec. 611.515.
(c) The proposal shall be approved if agreed to by:
(1) A majority of the stockholders of the bank voting in person or
by proxy, with each association entitled to cast a number of votes equal
to the number of its voting stockholders;
(2) A majority of the stockholders of the association voting, in
person or by proxy;
(3) The Farm Credit Administration.
Sec. 611.515 Information statement.
(a) The bank and association shall prepare an information statement
which will inform stockholders about the provisions of the proposed
transfer of authorities and the effect of the proposal on the bank and
the association.
(b) The information statement for each institution involved shall
contain the following materials as applicable to the institution:
(1) A statement either on the first page of the materials or on the
notice of the stockholders meeting, in capital letters and boldface
type, that:
THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF
MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE
CONTRARY SHALL BE MADE OR RELIED UPON.
(2) A description of the material provisions of the plan under Sec.
611.520 and the effect of the transaction on the institution, its
stockholders, and the territory to be served.
(3) A statement enumerating the potential advantages and
disadvantages of the proposed transfer including, but not limited to,
changes in operating efficiencies, one-stop service, branch offices,
local control, and financial condition.
(4) A summary of the provisions of the charter and bylaws following
the transfer that differ materially from the charter or bylaws currently
existing.
(5) A brief statement by the board of directors of the institution
setting forth the board's opinion on the advisability of the transfer.
(6) A presentation of the following financial data:
[[Page 57]]
(i) An audited balance sheet and income statement and notes thereto
of the bank or the association, as applicable, for the preceding 2
fiscal years.
(ii) If the transfer of authority includes any material transfer of
assets, a balance sheet and income statement of the bank and the
association showing its financial condition before the transfer of
authority and a pro forma balance sheet and income statement for the
bank or association, as applicable, showing its financial condition
after the transfer. The statements shall meet the following conditions:
(A) Such financial statements shall be presented in columnar form,
showing the financial condition as of the end of the most recent quarter
of the institution, and operating results since the end of the last
fiscal year through the end of the most recent quarter of the
institution.
(B) If the request is made within 90 days after the end of the
fiscal year, the institution's financial statements shall be as of the
most recent fiscal yearend.
(C) If the request is made within 45 days after the end of the most
recent quarter, the institution's financial statements shall be as of
the end of the quarter preceding the quarter just ended.
(D) If the request is made more than 45 days after the end of the
most recent quarter, the institution's financial statements shall be as
of the end of that quarter.
(E) The financial statements must be accompanied by appropriate
notes, describing any assets being transferred and including data
relating to high-risk assets and other property owned, allowance for
loan losses, and current year-to-date chargeoffs.
(F) The amount and nature of start-up costs estimated to be
associated with the transfer.
(7) A description of the type and dollar amount of any financial
assistance that has been provided to the bank or the association, as
applicable, during the past year; the conditions on which the financial
assistance was extended, the terms of repayment or retirement, if any;
and, the liability for repayment of this assistance by the bank or the
association if the transfer were approved.
(8) A statement as to whether the bank or the association, as
applicable, would require financial assistance during the first 3 years
of operation, the estimated type and dollar amount of the assistance,
and terms of repayment or retirement, if known.
(9) A statement indicating the possible tax consequences to
stockholders and whether any legal opinion, ruling or external auditor's
opinion has been obtained on the matter.
(10) A presentation of the association's interest rate and fee
programs, interest collection policy, capitalization plan and other
factors that would affect a borrower's cost of doing business with the
association.
(11) A description of any event subsequent to the date of the last
quarterly report, but prior to the stockholder vote, that would have a
material impact on the financial condition of the bank or the
association.
(12) A statement of any other material fact or circumstances that a
stockholder would need in order to make an informed and responsible
decision, or that would be necessary in order to provide a disclosure
that is not misleading.
(13) A form of written proxy, together with instructions on its
purpose, use and authorization by the stockholder. The proxy
instructions must ensure the secrecy of the stockholder's ballot if the
stockholder votes by proxy.
(14) A copy of the plan of transfer provided for in Sec. 611.520 of
this part.
(c) No bank or association director, officer, or employee shall make
any untrue or misleading statement of a material fact, or fail to
disclose any material fact necessary under the circumstances to make
statements made not misleading, to a stockholder of the association in
connection with a transfer under this subpart.
[53 FR 50393, Dec. 15, 1988, as amended at 58 FR 48790, Sept. 20, 1993]
Sec. 611.520 Plan of transfer.
The transfer of authorities and assets, as appropriate, shall occur
pursuant to a written plan which shall be
[[Page 58]]
agreed to by the bank and the association involved. The written plan
shall include the following:
(a) An explanation of the value of the equity ownership as of the
last monthend held by stockholders of the bank and the association and
the impact, if any, of the transfer on the value of that equity.
(b) If the plan provides for a transfer of assets, a description of
the terms and conditions upon which such transfer will occur, including,
but not limited to, any warranties or representations regarding the
value of such assets.
(c) A description of how the association would obtain loan funds
after the transfer.
(d) A statement on how the expenses connected with the transfer are
to be borne by the affected parties.
(e) A statement of any conditions which must be satisfied prior to
the effective date of the transfer, including but not limited to
approval by stockholders and approval by the Farm Credit Administration.
(f) A statement that prior to the effective date of the transfer the
board of directors of the bank or the association may rescind its
resolution and void the transfer, with the concurrence of the Farm
Credit Administration, on the basis that:
(1) The information disclosed to stockholders contained material
errors or omissions;
(2) Material misrepresentations were made to stockholders regarding
the impact of the transfer;
(3) Fraudulent activities were used to obtain the stockholders'
approval; or,
(4) An event occurred between the time of the vote and the transfer
that would have a significant adverse impact on the future viability of
the association.
(g) A designation of those persons who have authority to carry out
the plan of transfer, including the authority to execute any documents
necessary to perfect title, on behalf of the bank and the association.
Sec. 611.525 Stockholder reconsideration.
(a) Stockholders have the right to reconsider the approval of the
transfer provided that a petition signed by 15 percent of the
stockholders of either institution involved in the transfer is filed
with the Farm Credit Administration within 35 days after the date of
mailing of the notification of the final results of the stockholder vote
required under Sec. 611.505(d) and such petition is approved by the
Farm Credit Administration.
(b) A special stockholders meeting shall be called by the
institution to vote on the reconsideration following the Farm Credit
Administration's approval of a stockholder petition to reconsider the
transfer. If a majority of stockholders of any institution involved in
the transfer votes against the transfer, the transfer is not approved.
Subpart F_Bank Mergers, Consolidations and Charter Amendments
Source: 53 FR 50393, Dec. 15, 1988, unless otherwise noted.
Sec. 611.1000 General authority.
(a) An amendment to a bank charter may relate to any provision that
is properly the subject of a charter, including, but not limited to, the
name of the bank, the location of its offices, or the territory served.
(b) The Farm Credit Administration may make changes in the charter
of a bank as may be requested by that bank and approved by the Farm
Credit Administration pursuant to Sec. 611.1010 of this part.
(c) The Farm Credit Administration may, in accordance with the
provisions of the Act, make changes in the charter of a bank as may be
necessary or expedient to implement the provisions of the Act.
Sec. 611.1010 Bank charter amendment procedures.
(a) A bank may recommend a charter amendment to accomplish any of
the following actions:
(1) A merger or consolidation with any other bank or banks operating
under title I or III of the Act;
(2) A transfer of territory with any other bank operating under the
same title of the Act;
(3) A change to its name or location;
[[Page 59]]
(4) Any other change that is properly the subject of a bank charter;
(b) Upon approval of an appropriate resolution by the bank board,
the certified resolution, together with supporting documentation, shall
be submitted to the Farm Credit Administration for preliminary or final
approval, as the case may be.
(c) The Farm Credit Administration shall review the material
submitted and either approve or disapprove the request. The Farm Credit
Administration may require submission of any supplemental materials it
deems appropriate. If the request is for merger, consolidation, or
transfer of territory, the approval of Farm Credit Administration will
be preliminary only, with final approval subject to a vote of the bank's
stockholders.
(d) Following receipt of the Farm Credit Administration's written
preliminary approval, the proposal shall be submitted for approval to
the voting stockholders of the bank. A proposal shall be approved if
agreed to by a majority of the stockholders of each bank voting, in
person or by proxy, at a duly authorized stockholder meeting with each
association entitled to cast a number of votes equal to the number of
the association's voting shareholders.
(e) Upon approval by the stockholders of the bank, the request for
final approval and issuance of the appropriate charter or amendments to
charter for the banks involved shall be submitted to the Farm Credit
Administration.
Sec. 611.1020 Requirements for mergers or consolidations of banks.
(a) As authorized under sections 7.0 and 7.12 of the Act, a bank may
merge or consolidate with one or more banks operating under the same or
different titles of the Act.
(b) Where two or more banks plan to merge or consolidate, the banks
shall jointly submit to the Farm Credit Administration the documents
itemized in Sec. Sec. 611.1122(a)(1) through (4), (6), (7),
611.1122(e), and 611.1123. In interpreting those sections, the word
``bank'' shall be read for the word ``association.''
(c) No bank director, officer, or employee shall make any untrue or
misleading statement of a material fact, or fail to disclose any
material fact necessary under the circumstances to make statements made
not misleading, to any stockholder of the bank in connection with a bank
merger or consolidation.
(d) Upon approval of a proposed bank merger or consolidation by the
stockholders of each constituent bank, the following documents shall be
submitted from the constituent banks to the Farm Credit Administration
for final approval and issuance of the appropriate charters or
amendments to charter:
(1) A certified copy of the stockholders' resolution, on which the
stockholders cast their votes, from each constituent bank;
(2) A certification of the stockholder vote from the corporate
secretary of each bank or from an independent third party;
(3) An Agreement of Merger or Consolidation duly executed by those
authorized to sign on behalf of each constituent bank.
Sec. 611.1030 Board of directors of an agricultural credit bank.
Each agricultural credit bank formed by the consolidation of a Farm
Credit Bank and a bank for cooperatives shall elect a board of directors
of such number, for such term, in such manner, and with such
qualifications, as may be required in its bylaws, except that at least
one member shall be elected by the other directors, which member shall
not be a director, officer, employee, or stockholder of a System
institution. In electing such directors each association shall be
entitled to cast a number of votes equal to the number of its voting
stockholders.
[53 FR 50393, Dec. 15, 1988, as amended at 61 FR 67185, Dec. 20, 1996]
Sec. 611.1040 Creation of new associations.
Any application for the issuance of a charter to a new production
credit association or Federal land bank association shall meet the
requirements of sections 2.0 or 2.10, respectively, of the Act. Any
application for the issuance of a charter for an agricultural credit
association shall meet the requirements of section 2.0 of the Act.
[[Page 60]]
Subpart G_Mergers, Consolidations, and Charter Amendments of
Associations
Sec. 611.1120 General authority.
(a) An amendment to an association charter may relate to any
provision that is properly the subject of a charter, including, but not
limited to, the name of the association, the location of its offices, or
the territory served.
(b) The Farm Credit Administration may make changes in the charter
of an association as may be requested by that association and approved
by the Farm Credit Administration pursuant to Sec. 611.1121 of this
part.
(c) The Farm Credit Administration may, by order of the Chairman and
on its own initiative, make changes in the charter of a Federal land
bank association or a production credit association where the Chairman
determines that the change is necessary for the accomplishment of the
purposes of the Act.
[50 FR 20400, May 16, 1985, as amended at 51 FR 41945, Nov. 20, 1986]
Sec. 611.1121 Charter amendment procedures.
This section shall apply to any request by an association to amend
its charter.
(a) An association which proposes to amend its charter shall submit
a request to its supervising bank containing the following information:
(1) A statement of the provision(s) of the charter that the
association proposes to amend and the proposed amendment(s);
(2) A statement of the reasons for the proposed amendment(s), the
impact of the amendment(s) on the association and its stockholders, and
the requested effective date of the amendment(s);
(3) A certified copy of the resolution of the board of directors of
the association approving the amendment(s);
(4) Any additional information or documents that the association
wishes to submit in support of the request or that may be requested by
the supervising bank.
(b) Upon receipt of a proposed amendment from an association, the
district bank shall review the materials submitted and provide the
association with its analysis of the proposal within a reasonable period
of time. Concurrently, the bank shall communicate its recommendation on
the proposal to the Farm Credit Administration, including the reasons
for the recommendation, and any analysis the bank believes appropriate.
Following review by the bank, the association shall transmit the
proposed amendment with attachments to the Farm Credit Administration.
(c) Upon receipt of an association's request for a charter
amendment, the Farm Credit Administration shall review the materials
submitted and either approve or disapprove the request. The Farm Credit
Administration may require submission of any supplemental materials it
deems appropriate.
(d) The Farm Credit Administration shall notify the association of
its approval or disapproval of the amendment request, and provide a copy
of such communication to the bank. A notification of approval shall be
accompanied by a copy of the charter, as amended.
[50 FR 20400, May 16, 1985, as amended at 51 FR 32441, Sept. 12, 1986]
Sec. 611.1122 Requirements for mergers or consolidations.
This section shall apply to any request for approval of a proposed
merger or consolidation of associations. A merger involves the
combination of one or more associations into a continuing constituent
association, which retains its charter and bylaws (except as amended to
effect the merger proposal). A consolidation involves the combination of
two or more associations into a newly organized association having a new
charter and bylaws.
(a) Where two or more associations plan to merge or consolidate, or
where the district board has adopted a reorganization plan for the
associations in the district, the associations involved shall jointly
submit a request to the district bank containing the following:
(1) In the case of a merger, a copy of the charter of the continuing
association reflecting any proposed amendments. In the case of
consolidation, a copy of the proposed charter of the new association;
[[Page 61]]
(2) A statement of the reasons for the proposed merger or
consolidation, the impact of the proposed transaction on the
associations and their stockholders, and the planned effective date of
the merger or consolidation;
(3)(i) A certified copy of the resolution of the board of directors
of each association recommending approval of the merger or
consolidation; or
(ii) In the case of a district reorganization plan, a certified copy
of the resolution of the board of directors of each association
recommending either approval or disapproval of the proposal.
(4) A copy of the agreement of merger or consolidation;
(5) Two signed copies of the continuing or proposed Articles of
Association;
(6) All of the information specified in paragraph (e) of this
section; and
(7) Any additional information or documents each association wishes
to submit in support of the request or that the supervising bank or the
Farm Credit Administration requests.
(b) Upon receipt of a request for approval of an association merger
or consolidation, the district bank shall review the materials submitted
to determine whether they comply with the requirements of these
regulations and shall communicate with the associations concerning any
deficiency. When the bank approves the request to merge or consolidate
it shall notify the associations and the Farm Credit Administration of
its approval together with the reasons for its approval and any
supporting analysis the bank deems appropriate. The associations shall
jointly submit the proposal together with required documentation to the
Farm Credit Administration for preliminary approval.
(c) Upon receipt of an association merger or consolidation request,
the Farm Credit Administration shall review the request and either deny
or give its preliminary approval to the request. When a request is
denied, written notice stating the reasons for the denial shall be
transmitted to the associations and a copy provided to the bank. When a
request is preliminarily approved, written notice of the preliminary
approval shall be given to the associations and a copy provided to the
bank. Preliminary approval by the Farm Credit Administration shall not
constitute approval of the merger or consolidation. Approval of a merger
or consolidation shall be only pursuant to paragraph (g) of this
section.
(d) Upon receipt of preliminary approval by the Farm Credit
Administration of a merger or consolidation request, each constituent
association shall call a meeting of its voting stockholders. The meeting
shall be called on written notice to each stockholder entitled to vote
on the transaction, and held in accordance with the terms of each
association's bylaws. The affirmative vote of a majority of the voting
stockholders of each association present and voting or voting by written
proxy at a meeting at which a quorum is present shall be required for
stockholder approval of a merger or consolidation proposal.
(e) Notice of the meeting to consider and act upon a proposed merger
or consolidation of associations shall be accompanied by the following
information covering each constituent association.
(1) A statement either on the first page of the materials or on the
notice of the stockholders' meeting, in capital letters and bold face
type, that:
THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF
MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE
CONTRARY SHALL BE MADE OR RELIED UPON.
(2) A description of the material provisions of the agreement of
merger or consolidation and the effect of the proposed merger or
consolidation on the associations, their stockholders, the new or
continuing board of directors, and the territory to be served. In
addition, a copy of the agreement must be furnished with the notice to
stockholders.
(3) A summary of the provisions of the charter and bylaws of the
continuing or new association that differ materially from the existing
charter or
[[Page 62]]
bylaw provisions of the constituent associations.
(4) A brief statement by the boards of directors of the constituent
associations setting forth the basis for the boards' recommendation on
the merger or consolidation.
(5) A description of any agreement or arrangement between a
constituent association and any of its officers relating to employment
or termination of employment and arising from the merger or
consolidation.
(6) A presentation of the following financial data:
(i) A balance sheet and income statement for each constituent
association for each of the 2 preceding fiscal years.
(ii) A balance sheet for each constituent association as of a date
within 90 days of the date the request for preliminary approval is
forwarded to the Farm Credit Administration presented on a comparative
basis with the corresponding period of the prior fiscal year.
(iii) An income statement for the interim period between the end of
the last fiscal year and the date of the required balance sheet
presented on a comparative basis with the corresponding period of the
preceding fiscal year. The balance sheet and income statement format
shall be that contained in the association's annual report to
stockholders; shall contain any significant changes in accounting
policies that differ from those in the latest association annual report
to stockholders; and shall contain appropriate footnote disclosures,
including data relating to high-risk assets and other property owned,
and allowance for loan losses, including net chargeoffs as required in
paragraph (e)(10) of this section.
(7) The financial statements (balance sheet and income statement)
shall be in sufficient detail to show separately all significant
categories of interest-earning assets and interest-bearing liabilities
and the income or expense accrued thereon.
(8) Attached to the financial statements for each constituent
association, either:
(i) A statement signed by the chief executive officer and each
member of the board of directors of the association that the various
financial statements are unaudited, but have been prepared in all
material respects in accordance with generally accepted accounting
principles (except as otherwise disclosed therein) and are, to the best
of the knowledge of the board, a fair and accurate presentation of the
financial condition of the association; or
(ii) A signed opinion by an independent certified public accountant
that the various financial statements have been examined in accordance
with generally accepted auditing standards and, accordingly, included
such tests of the accounting records and such other auditing procedures
as were considered necessary in the circumstances, and, as of the date
of the statements, present fairly the financial position of the
association in conformity with generally accepted accounting principles
applied on a consistent basis, except as otherwise noted thereon.
(9) A presentation for each constituent association regarding its
policy on accounting for loan performance, together with the number and
dollar amount of loans in all performance categories, including those
categorized as high-risk assets.
(10) Information of each constituent association concerning the
amount of loans charged off in each of the 2 fiscal years preceding the
date of the balance sheet, the current year-to-date net chargeoff
amount, and the balance in the allowance for loan losses account and a
statement regarding whether, in the opinion of management, the allowance
for loan losses is adequate to absorb the risk currently existing in the
loan portfolio. This information may be appropriately included in the
footnotes to the financial statements.
(11) A management discussion and analysis of the financial condition
and results of operation for the past 2 fiscal years for each
constituent institution. This requirement can be satisfied by including
the materials contained in the management discussion and analysis of
each institution's most recent annual report.
(12) A discussion of any material changes in financial condition of
each constituent institution from the end of the last fiscal year to the
date of the interim balance sheet provided.
[[Page 63]]
(13) A discussion of any material changes in the results of
operations of each constituent institution with respect to the most
recent fiscal-year-to-date period for which an income statement is
provided.
(14) A discussion of any change in the tax status of the new
institution from those of the constituent institutions as a result of
merger or consolidation. A statement on any adverse tax consequences to
the stockholders of the institution as a result of the change in tax
status.
(15) A statement on the proposed institution's relationship with an
independent public accountant, including any change that may occur as a
result of the merger or consolidation.
(16) A pro forma balance sheet of the continuing or consolidated
association presented as if the merger or consolidation had occurred as
of the date on the balance sheets required in paragraph (e)(6) of this
section, as recommended to the stockholders. A pro forma summary of
earnings for the continuing or consolidated association presented as if
the merger or consolidation had been effective at the beginning of the
interim period between the end of the last fiscal year and the date of
the balance sheets.
(17) A description of the type and dollar amount of any financial
assistance that has been provided during the past year or will be
provided by the supervising bank or other party to assist the
constituent or the continuing or new association(s), the conditions on
which financial assistance has been or will be extended, the terms of
repayment or retirement, if any, and the impact of the assistance on the
subject association(s) or the stockholders.
(18) A presentation for each constituent association of interest
rate comparisons for the last 2 fiscal years preceding the date of the
balance sheet, together with a statement of the continuing or new
association's proposed interest rate and fee programs, interest
collection policies, capitalization rates, dividends or patronage
refunds, and other factors that would affect a borrower's cost of doing
business with the continuing or new association. Where agreement has not
been reached on such matters, current related information shall be
presented for each constituent association.
(19) A description for each constituent association of any event
subsequent to the date of the financial statements, but prior to the
merger or consolidation vote, that would have a material impact on the
financial condition of the constituent or continuing or new
association(s).
(20) A statement of any other material fact or circumstance that a
stockholder would need in order to make an informed decision on the
merger or consolidation proposal, or that is necessary to make the
required disclosures not misleading.
(21) Where proxies are to be solicited, a form of written proxy,
together with instructions on the purpose and authority for its use, and
the proper method for signature by the stockholder.
(f) No bank or association, or director, officer, or employee
thereof, shall make any untrue or misleading statement of a material
fact, or fail to disclose any material fact necessary under the
circumstances to make statements made not misleading, to a stockholder
of any association in connection with an association merger or
consolidation.
(g) Upon approval of a proposed merger or consolidation by the
stockholders of the constituent associations, a certified copy of the
stockholders' resolution shall be forwarded to the Farm Credit
Administration. Each constituent association shall notify its
stockholders not later than 30 days after the stockholder vote of the
final results of the vote. If no petition is filed with the Farm Credit
Administration to reconsider the vote, upon final approval by the FCA,
the merger or consolidation shall be effective on the date specified in
the merger agreement or at such later date as may be required by the
Farm Credit Administration to grant final approval. Notice of final
approval shall be transmitted to the associations and a copy provided to
the affiliated bank.
(h) No director, officer, or employee of a bank or an association
shall make an oral or written representation to any person that a
preliminary or final
[[Page 64]]
approval by the Farm Credit Administration of an association merger or
consolidation constitutes, directly or indirectly, either a
recommendation on the merits of the transaction or an assurance
concerning the adequacy or accuracy of any information provided to any
association's stockholders in connection therewith.
(i) The notice and accompanying information required under paragraph
(e) of this section shall not be sent to stockholders until preliminary
approval of the merger or consolidation has been given by the Farm
Credit Administration.
(j) Where a proposed merger or consolidation will involve more than
three associations, the Farm Credit Administration may require the
supplementation, or allow the condensation or omission of any
information required under paragraph (e) of this section in furtherance
of meaningful disclosure to stockholders. Any waiver sought under this
paragraph shall be obtained before preparation of the financial
statements and accompanying schedules required under paragraph (e) of
this section.
(k) The effective date of a merger or consolidation may not be less
than 35 days after the date of mailing of the notification to
stockholders of the results of the stockholder vote, or 15 days after
the date of submission to the Farm Credit Administration of all required
documents for the Agency's consideration of final approval, whichever
occurs later. If a petition for reconsideration is filed within 35 days
after mailing of the notification to stockholders of the results of the
stockholder vote, the constituent institutions must agree on a second
effective date to be used in the event the merger or consolidation is
approved on reconsideration. The second effective date may not be less
than 60 days after stockholder notification of the results of the first
vote, or 15 days after the date of the reconsideration vote, whichever
occurs later.
[50 FR 20400, May 16, 1985; 50 FR 32165, Aug. 9, 1985, as amended at 51
FR 32441, Sept. 12, 1986; 53 FR 50396, Dec. 15, 1988; 56 FR 2674, Jan.
24, 1991; 58 FR 48790, Sept. 20, 1993; 63 FR 64844, Nov. 24, 1998]
Sec. 611.1123 Merger or consolidation agreements.
(a) Associations operating under the same title of the Act may merge
or consolidate voluntarily only pursuant to a written agreement. The
agreement shall set forth all of the terms of the transaction,
including, but not limited to, the following:
(1) The proposed effective date of the merger or consolidation.
(2) The proposed name and headquarters location of the continuing or
consolidated association.
(3) The names of the persons nominated to serve as directors until
the first regular annual meeting of the continuing or consolidated
association to be held after the effective date of the merger or
consolidation. Any director of a constituent association may be
designated in the agreement to serve as a director of the continuing or
consolidated association for a period not to exceed his or her current
term, after which he or she must stand for reelection. However, the
terms of the agreement must provide for the election of at least one
director at each annual meeting subsequent to the effective date of the
merger or consolidation. The bylaws of the continuing or consolidated
association shall reflect the provisions of the merger or consolidation
agreement regarding director terms.
(4) A statement of the formula to be used to exchange the stock of
the constituent associations for the stock of the continuing or
consolidated association. No fractional shares of stock shall be issued.
(5) A statement of any conditions which must be satisfied prior to
the effective date of the proposed transaction, including but not
limited to approval by stockholders, the supervising bank, and the Farm
Credit Administration.
(6) A statement of the representations or warranties, if any, made
or to be made by any association, or its officers, directors, or
employees that is a party to the proposed transactions.
(7) A statement that the board of directors of each constituent
association can terminate the agreement before
[[Page 65]]
the effective date upon a determination by an association, with the
concurrence of the Farm Credit Administration, that:
(i) The information disclosed to stockholders contained material
errors or omissions;
(ii) Material misrepresentations were made to stockholders regarding
the impact of the merger or consolidation;
(iii) Fraudulent activities were used to obtain stockholders'
approval; or
(iv) An event occurred between the time of the vote and the merger
that would have a significant adverse impact on the future viability of
the continuing institution.
(8) A description of the legal opinions or rulings (including those
related to tax matters), if any, that have been obtained or furnished by
any party in connection with the proposed transaction. Also, refer to
paragraph (a)(5) of this section.
(9) The capitalization plan and capital structure for the new
institution and a statement that the capitalization plan shall comply
with applicable FCA regulations.
(10) Provision for the employee benefits plan, its subsequent
continuation or adaptation by the board of directors of the proposed
institution following the merger or consolidation.
(11) A statement of the authority of those persons designated to
carry out the terms of the agreement, including the authority to waive
provisions of the agreement and to execute any documents necessary to
perfect title, on behalf of the constituent associations.
(b) As an attachment to the agreement, set forth those provisions of
the charter and bylaws of the continuing or consolidated association
which differ from the existing charter or bylaw provisions of the
constituent associations.
(c) Stockholders have the right to reconsider the approval of the
merger provided that a petition signed by 15 percent of the stockholders
eligible to vote of one or more of the constituent institutions is filed
with the Farm Credit Administration within 35 days after the date of
mailing the notification of the final results of the stockholder vote
required under Sec. 611.1122(g). The Farm Credit Administration will
review the petition to determine whether it complies with the
requirements of section 7.9 of the Act. Following a determination that
the petition complies with the applicable requirements, a special
stockholders meeting shall be called by the institution to reconsider
the vote. If a majority of the stockholders voting, in person or by
proxy, of any one of the constituent institutions that is a party to the
merger vote against the merger, the merger shall not take place.
[50 FR 20400, May 16, 1985, as amended at 51 FR 32442, Sept. 12, 1986;
53 FR 50396, Dec. 15, 1988]
Sec. 611.1124 Territorial adjustments.
This section shall apply to any request submitted to the Farm Credit
Administration to modify association charters for the purpose of
transferring territory from one association to another.
(a) Territorial adjustments, except as specified in paragraph (m) of
this section, require approval of a majority of the voting stockholders
of each association present and voting or voting by written proxy at a
duly authorized meeting at which a quorum is present.
(b) When two or more associations agree to transfer territory, each
association shall submit a proposal to the district bank containing the
following:
(1) A statement of the reasons for the proposed transfer and the
impact the transfer will have on its stockholders and holders of
participation certificates;
(2) A certified copy of the resolution of the board of directors of
each association approving the proposed territory transfer;
(3) A copy of the agreement to transfer territory that contains the
following information:
(i) A description of the territory to be transferred.
(ii) Transferor association's plan to transfer loans and the types
of loans to be transferred.
(iii) Transferor association's plan to retire and transferee
association's plan to issue equities held by holders of stock,
participation certificates, and allocated equities, if any, and a
statement by each association that the book
[[Page 66]]
value of its equities is at least equal to par.
(iv) An inventory of the assets to be sold by the transferor
association and purchased by the transferee association.
(v) An inventory of the liabilities to be assumed from the
transferor association by the transferee association.
(vi) A statement that the holders of stock and participation
certificates whose loans are subject to transfer have 60 days from the
effective date of the territory transfer to inform the transferor
association of their decision to remain with the transferor association
for normal servicing until the current loan is paid.
(vii) A statement that the transfer is conditioned upon the approval
of the stockholders of each constituent association.
(viii) The effective date of the proposed territory transfer.
(4) A copy of the stockholder disclosure statement provided for in
paragraph (f) of this section; and
(5) Any additional relevant information or documents that the
association wishes to submit in support of its request or that may be
required by the Farm Credit Administration.
(c) Upon receipt of documents supporting a proposed territory
transfer, the district bank shall review the materials submitted and
provide the associations with its analysis of the proposal within a
reasonable period of time. The bank shall concurrently advise the Farm
Credit Administration of its recommendation regarding the proposed
territory transfer. Following review by the bank, the associations shall
transmit the proposal to the Farm Credit Administration together with
all required documents.
(d) Upon receipt of an association's request to transfer territory,
the Farm Credit Administration shall review the request and either deny
or give preliminary approval to the request. When a request is denied,
written notice stating the reasons for the denial shall be transmitted
to the associations, and a copy provided to the bank. When a request is
preliminarily approved, written notice of the preliminary approval shall
be transmitted to the associations, and a copy provided to the bank.
Preliminary approval by the Farm Credit Administration shall not
constitute approval of the territory transfer. Final approval shall be
granted only in accordance with paragraph (h) of this section.
(e) Upon receipt of preliminary approval by the Farm Credit
Administration, each constituent association shall, by written notice,
and in accordance with its bylaws, call a meeting of its voting
stockholders. The affirmative vote of a majority of the voting
stockholders of each association present and voting or voting by written
proxy at a meeting at which a quorum is present shall be required for
stockholder approval of a territory transfer.
(f) Notice of the meeting to consider and act upon a proposed
territory transfer shall be accompanied by the following information
covering each constituent association:
(1) A statement either on the first page of the materials or on the
notice of the stockholders' meeting, in capital letters and bold face
type, that:
THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF
MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE
CONTRARY SHALL BE MADE OR RELIED UPON.
(2) A copy of the Agreement to Transfer Territory and a summary of
the major provisions of the Agreement.
(3) The reason the territory transfer is proposed.
(4) A map of the association's territory as it would look after the
transfer.
(5) A summary of the differences, if any, between the transferor and
transferee associations' interest rates, interest rate policies,
collection policies, service fees, bylaws, and any other items of
interest that would impact a borrower's lending relationship with the
institution.
(6) A statement that all loans of the transferor association that
finance operations located in the transferred territory shall be
transferred to the transferee association except as otherwise provided
for in this section or in accordance with agreements between the
associations as provided for in Sec. 614.4070 of this chapter.
[[Page 67]]
(7) Where proxies are to be solicited, a form of written proxy,
together with instructions on the purpose and authority for its use, and
the proper method for signature by the stockholders.
(8) A statement that the associations' bylaws, financial statements
for the previous 3 years, and any financial information prepared by the
associations concerning the proposed transfer of territory are available
on request to the stockholders of any association involved in the
transaction.
(g) No bank or association, or director, officer, or employee
thereof, shall make any untrue or misleading statement of a material
fact, or fail to disclose any material fact necessary under the
circumstances to make statements made not misleading, to a stockholder
of any association in connection with a territory transfer.
(h) Upon approval of a proposed territory transfer by the
stockholders of the constituent associations, a certified copy of the
stockholders' resolution for each constituent association and one
executed Agreement to Transfer Territory shall be forwarded to the Farm
Credit Administration. The territory transfer shall be effective when
thereafter finally approved and on the date as specified by the Farm
Credit Administration. Notice of final approval shall be transmitted to
the associations and a copy provided to the bank.
(i) No director, officer, or employee of a bank or an association
shall make an oral or written representation to any person that a
Preliminary or final approval by the Farm Credit Administration of a
territory transfer constitutes, directly or indirectly, a recommendation
on the merits of the transaction or an assurance concerning the adequacy
or accuracy of any information provided to any association's
stockholders in connection therewith.
(j) The notice and accompanying information required under paragraph
(f) of this section shall not be sent to stockholders until preliminary
approval of the territory transfer has been granted by the Farm Credit
Administration.
(k) Where a territory transfer is proposed simultaneously with a
merger or consolidation, both transactions may be voted on by
stockholders at the same meeting. Only stockholders of a transferee or
transferor association shall vote on a territory transfer.
(l) Each borrower whose real estate or operations is located in a
territory that will be transferred shall be provided with a written
Notice of Territory Transfer immediately after the Farm Credit
Administration has given final approval of the territory transfer. The
Notice shall inform the borrower of the transfer of the borrower's loan
to the transferee association and the exchange of related equities for
equities of like kinds and amounts in the transferee association. If a
like kind of equity is not available in the transferee association,
similar equities shall be offered that will not adversely affect the
interest of the owner. The Notice shall give the borrower 60 days from
the effective date of the territory transfer to notify the transferor
association in writing if the borrower decides to stay with the
transferor association for normal servicing until the current loan is
paid. Any application by the borrower for renewal or for additional
credit shall be made to the transferee association, except as otherwise
provided for by an agreement between associations in accordance with
Sec. 614.4070 of this chapter.
(m) This section shall not apply to territory transfers initiated by
order of the Chairman of the Farm Credit Administration or to territory
transfers due to the liquidation of the transferor association.
(n) Where a proposed action involves the transfer of a portion of an
association's territory to an association operating in a different
district, such proposal must comply with the provisions of this section
and Sec. 611.1090 of this part.
[51 FR 32442, Sept. 12, 1986]
Sec. 611.1125 Treatment of associations not approving districtwide
mergers.
(a) Issuance of charters. When issuing charters or certificates of
territory for districtwide mergers or consolidations
[[Page 68]]
of associations, the Farm Credit Administration will not issue any
charters or certificates of territory that include the territory of one
or more associations whose stockholders voted to disapprove the merger
or consolidation.
(b) A district bank shall not take any of the following actions with
respect to an association that has determined to not participate in a
districtwide merger or consolidation:
(1) Discriminate in the provision of any financial service and
assistance, including, but not limited to, access to loan funds and
rates of interest on loans and discounts offered by the district bank to
associations and their member/borrowers;
(2) Discriminate in the provision of any related services that are
offered by the district bank to associations and their member/borrowers;
(3) Discriminate in the provision of any professional assistance
that may be normally provided by the district bank to associations; or
(4) Discriminate in the provision of any technical assistance that
may be normally provided by the district bank to associations.
(c) This regulation does not prohibit a district bank from taking
any action with respect to an association, including, but not limited
to, charging different rates of interest or different prices for
services, or declining to provide financial assistance; provided that
any such action is fully documented and based on an objective analysis
of applicable criteria that are uniformly and consistently applied by
the district bank to all associations in the district.
[51 FR 32443, Sept. 12, 1986, as amended at 60 FR 34099, June 30, 1995]
Subpart H_Rules for Inter-System Fund Transfers
Sec. 611.1130 Inter-System transfer of funds and equities.
(a) Section 5.17(a)(6) of the Act authorizes the FCA to regulate the
borrowing, repayment, and transfer of funds and equities between
institutions of the System, including banks, associations, and service
organizations organized under the Act. This section sets forth the
circumstances and procedures under which the FCA may direct such a
transfer of funds and equities based on its determination with respect
to the financial condition of one or more institutions of the System.
For purposes of this section, the term ``bond'' refers to long-term
notes, bonds, debentures, or other similar obligations, or short-term
discount notes issued by one or more banks pursuant to section 4.2 of
the Act.
(b) The FCA may direct a transfer of funds or equities by one or
more banks of the System to another bank of the System where it
determines that:
(1) The receiving institution will not be able to make payments of
principal or interest on bonds for which it is primarily liable within
the meaning of section 4.4(a) of the Act; or
(2) The common or preferred stock, participation certificates, or
allocated equities of the receiving institution have a book value less
than their par or stated values; or
(3) The total bonds outstanding for which the receiving institution
is primarily liable exceed 20 times the combined capital and surplus
accounts of the bank; or
(4) Based on application to it of one or more of the following
ratios, the receiving institution is not financially viable in that it
will not be able to continue to extend new or additional credit or
financial assistance to its eligible borrowers:
(i) The ratio of stock to earned net worth (including legal reserve,
unallocated and reserved surplus, undistributed earnings, and allowance
for losses) exceeds 2 to 1;
(ii) The ratio of the outstanding bonds to capital and surplus
exceeds 15 to 1;
(iii) Nonearning assets (any noninterest-bearing assets, including
but not limited to cash, noninterest-earning loans, net fixed assets,
other property owned, accrued interest receivable, and accounts
receivable) exceed 15 percent of total assets;
(iv) Lendable net worth (interest-earning assets less interest-
bearing liabilities) is zero or less.
(c) The FCA may direct a transfer of funds or equities between two
or more Federal land bank associations or two or more production credit
associations
[[Page 69]]
in district where it determines that such transfer:
(1) Is necessary to provide financial support to the district bank
in which those associations are stockholders based on application of the
criteria to the bank as set forth in paragraph (b) of this section; or
(2) Is necessary to provide financial support to one or more other
like associations in the district based on application of the criteria
set forth in paragraph (b)(2) or (b)(4) of this section to the
associations, provided that in applying paragraph (b)(4)(ii) of this
section the ratio of outstanding indebtedness to capital and surplus of
the receiving association(s) shall not exceed 9 to 1; or
(3) Is an integral part of a plan that has been adopted by other
institutions of the System, and approved by the FCA, under which those
institutions will extend financial assistance to the district bank in
which those associations are stockholders.
(d) A direction by the FCA for a transfer of funds or equities
pursuant to this section shall be signed by the Chairman and shall
establish the amount, timing, duration, repayment, and other terms of
assessments necessary to accomplish such transfer, taking into
consideration the financial condition of each institution to be
assessed. Where the FCA directs a transfer of funds or equities between
associations under paragraph (c) (1) or (2) of this section, it may
authorize the district bank in which such associations are stockholders
to accomplish the necessary assessments through debits and credits to
the accounts of the bank.
[50 FR 36986, Sept. 11, 1985. Redesignated at 51 FR 8666, Mar. 13, 1986,
as amended at 51 FR 41945, Nov. 20, 1986; 58 FR 48790, Sept. 20, 1993;
59 FR 21643, Apr. 26, 1994]
Subpart I_Service Organizations
Source: 66 FR 16843, Mar. 28, 2001, unless otherwise noted.
Sec. 611.1135 Incorporation of service corporations.
(a) What is the process for chartering a service corporation? A Farm
Credit bank or association (you or your) may organize a corporation
acting alone or with other Farm Credit banks or associations to perform,
for you or on your behalf, any function or service that you are
authorized to perform under the Act and Farm Credit Administration (we,
us, or our) regulations, with two exceptions. Those exceptions are that
your corporation may not extend credit or provide insurance services. To
organize a service corporation, you must submit an application to us
following the applicable requirements of paragraph (c) of this section.
If what you propose in your application meets the requirements of the
Act, our regulations, and any other conditions we may impose, we may
issue a charter for your service corporation making it a federally
chartered instrumentality of the United States. Your service corporation
will be subject to examination, supervision, and regulation by us.
(b) Who may own equities in your service corporation? All Farm
Credit banks and associations are eligible to become stockholders in
your service corporation. Your service corporation may also issue non-
voting and voting stock to persons that are not Farm Credit
institutions, provided that at least 80 percent of the voting stock is
at all times held by Farm Credit institutions. For the purposes of this
subpart, we define persons as individuals or legal entities organized
under the laws of the United States or any state or territory thereof.
(c) What must be included in your application to form a service
corporation? Your application for a corporate charter must include:
(1) The certified resolution of the board of each organizing bank or
association authorizing the incorporation;
(2) A request signed by the president(s) of the organizing bank(s)
or association(s) to us to issue a charter, supported by a detailed
statement demonstrating the need and the justification for the proposed
entity; and
(3) The proposed articles of incorporation addressing, at a minimum,
the following:
(i) The name of your corporation;
(ii) The city and state where the principal offices of your
corporation are to be located;
[[Page 70]]
(iii) The general purposes for the formation of your corporation;
(iv) The general powers of your corporation;
(v) The procedures for a Farm Credit bank or association or persons
that are not Farm Credit institutions to become a stockholder;
(vi) The procedures to adopt and amend your corporation's bylaws;
(vii) The title, par value, voting and other rights, and authorized
amount of each class of stock that your corporation will issue and the
procedures to retire each class;
(viii) The notice and quorum requirement for a meeting of
shareholders, and the vote required for shareholder action on various
matters;
(ix) The procedures and shareholder voting requirements for the
merger, voluntary liquidation, or dissolution of your corporation or the
distribution of corporate assets;
(x) The standards and procedures for the application and
distribution of your corporation's earnings; and
(xi) The length of time your corporation will exist.
(4) The proposed bylaws, which must include the provisions required
by Sec. 615.5220(b) of this chapter;
(5) A statement of the proposed amounts and sources of
capitalization and operating funds;
(6) Any agreements between the organizing banks and associations
relating to the organization or the operation of the corporation; and
(7) Any other supporting documentation that we may request.
(d) What will we do with your application? If we approve your
completed application, we will issue a charter for your service
corporation as a corporate body and a federally chartered
instrumentality. We may condition the issuance of a charter, including
imposing minimum capital requirements, as we deem appropriate. For good
cause, we may deny your application.
(e) Once your service corporation is formed, how are its articles of
incorporation amended? Your service corporation's articles of
incorporation may be amended in either of two ways:
(1) The board of directors of the corporation may request that we
amend the articles of incorporation by sending us a certified resolution
of the board of directors of the service corporation that states the:
(i) Section(s) to be amended;
(ii) Reason(s) for the amendment;
(iii) Language of the articles of incorporation provision, as
amended; and
(iv) Requisite shareholder approval has been obtained. The request
will be subject to our approval as stated in paragraphs (a) and (c) of
this section.
(2) We may at any time make any changes in the articles of
incorporation of your service corporation that are necessary and
appropriate for the accomplishment of the purposes of the Act.
(f) When your service corporation issues equities, what are the
disclosure requirements? Your service corporation must provide the
disclosures described in Sec. 615.5250(c) and (d) of this chapter.
Sec. 611.1136 Regulation and examination of service organizations.
(a) What regulations apply to a service organization? Because a
service organization is formed by banks and associations, it is subject
to applicable Farm Credit Administration (we, our) regulations.
(b) Who examines a service organization? We examine service
organizations.
(c) What types of service organizations are subject to our
regulations and examination? All incorporated service corporations and
unincorporated service organizations formed by banks and associations
are subject to our regulations and examination.
Sec. 611.1137 Title VIII service corporations.
(a) What is a title VIII service corporation? A title VIII service
corporation is a service corporation organized for the purpose of
exercising the authorities granted under title VIII of the Act to act as
an agricultural mortgage marketing facility.
(b) How do I form a title VIII service corporation? A title VIII
service corporation is formed and subject to the same requirements as a
service corporation formed under Sec. 611.1135, with one exception. The
Federal Agricultural Mortgage Corporation or its affiliates may not form
or own stock in a title VIII service corporation.
[[Page 71]]
Subpart J-O [Reserved]
Subpart P_Termination of System Institution Status
Source: 67 FR 17909, Apr. 12, 2002, unless otherwise noted.
Sec. 611.1200 Applicability of this subpart.
The regulations in this subpart apply to each bank and association
that desires to terminate its System institution status and become
chartered as a bank, savings association, or other financial
institution.
Sec. 611.1205 Definitions that apply in this subpart.
Assets means all assets determined in conformity with GAAP, except
as otherwise required in this subpart.
GAAP means ``generally accepted accounting principles'' as that term
is defined in Sec. 621.2(c) of this chapter.
OFI means an ``other financing institution'' that has a funding and
discount agreement with a Farm Credit bank under section 1.7(b)(1) of
the Act.
Successor institution means the bank, savings association, or other
financial institution that the terminating bank or association will
become when we revoke its Farm Credit charter.
Sec. 611.1210 Commencement resolution and advance notice.
(a) Adoption of commencement resolution. Your board of directors
must begin the termination process by adopting a commencement resolution
stating your intention to terminate Farm Credit status under section
7.10 of the Act.
(b) Advance notice. Within 5 days after adopting the commencement
resolution, you must:
(1) Send a certified copy of the commencement resolution to us and
the Farm Credit System Insurance Corporation (FCSIC). If your
institution is an association, also send a copy to your affiliated bank.
If your institution is a bank, also send a copy to your affiliated
associations, the other Farm Credit banks, the Federal Farm Credit Banks
Funding Corporation (Funding Corporation), and the Farm Credit System
Financial Assistance Corporation (FAC);
(2) Mail an announcement to all equity holders stating you are
taking steps to terminate Farm Credit status and describing the
following:
(i) The process of termination;
(ii) The expected effect of termination on equity holders, including
the effect on borrower rights and the consequences of any stock
retirements before termination;
(iii) The type of charter the successor institution will have; and
(iv) Any bylaw creating a special class of borrower stock and
participation certificates under paragraph (f) of this section.
(c) Bank negotiations on joint and several liability. If your
institution is a terminating bank, within 10 days of adopting the
commencement resolution, your bank and the other Farm Credit banks must
begin negotiations to provide for your satisfaction of liabilities
(other than your primary liability) under section 4.4 of the Act. The
Funding Corporation may, at its option, be a party to the negotiations
to the extent necessary to fulfill its duties with respect to financing
and disclosure. The agreement must comply with the requirements in Sec.
611.1270(c).
(d) Disclosure to customers after commencement resolution. Between
the date of the commencement resolution and the termination date, you
must give the following information to your customers:
(1) For each applicant who is not a current stockholder, describe at
the time of loan application:
(i) The effect of the proposed termination on the borrower's loan;
and
(ii) Whether the borrower will continue to have any of the borrower
rights provided under the Act and regulations.
(2) For any equity holders who ask to have their equities retired,
explain that the retirement would extinguish the holder's right to
exchange those equities for an interest in the successor institution. In
addition, inform holders of equities entitled to your residual assets in
liquidation that retirement before termination would extinguish their
right to dissent from the termination and have their equities retired.
[[Page 72]]
(e) Terminating bank's right to continue issuing debt. Through the
termination date, a terminating bank may continue to participate in the
issuance of consolidated and Systemwide obligations to the same extent
it would be able to participate if it were not terminating.
(f) Special class of stock. Notwithstanding any requirements to the
contrary in Sec. 615.5230(b) of this chapter, you may adopt bylaws
providing for the issuance of a special class of stock and participation
certificates between the date of adoption of a commencement resolution
and the termination date. Your stockholders must approve the special
class before you adopt the commencement resolution. The equities must
comply with section 4.3A of the Act and be identical in all respects to
existing classes of equities that are entitled to the residual assets of
the institution in a liquidation, except for the value a holder will
receive in a termination. In a termination, the holder of the special
class of stock receives value equal to the lower of either par (or face)
value, or the value calculated under Sec. 611.1280(c) and (d). A holder
must have the same right to vote (if the equity is held on the voting
record date) and to dissent as holders of similar equities issued before
the commencement resolution. If the termination does not occur, the
special classes of stock and participation certificates must
automatically convert into shares of the otherwise identical equities.
Sec. 611.1215 Prohibited acts.
(a) Statements about termination. Neither the institution nor any
director, officer, employee, or agent may make any untrue or misleading
statement of a material fact, or fail to disclose any material fact,
about the termination to a current or prospective equity holder.
(b) Representations regarding FCA approval. Neither the institution
nor any director, officer, employee, or agent may make an oral or
written representation to anyone that a preliminary or final approval of
the termination by us is, directly or indirectly, either a
recommendation on the merits of the proposal or an assurance that the
information you give to your equity holders is adequate or accurate.
Sec. 611.1220 Filing of termination application.
(a) Adoption of termination resolution. Your board must adopt a
termination resolution authorizing the application for termination and
for a new charter.
(b) Contents of termination application. Send us an original and
five copies of the termination application for review and preliminary
approval. If you send us the application in electronic form, you must
send us at least one hard copy application with original signatures. The
application must contain:
(1) A certified copy of the termination resolution;
(2) A copy of the plan of termination required under Sec. 611.1222;
(3) An information statement that complies with Sec. 611.1223;
(4) All other information that you give to current or prospective
equity holders in connection with the termination; and
(5) Any additional information that either we request or your board
of directors wishes to submit in support of the application.
(c) Requirement to update application. You must immediately send us
any material changes to information in the plan of termination,
including financial information, that occur between the date you file
the application and the termination date. In addition, send us copies of
any additional written information on the termination that you give to
current or prospective equity holders before termination.
Sec. 611.1221 Filing of termination application--timing.
If we receive the termination application required in Sec. 611.1220
less than 30 days after receiving the advance notice, we may in our
discretion disapprove the application.
Sec. 611.1222 Plan of termination--contents.
The plan of termination must include:
(a) Copies of all contracts, agreements, and other documents on the
proposed termination and organization of the successor institution.
[[Page 73]]
(b) A statement of how you will transfer assets to, and have your
liabilities assumed by, the successor institution.
(c) Your plan to retire outstanding equities or convert them to
equities of the successor institution.
(d) A copy of the charter application for the successor institution,
with any exhibits or other supporting information.
(e) A statement, if applicable, whether the successor institution
will continue to borrow from a Farm Credit bank and how such a
relationship will affect your provision for payment of debts. The plan
of termination must include evidence of any agreement and plan for
satisfaction of outstanding debts (including amounts you owe to the FAC
because of the termination).
Sec. 611.1223 Information statement--contents.
(a) Plain language requirements. (1) Present the contents of the
information statement in a clear, concise, and understandable manner.
(2) Use short, explanatory sentences, bullet lists or charts where
helpful, and descriptive headings and subheadings.
(3) Minimize the use of glossaries or defined terms.
(4) Write in the active voice when possible.
(5) Avoid legal and highly technical business terminology.
(b) Disclaimer. Place the following statement in boldface type in
the material sent to equity holders, either on the notice of meeting or
the first page of the information statement:
The Farm Credit Administration has not determined if this information is
accurate or complete. You should not rely on any statement to the
contrary.
(c) Summary. The first part of the information statement must be a
summary that concisely explains:
(1) Which stockholders have a right to vote on termination;
(2) The material changes the termination will cause to the rights of
stockholders, borrowers, and other equity holders;
(3) The effect of those changes;
(4) The potential benefits and disadvantages of the termination;
(5) The right of certain stockholders to dissent and receive payment
for their existing equities; and
(6) The proposed termination date.
(d) Remaining requirements. The rest of the information statement
must contain the following:
(1) Plan of termination. Describe the plan of termination.
(2) Benefits and disadvantages. Provide the following information:
(i) An enumerated statement of the anticipated benefits and
potential disadvantages of the termination;
(ii) An explanation of the preliminary exit fee estimate, with any
adjustments we require, and estimated expenses of termination and
organization of the successor institution; and
(iii) An explanation of the board's basis for recommending the
termination.
(3) Initial board of directors. List the initial board of directors
and senior officers for the successor institution, with a brief
description of the business experience of each person, including
principal occupation and employment during the past 5 years.
(4) Bylaws and charter. Summarize the provisions of the bylaws and
charter of the successor institution that differ materially from your
bylaws and charter. The summary must state:
(i) Whether the successor institution will require a borrower to
hold an equity interest as a condition for having a loan; and
(ii) Whether the successor institution will require stockholders to
do business with the institution.
(5) Changes to equity. Explain any changes in the nature of equity
investments in the successor institution, such as changes in dividends,
patronage, voting rights, preferences, retirement of equities, and
liquidation priority. If equities protected under section 4.9A of the
Act are outstanding, the information statement must state that the Act's
protections will be extinguished on termination.
(6) Effect of termination on statutory and regulatory rights.
Explain the effect of termination on rights granted by the Act and FCA
regulations. You must explain the effect termination will have on
borrower rights granted in the Act and part 617 of this chapter.
[[Page 74]]
(7) Loan refinancing by borrowers. (i) State, as applicable, that
borrowers may seek to refinance their loans with the System institutions
that already serve, or will be permitted to serve, your territory. State
that no System institution is obligated to refinance your loans.
(ii) If we have assigned your territory to another System
institution before the information statement is mailed to equity
holders, or if another System institution is already chartered to make
the same type of loans you make in your territory, identify such
institution(s) and provide the following information:
(A) The name, address, and telephone number of the institution; and
(B) An explanation of the institution's procedures for borrowers to
apply for refinancing.
(iii) If we have not assigned the territory before you mail the
information statement, give the name, address, and telephone number of
the System institution specified by us and state that borrowers may
contact the institution for information about loan refinancing.
(8) Equity exchanges. Explain the formula and procedure to exchange
equity in your institution for equity in the successor institution.
(9) Employment, retirement, and severance agreements. Describe any
employment agreement or arrangement between the successor institution
and any of your senior officers (as defined in Sec. 620.1 of this
chapter) or directors. Describe any severance and retirement plans that
cover your employees or directors and state the costs you expect to
incur under the plans in connection with the termination.
(10) Exit fee calculation. Explain how the exit fee will be
calculated.
(11) New charter. Describe the nature and type of financial
institution the successor institution will be and any conditions of
approval of the new chartering authority or regulator.
(12) Differences in successor institution's programs and policies.
Summarize any differences between you and the successor institution on:
(i) Interest rates and fees;
(ii) Collection policies;
(iii) Services provided; and
(iv) Any other item that would affect a borrower's lending
relationship with the successor institution, including whether a
stockholder's ability to borrow from the institution will be restricted.
(13) Capitalization. Discuss expected capital requirements of the
successor institution, and the amount and method of capitalization.
(14) Sources of funding. Explain the sources and manner of funding
for the successor institution's operations.
(15) Contingent liabilities. Describe how the successor institution
will address any contingent liability it will assume from you.
(16) Tax status. Summarize the differences in tax status between
your institution and the successor institution, and explain how the
differences will affect stockholders.
(17) Regulatory environment. Describe briefly how the regulatory
environment for the successor institution will differ from your current
regulatory environment, and any effect on the cost of doing business or
the value of stockholders' equity.
(18) Dissenters' rights. Explain which equity holders are entitled
to dissenters' rights and what those rights are. The explanation must
include the estimated liquidation value of the stock, procedures for
exercising dissenters' rights, and a statement of when the rights may be
exercised.
(19) Financial information. (i) Present the following financial
data:
(A) A balance sheet and income statement for each of the 3 preceding
fiscal years;
(B) A balance sheet as of a date within 90 days of the date you mail
the termination application to us, presented on a comparative basis with
the corresponding period of the previous 2 fiscal years;
(C) An income statement for the interim period between the end of
the last fiscal year and the date of the balance sheet required by
paragraph (d)(19)(i)(B) of this section, presented on a comparative
basis with the corresponding period of the previous 2 fiscal years;
(D) A pro forma balance sheet of the successor institution presented
as if termination had occurred as of the
[[Page 75]]
date of the most recent balance sheet presented in the statement; and
(E) A pro forma summary of earnings for the successor institution
presented as if the termination had been effective at the beginning of
the interim period between the end of the last fiscal year and the date
of the balance sheet presented under paragraph (d)(19)(i)(D) of this
section.
(ii) The format for the balance sheet and income statement must be
the same as the format in your annual report and must contain
appropriate footnote disclosures, including data on high-risk assets,
other property owned, and allowance for losses.
(iii) The financial statements must include either:
(A) A statement signed by the chief executive officer and each board
member that the various financial statements are unaudited but have been
prepared in all material respects in conformity with GAAP (except as
otherwise disclosed) and are, to the best of each signer's knowledge, a
fair and accurate presentation of the financial condition of the
institution; or
(B) A signed opinion by an independent certified public accountant
that the various financial statements have been examined in conformity
with generally accepted auditing standards and included such tests of
the accounting records and other such auditing procedures as were
considered necessary in the circumstances, and, as of the date of the
statements, present fairly the financial position of the institution in
conformity with GAAP applied on a consistent basis, except as otherwise
disclosed.
(20) Subsequent financial events. Describe any event after the date
of the financial statements, but before the date you send the
termination application to us, that would have a material impact on your
financial condition or the condition of the successor institution.
(21) Other subsequent events. Describe any event after you send the
termination application to us that could have a material impact on any
information in the termination application.
(22) Other material disclosures. Describe any other material fact or
circumstance that a stockholder would need to know to make an informed
decision on the termination, or that is necessary to make the
disclosures not misleading.
(23) Ballot and proxy. Include a ballot and proxy, with instructions
on the purpose and authority for their use, and the proper method for
the stockholder to sign the proxy.
(24) Board of directors certification. Include a certification
signed by the entire board of directors as to the truth, accuracy, and
completeness of the information contained in the information statement.
If any director refuses to sign the certification, the director must
inform us of the reasons for refusing.
[67 FR 17909, Apr. 12, 2002, as amended at 69 FR 10906, Mar. 9, 2004]
Sec. 611.1230 FCA review and approval.
(a) FCA review period. We will review a termination application and
either give preliminary approval or disapprove the application no later
than 60 days after we receive the application.
(b) Reservation of right to disapprove termination. In addition to
any other reason for disapproval, we may disapprove a termination if we
determine that the termination would have a material adverse effect on
the ability of the remaining System institutions to fulfill their
statutory purpose.
(c) Conditions of final FCA approval. We will give final approval to
your termination application only if:
(1) Your stockholders vote in favor of termination in the
termination vote and in any reconsideration vote;
(2) You give us executed copies of all contracts, agreements, and
other documents submitted under Sec. 611.1222;
(3) You have paid or made adequate provision for payment of debts,
including responsibility for any contingent liabilities, and for
retirement of equities;
(4) A Federal or State chartering authority has granted a new
charter to the successor institution;
(5) You deposit into escrow an amount equal to 110 percent of the
estimated exit fee plus 110 percent of the estimated amount you must pay
to retire equities of dissenting stockholders
[[Page 76]]
and Farm Credit institutions, as described in Sec. 611.1255(c); and
(6) You have fulfilled any other condition of termination we have
imposed.
(d) Effective date of termination. If we grant final approval, we
will revoke your charter, and the termination will be effective on the
last to occur of:
(1) Fulfillment of all conditions listed in paragraph (c) of this
section;
(2) Your proposed termination date;
(3) Ninety (90) days after we receive the notice described in Sec.
611.1240(e); and
(4) Fifteen (15) days after any reconsideration vote.
Sec. 611.1240 Voting record date and stockholder approval.
(a) Stockholder meeting. You must call the meeting by written notice
in compliance with your bylaws. The stockholder meeting to vote on the
termination must occur within 60 days of our preliminary approval (or,
if we take no action, within 60 days of the end of our approval period).
(b) Voting record date. The voting record date may not be more than
70 days before the stockholders' meeting.
(c) Information statement. You must provide all equity holders with
a notice of meeting and the information statement required by Sec.
611.1223 at least 30 days before the stockholder vote.
(d) Voting procedures. The voting procedures must comply with Sec.
611.330. You must have an independent third party count the ballots. If
a voting stockholder notifies you of the stockholder's intent to
exercise dissenters' rights, the tabulator must be able to verify to you
that the stockholder voted against the termination. Otherwise, the votes
of stockholders must remain confidential.
(e) Notice to FCA and equity holders of voting results. Within 10
days of the termination vote, you must send us a certified record of the
results of the vote. You must notify all equity holders of the results
within 30 days after the stockholder meeting. If the stockholders
approve the termination, you must give the following information to
equity holders:
(1) Stockholders who voted against termination and equity holders
who were not entitled to vote have a right to dissent as provided in
Sec. 611.1280; and
(2) Voting stockholders have a right, under Sec. 611.1245, to file
a petition with the FCA for reconsideration within 35 days after the
date you mail to them the notice of the results of the termination vote.
(f) Requirement to notify new equity holders. You must provide the
information described in paragraph (e)(1) of this section to each person
that becomes an equity holder after the termination vote and before
termination.
Sec. 611.1245 Stockholder reconsideration.
(a) Right to reconsider termination. Voting stockholders have the
right to reconsider their approval of the termination if a petition
signed by 15 percent of the stockholders is filed with us within 35 days
after you mail notices to stockholders that the termination was
approved. If we determine that the petition complies with the
requirements of section 7.9 of the Act, you must call a special
stockholders' meeting to reconsider the vote. The meeting must occur
within 60 days after the date on which you mailed to stockholders the
results of the termination vote. If a majority of the stockholders
voting, in person or by proxy, vote against the termination, the
termination may not take place.
(b) Stockholder list and expenses. You must, at your expense, timely
give stockholders who request it a list of the names and addresses of
stockholders eligible to vote in the reconsideration vote. The
petitioners must pay all other expenses for the petition. You must pay
expenses that you incur for the reconsideration vote.
Sec. 611.1250 Preliminary exit fee estimate.
(a) Preliminary exit fee estimate--terminating association. You must
provide a preliminary exit fee estimate to us when you submit the
termination application. Calculate the preliminary exit fee estimate in
the following order:
(1) Base your exit fee calculation on the average daily balances of
assets and liabilities for the 12-month period as of the quarter end
immediately before the date you send us your termination application.
[[Page 77]]
(2) Any amounts we refer to in this section are average daily
balances unless we specify that they are not. Amounts that are not
average daily balances will be referred to as ``dollar amount.''
(3) Compute the average daily balances based on financial statements
that comply with GAAP. The financial statements, as of the quarter end
immediately before the date you send us your termination application,
must be independently audited by a qualified public accountant, as
defined in Sec. 621.2(i) of this chapter. We may, in our discretion,
waive the audit requirement if an independent audit was performed as of
a date less than 6 months before you submit the termination application.
(4) Make adjustments to assets as follows:
(i) Add back expenses you have incurred related to termination.
Related expenses include, but are not limited to, legal services,
accounting services, auditing, business planning, and application fees
for the termination and reorganization.
(ii) Subtract the following:
(A) The dollar amount of your estimated payment (to your affiliated
bank) related to FAC obligations as described in Sec. 611.1260(d); and
(B) The dollar amount of your estimated taxes due to the
termination.
(iii) Adjust for the dollar amount of significant transactions you
reasonably expect to occur between the quarter end before you file your
termination application and termination. Examples of these transactions
include, but are not limited to, gains or losses on the sale of assets,
retirements of equity, loan repayments, and patronage distributions. Do
not make adjustments for future expenses related to termination, such as
severance or special retirement payments, or stock retirements to
dissenting stockholders and Farm Credit institutions.
(5) Subtract from liabilities any liability that we treat as
regulatory capital under the capital or collateral requirements in
subparts H and K of part 615 of this chapter.
(6) Make any adjustments we require under paragraph (c) of this
section.
(7) After making these adjustments to assets and liabilities,
subtract liabilities from assets. This is your preliminary total capital
for purposes of termination.
(8) Multiply assets as adjusted above by 6 percent, and subtract
this amount from preliminary total capital. This is your preliminary
exit fee estimate.
(b) Preliminary exit fee estimate--terminating bank. (1) Affiliated
associations that are terminating with you must calculate their
individual preliminary exit fee estimates as described in paragraph (a)
of this section.
(2) Base your exit fee calculation on the average daily balances of
assets and liabilities for the 12-month period as of the quarter end
immediately before the date you send us your termination application.
(3) Any amounts we refer to in this section are average daily
balances unless we specify that they are not. Amounts that are not
average daily balances will be referred to as ``dollar amount.''
(4) Compute the average daily balances based on bank-only financial
statements that comply with GAAP. The financial statements, as of the
quarter end immediately before the date you send us your termination
application, must be independently audited by a qualified public
accountant, as defined in Sec. 621.2(i) of this chapter. We may, in our
discretion, waive this requirement if an independent audit was performed
as of a date less than 6 months before you submit the termination
application.
(5) Make adjustments to assets and liabilities as follows:
(i) Add back to assets the following:
(A) Expenses you have incurred related to termination. Related
expenses include, but are not limited to, legal services, accounting
services, auditing, business planning, and application fees for the
termination and reorganization; and
(B) Any specific allowance for losses, and a pro rata portion of any
general allowance for loan losses, on direct loans to associations that
you do not expect to incur before or at termination.
[[Page 78]]
(ii) Subtract from your assets and liabilities an amount equal to
your direct loans to your affiliated associations that are not
terminating.
(iii) Subtract the following from assets:
(A) Equity investments in your institution that are held by
nonterminating associations and that you expect to transfer to another
System bank before or at termination. A nonterminating association's
investment consists of purchased equities, allocated equities, and a
share of the bank's unallocated surplus calculated in accordance with
the bank's bylaw provisions on liquidation. We may require a different
calculation method for the unallocated surplus if we determine that
using the liquidation provision would be inequitable to stockholders;
(B) The dollar amount of your estimated termination payment to the
FAC, as described in Sec. 611.1270(d); and
(C) The dollar amount of estimated taxes due to the termination.
(iv) Subtract from liabilities any liability that we treat as
regulatory capital under the capital or collateral requirements in
subparts H and K of part 615 of this chapter.
(v) Adjust for the dollar amount of significant transactions you
reasonably expect to occur between the quarter end before you file your
termination application and termination. Examples of these transactions
include, but are not limited to, retirements of equity, loan repayments,
and patronage distributions. Do not make adjustments for future expenses
related to termination, such as severance or special retirement
payments, or stock retirements to dissenting stockholders and Farm
Credit institutions.
(6) Add to assets the dollar amount of estimated termination
payments of the terminating associations related to FAC obligations.
(7) Make any adjustments we require under paragraph (c) of this
section.
(8) After the above adjustments, combine your balance sheet with the
balance sheets of your terminating associations after they have made the
adjustments required in paragraph (a) of this section. Subtract
liabilities from assets. This is your preliminary total capital estimate
for purposes of termination.
(9) Multiply the assets of the combined balance sheet after the
above adjustments by 6 percent. Subtract this amount from the
preliminary total capital estimate of the combined balance sheet. The
remainder is the preliminary exit fee estimate of the bank and
terminating affiliated associations.
(10) Your preliminary exit fee estimate is the amount by which the
preliminary exit fee estimate for the combined entity exceeds the total
of the individual preliminary exit fee estimates of your affiliated
terminating associations.
(c) Three-year look-back. (1) We will review your transactions over
the 3 years before the date of the termination resolution under Sec.
611.1220. Our review will include, but not be limited to, the following:
(i) Additions to or subtractions from any allowance for losses;
(ii) Additions to assets or liabilities, or subtractions from assets
or liabilities, due to transactions that are outside your ordinary
course of business;
(iii) Dividends or patronage refunds exceeding your usual practices;
(iv) Changes in the institution's capital plan, or in implementing
the plan, that increased or decreased the level of borrower investment;
(v) Contingent liabilities, such as loss-sharing obligations, that
can be reasonably quantified; and
(vi) Assets that may be overvalued, undervalued, or not recorded on
your books.
(2) If we determine the account balances do not accurately show the
value of your assets and liabilities (whether the assets and liabilities
were booked before or during the 3-year look-back period), we will make
any adjustments we deem necessary.
(3) We may require you to reverse the effect of a transaction if we
determine that:
(i) You have retired capital outside the ordinary course of
business;
(ii) You have taken any other actions unrelated to your core
business that have the effect of changing the exit fee; or
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(iii) You incurred expenses related to termination prior to the 12-
month average daily balance period on which the exit fee calculation is
based.
(4) We may require you to make these adjustments to the preliminary
exit fee estimate that is disclosed in the information statement, the
final exit fee calculation, and the calculations of the value of
equities held by dissenting stockholders, Farm Credit institutions that
choose to have their equities retired at termination, and reaffiliating
associations.
Sec. 611.1255 Exit fee calculation.
(a) Final exit fee calculation--terminating association. Calculate
the final exit fee in the following order:
(1) Base your exit fee calculation on the average daily balances of
assets and liabilities for the 12-month period preceding the termination
date. Assume for this calculation that you have not paid or accrued the
items described in paragraph (a)(4)(ii) of this section.
(2) Any amounts we refer to in this section are average daily
balances unless we specify that they are not. Amounts that are not
average daily balances will be referred to as ``dollar amount.''
(3) Compute the average daily balances based on financial statements
that comply with GAAP. The financial statements, as of the termination
date, must be independently audited by a qualified public accountant, as
defined in Sec. 621.2(i) of this chapter.
(4) Make adjustments to assets and liabilities as follows:
(i) Add back expenses related to termination incurred in the 12
months before termination. Related expenses include, but are not limited
to, legal services, accounting services, auditing, business planning,
payments of severance and special retirements, and application fees for
the termination and reorganization.
(ii) Subtract from assets the following:
(A) The dollar amount of your termination payment (to your
affiliated bank) related to FAC obligations as described in Sec.
611.1260(d); and
(B) The dollar amount of taxes you will have to pay due to the
termination;
(iii) Subtract from liabilities any liability that we treat as
regulatory capital under the capital or collateral requirements in
subparts H and K of part 615 of this chapter.
(iv) Make the adjustments that we require under Sec. 611.1250(c).
For the final exit fee, we will review and may require additional
adjustments for transactions between the date you adopted the
termination resolution and the termination date.
(5) After making these adjustments to assets and liabilities,
subtract liabilities from assets. This is your total capital for
purposes of termination.
(6) Multiply assets by 6 percent, and subtract this amount from
total capital. This is your final exit fee.
(b) Final exit fee calculation--terminating bank. (1) The individual
exit fees of affiliated associations that are terminating with you must
be calculated as described in paragraph (a) of this section.
(2) Base your exit fee calculation on the average daily balances of
assets and liabilities for the 12-month period preceding the termination
date. Assume for this calculation that you have not paid or accrued the
items described in paragraph (b)(5)(iii)(B) and (C) of this section.
(3) Any amounts we refer to in this section are average daily
balances unless we specify that they are not. Amounts that are not
average daily balances will be referred to as ``dollar amount.''
(4) Compute the average daily balances based on bank-only financial
statements that comply with GAAP. The financial statements, as of the
termination date, must be independently audited by a qualified public
accountant, as defined in Sec. 621.2(i) of this chapter.
(5) Make adjustments to assets and liabilities as follows:
(i) Add back the following to your assets:
(A) Expenses you have incurred related to termination. Related
expenses include, but are not limited to, legal services, accounting
services, auditing, business planning, payments of severance and special
retirements, and application fees for the termination and
reorganization.
[[Page 80]]
(B) The dollar amount of the termination payments to you by the
terminating associations related to FAC obligations.
(C) Any specific allowance for losses, and a pro rata share of any
general allowance for losses, on direct loans to associations that are
paid off or transferred before or at termination.
(ii) Subtract from your assets and liabilities your direct loans to
affiliated associations that were paid off or transferred in the 12-
month period before termination or at termination.
(iii) Subtract from your assets the following:
(A) Equity investments held in your institution by affiliated
associations that you transferred at termination or during the 12 months
before termination;
(B) The dollar amount of your termination payment to the FAC; and
(C) The dollar amount of taxes paid or accrued due to the
termination;
(iv) Subtract from liabilities any liability that we treat as
regulatory capital (or that we do not treat as a liability) under the
capital or collateral requirements in subparts H and K of part 615 of
this chapter.
(v) Make the adjustments that we require under Sec. 611.1250(c).
For the final exit fee, we will review and may require additional
adjustments for transactions between the date you adopted the
termination resolution and the termination date.
(6) After the above adjustments, combine your balance sheet with the
balance sheets of terminating associations after making the adjustments
required in paragraph (a) of this section.
(7) Subtract combined liabilities from combined assets. This is the
total capital of the combined balance sheet.
(8) Multiply the assets of the combined balance sheet after the
above adjustments by 6 percent. Subtract this amount from the total
capital of the combined balance sheet. This amount is the combined final
exit fee for your institution and the terminating affiliated
associations.
(9) Your final exit fee is the amount by which the combined final
exit fee exceeds the total of the individual final exit fees of your
affiliated terminating associations.
(c) Payment of exit fee. On the termination date, you must:
(1) Deposit into an escrow account acceptable to us and the FCSIC an
amount equal to 110 percent of the preliminary exit fee estimate,
adjusted to account for stock retirements to dissenting stockholders and
Farm Credit institutions, and any other adjustments we require.
(2) Deposit into an escrow account acceptable to us an amount equal
to 110 percent of the equity you must retire for dissenting stockholders
and System institutions holding stock that would be entitled to a share
of the remaining assets in a liquidation.
(d) Pay-out of escrow. Following the independent audit of the
institution's account balances as of the termination date, we will
determine the amount of the final exit fee and the amounts owed to
stockholders to retire their equities. We will then direct the escrow
agent to:
(1) Pay the exit fee to the Farm Credit Insurance Fund;
(2) Pay the amounts owed to dissenting stockholders and Farm Credit
institutions; and
(3) Return any remaining amounts to the successor institution.
(e) Additional payment. If the amount held in escrow is not enough
to pay the amounts under paragraph (d)(1) and (2) of this section, the
successor institution must pay any remaining liability to the escrow
agent for distribution to the appropriate parties. The termination
application must include evidence that, after termination, the successor
institution will pay any remaining amounts owed.
Sec. 611.1260 Payment of debts and assessments--terminating association.
(a) General rule. If your institution is a terminating association,
you must pay or make adequate provision for the payment of all
outstanding debt obligations and assessments.
(b) No OFI relationship. If the successor institution will not
become an OFI, you must either:
(1) Pay debts and assessments owed to your affiliated Farm Credit
bank at termination; or
(2) With your affiliated Farm Credit bank's concurrence, arrange to
pay any
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obligations or assessments to the bank after termination.
(c) Obligations to other Farm Credit institutions. You must pay or
make adequate provision for payment of obligations to any Farm Credit
institution (other than your affiliated bank) under any loss-sharing or
other agreement.
(d) FAC payments. Before termination, you must pay the estimated
present value of future assessments and payment obligations to your
affiliated Farm Credit bank to the extent required by subparagraphs
(c)(5)(F) and (d)(1)(C)(v) of section 6.26 of the Act. The FAC must make
the present value estimations, subject to our approval, based on an
appropriate discount rate. The appropriate discount rate is the non-
interest-bearing U.S. Treasury security rate for securities with a
maturity as near as possible to the period remaining until the
terminating association's obligations under this paragraph would be due
(but before the due date).
Sec. 611.1265 Retirement of a terminating association's investment
in its affiliated bank.
(a) Safety and soundness restrictions. Notwithstanding anything in
this subpart to the contrary, we may prohibit a bank from retiring the
equities you hold in the bank if the retirement would cause the bank to
fall below its regulatory capital requirements after retirement, or if
we determine that the bank would be in an unsafe or unsound condition
after retirement.
(b) Retirement agreement. Your affiliated bank may retire the
purchased and allocated equities held by your institution in the bank
according to the terms of the bank's capital revolvement plan or an
agreement between you and the bank.
(c) Retirement in absence of agreement. Your affiliated bank must
retire any equities not subject to an agreement or revolvement plan no
later than when you or the successor institution pays off your loan from
the bank.
(d) No retirement of unallocated surplus. When your bank retires
equities you own in the bank, the bank must pay par or face value for
purchased and allocated equities, less any impairment. The bank may not
pay you any portion of its unallocated surplus.
(e) Exclusion of equities from capital ratios. If another Farm
Credit institution makes an agreement to retire equities you hold in
that institution after termination, we may require that institution to
exclude part or all of those equities from assets and capital when the
institution calculates its capital and net collateral ratios under
subparts H and K of part 615 of this chapter.
Sec. 611.1270 Repayment of obligations--terminating bank.
(a) General rule. If your institution is a terminating bank, you
must pay or make adequate provision for the payment of all outstanding
debt obligations, and provide for your responsibility for any probable
contingent liabilities identified.
(b) Satisfaction of primary liability on consolidated or Systemwide
obligations. After consulting with the other Farm Credit banks, the
Funding Corporation, and the FCSIC, you must pay or make adequate
provision for payment of your primary liability on consolidated or
Systemwide obligations in a method that we deem acceptable. Before we
make a final decision on your proposal and as we deem necessary, we may
consult with the other Farm Credit banks, the Funding Corporation, and
the FCSIC.
(c) Satisfaction of joint and several liability and liability for
interest on individual obligations. (1) You and the other Farm Credit
banks must enter into an agreement, which is subject to our approval,
covering obligations issued under section 4.2 of the Act and outstanding
on the termination date. The agreement must specify how you and your
successor institution will make adequate provision for the payment of
your joint and several liability to holders of obligations other than
those obligations on which you are primarily liable, in the event we
make calls for payment under section 4.4 of the Act. You and your
successor institution must also provide for your liability under section
4.4(a)(1) of the Act to pay interest on the individual obligations
issued by other System banks. As a part of the agreement, you must also
agree that your successor institution
[[Page 82]]
will provide ongoing information to the Funding Corporation to enable it
to fulfill its funding and disclosure duties. The Funding Corporation
may, at its option, be a party to the agreement to the extent necessary
to fulfill its duties with respect to financing and disclosure.
(2) If you and the other Farm Credit banks are unable to reach
agreement within 90 days before the proposed termination date, we will
specify the manner in which you will make adequate provision for the
payment of the liabilities in question and how we will make joint and
several calls for those obligations outstanding on the termination date.
(3) Notwithstanding any other provision in these regulations, the
successor institution will be jointly and severally liable for
consolidated and Systemwide debt outstanding on the termination date
(other than the obligations on which you are primarily liable). The
successor institution will also be liable for interest on other banks'
individual obligations as described in section 4.4(a)(1) of the Act and
outstanding on the termination date. The termination application must
include evidence that the successor institution will continue to be
liable for consolidated and Systemwide debt and for interest on other
banks' individual obligations.
(d) Payment to the FAC. (1) Before termination, you must pay to the
FAC the amounts required by section 6.9(e)(3)(C)(ii) of the Act and by
subparagraphs (c)(5)(E)(i) and (d)(1)(C)(iv) of section 6.26 of the Act.
To make the calculations for section 6.26, you must include your retail
loan volume, the retail loan volume of the associations that are
terminating with you, and the retail loan volume of the affiliated
associations that continue their direct lending relationships with the
successor institution, but you must not include the retail loan volume
of associations that reaffiliate with another bank and transfer or repay
their direct loan on or before termination.
(2) The FAC must make the present value estimations, subject to our
approval, based on an appropriate discount rate. The appropriate
discount rate is the non-interest-bearing U.S. Treasury security rate
for securities with a maturity as near as possible to the period
remaining until your obligations under this paragraph would be due (but
before the due date).
(3) If your bank or your predecessor bank has redeemed early any
preferred stock issued to the FAC, we may require you to confirm in
writing that your successor institution will assume responsibility for
any and all of your contingent liabilities under any FAC-preferred stock
redemption agreement and indemnification agreement.
Sec. 611.1275 Retirement of equities held by other System institutions.
(a) Retirement at option of equity holder. If your institution is a
terminating institution, System institutions that own your equities have
the right to require you to retire the equities on the termination date.
(b) Value of equity holders' interests. You must retire the equities
in accordance with the liquidation provisions in your bylaws unless we
determine that the liquidation provisions would result in an inequitable
distribution to stockholders. If we make such a determination, we will
require you to distribute the equity in accordance with another method
that we deem equitable to stockholders. Before you retire any equity,
you must make the following adjustments to the amount of stockholder
equity as stated in the financial statements on the termination date:
(1) Make deductions for any FAC obligations and taxes due to the
termination that you have not yet recorded;
(2) Deduct the amount of the exit fee; and
(3) Make any adjustments described under Sec. 611.1250(c) that we
may require as we deem appropriate.
(c) Transfer of affiliated association's investment. As an
alternative to equity retirement, an affiliated association that
reaffiliates with another Farm Credit bank instead of terminating with
its bank has the right to require the terminating bank to transfer its
investment to its new affiliated bank when it reaffiliates. If your
institution is a terminating bank, at the time of reaffiliation you must
transfer the purchased and allocated equities held by the association,
as well as its share of
[[Page 83]]
unallocated surplus, to the new affiliated bank. Calculate the
association's share before deduction of the exit fee as of the month end
preceding the reaffiliation date (or the termination date if it is the
same as the reaffiliation date) in accordance with the liquidation
provisions of your bylaws, unless we determine that the liquidation
provisions would result in an inequitable distribution. If we make such
a determination, we will require you to distribute the association's
share of your unallocated surplus in accordance with another method that
we deem equitable to stockholders. Before you distribute any unallocated
surplus, you must make the following adjustments to stockholder equity
as stated in the financial statements as of the month end preceding the
reaffiliation date (or the termination date if it is the same as the
reaffiliation date):
(1) Add back any deductions of FAC obligations due to the
termination, taxes due to the termination, and the exit fee; and
(2) Make any adjustments described under Sec. 611.1250(c) that we
may require as we deem appropriate.
(d) Prohibition on certain affiliations. No Farm Credit institution
may retain an equity interest otherwise prohibited by law in a successor
institution.
Sec. 611.1280 Dissenting stockholders' rights.
(a) Definition. A dissenting stockholder is an equity holder (other
than a System institution) in a terminating institution on the
termination date who either:
(1) Was eligible to vote on the termination resolution and voted
against termination;
(2) Was an equity holder on the voting record date but was not
eligible to vote; or
(3) Became an equity holder after the voting record date.
(b) Retirement at option of a dissenting stockholder. A dissenting
stockholder may require a terminating institution to retire the
stockholder's equity interest in the terminating institution.
(c) Value of a dissenting stockholder's interest. You must pay a
dissenting stockholder according to the liquidation provision in your
bylaws, except that you must pay at least par or face value for eligible
borrower stock (as defined in section 4.9A(d)(2) of the Act). If we
determine that the liquidation provision is inequitable to stockholders,
we will require you to calculate their share in accordance with another
formula that we deem equitable.
(d) Calculation of interest of a dissenting stockholder. Before you
retire any equity, you must make the following adjustments to the amount
of stockholder equity as stated in the financial statements on the
termination date:
(1) Deduct any FAC obligations and taxes due to the termination that
you have not yet recorded;
(2) Deduct the amount of the exit fee; and
(3) Make any adjustments described under Sec. 611.1250(c) that we
may require as we deem appropriate.
(e) Form of payment to a dissenting stockholder. You must pay a
dissenting stockholder for his equities as follows:
(1) Pay cash for the par or face value of purchased stock, less any
impairment;
(2) For equities other than purchased equities, you may:
(i) Pay cash;
(ii) Cause or otherwise provide for the successor institution to
issue, on the date of termination, subordinated debt to the stockholder
with a face value equal to the value of the remaining equities. This
subordinated debt must have a maturity date of 7 years or less, must
have priority in liquidation ahead of all equity, and must carry a rate
of interest not less than the rate (at the time of termination) for debt
of comparable maturity issued by the U.S. Treasury plus 1 percent; or
(iii) Provide for a combination of cash and subordinated debt as
described above.
(f) Payment to holders of special class of stock. If you have
adopted bylaws under Sec. 611.1210(f), you must pay a dissenting
stockholder who owns shares of the special class of stock an amount
equal to the lower of the par (or face) value or the value of such stock
as determined under Sec. 611.1280(c) and (d).
(g) Notice to equity holders. The notice to equity holders required
in
[[Page 84]]
Sec. 611.1240(e) must include a form for stockholders to send back to
you, stating their intention to exercise dissenters' rights. The notice
must contain the following information:
(1) A description of the rights of dissenting stockholders set forth
in this section and the approximate value per share that a dissenting
stockholder can expect to receive. State whether the successor
institution will require borrowers to be stockholders or whether it will
require stockholders to be borrowers.
(2) A description of the current book and par value per share of
each class of equities, and the expected book and market value of the
stockholder's interest in the successor institution.
(3) A statement that a stockholder must return the enclosed form to
you within 30 days if the stockholder chooses to exercise dissenters'
rights.
(h) Notice to subsequent equity holders. Equity holders that acquire
their equities after the termination vote must also receive the notice
described in paragraph (g) of this section. You must give them at least
5 business days to decide whether to request retirement of their stock.
(i) Reconsideration. If a reconsideration vote is held and the
termination is disapproved, the right of stockholders to exercise
dissenters' rights is rescinded. If a reconsideration vote is held and
the termination is approved, you must retire the equities of dissenting
stockholders as if there had been no reconsideration vote.
Sec. 611.1285 Loan refinancing by borrowers.
(a) Disclosure of credit and loan information. At the request of a
borrower seeking refinancing with another System institution before you
terminate, you must give credit and loan information about the borrower
to such institution.
(b) No reassignment of territory. If, at the termination date, we
have not assigned your territory to another System institution, any
System institution may lend in your territory, to the extent otherwise
permitted by the Act and the regulations in this chapter.
Sec. 611.1290 Continuation of borrower rights.
You may not require a waiver of contractual borrower rights
provisions as a condition of borrowing from and owning equity in the
successor institution. Institutions that become other financing
institutions on termination must comply with the applicable borrower
rights provisions in the Act and part 617 of this chapter.
[67 FR 17909, Apr. 12, 2002, as amended at 69 FR 10906, Mar. 9, 2004]
PART 612_STANDARDS OF CONDUCT AND REFERRAL OF KNOWN OR SUSPECTED
CRIMINAL VIOLATIONS--Table of Contents
Subpart A_Standards of Conduct
Sec.
612.2130 Definitions.
612.2135 Director and employee responsibilities and conduct--generally.
612.2140 Directors--prohibited conduct.
612.2145 Director reporting.
612.2150 Employees--prohibited conduct.
612.2155 Employee reporting.
612.2157 Joint employees.
612.2160 Institution responsibilities.
612.2165 Policies and procedures.
612.2170 Standards of Conduct Official.
612.2260 Standards of conduct for agents.
612.2270 Purchase of System obligations.
Subpart B_Referral of Known or Suspected Criminal Violations
612.2300 Purpose and scope.
612.2301 Referrals.
612.2302 Notification of board of directors and bonding company.
612.2303 Institution responsibilities.
Authority: Secs. 5.9, 5.17, 5.19 of the Farm Credit Act (12 U.S.C.
2243, 2252, 2254).
Source: 59 FR 24894, May 13, 1994, unless otherwise noted.
Subpart A_Standards of Conduct
Sec. 612.2130 Definitions.
For purposes of this part, the following terms are defined:
(a) Agent means any person, other than a director or employee, who
represents a System institution in contacts with third parties or who
provides professional services to a System
[[Page 85]]
institution, such as legal, accounting, appraisal, and other similar
services.
(b) A conflict of interest or the appearance thereof exists when a
person has a financial interest in a transaction, relationship, or
activity that actually affects or has the appearance of affecting the
person's ability to perform official duties and responsibilities in a
totally impartial manner and in the best interest of the employing
institution when viewed from the perspective of a reasonable person with
knowledge of the relevant facts.
(c) Controlled entity and entity controlled by mean an entity in
which the individual, directly or indirectly, or acting through or in
concert with one or more persons:
(1) Owns 5 percent or more of the equity;
(2) Owns, controls, or has the power to vote 5 percent or more of
any class of voting securities; or
(3) Has the power to exercise a controlling influence over the
management of policies of such entity.
(d) Director means a member of a board of directors.
(e) Employee means any salaried officer or part-time, full-time, or
temporary salaried employee.
(f) Entity means a corporation, company, association, firm, joint
venture, partnership (general or limited), society, joint stock company,
trust (business or otherwise), fund, or other organization or
institution, except System institutions.
(g) Family means an individual and spouse and anyone having the
following relationship to either: parents, spouse, son, daughter,
sibling, stepparent, stepson, stepdaughter, stepbrother, stepsister,
half brother, half sister, uncle, aunt, nephew, niece, grandparent,
grandson, granddaughter, and the spouses of the foregoing.
(h) Financial interest means an interest in an activity,
transaction, property, or relationship with a person or an entity that
involves receiving or providing something of monetary value or other
present or deferred compensation.
(i) Financially obligated with means having a joint legally
enforceable obligation with, being financially obligated on behalf of
(contingently or otherwise), having an enforceable legal obligation
secured by property owned by another, or owning property that secures an
enforceable legal obligation of another.
(j) Material, when applied to a financial interest or transaction or
series of transactions, means that the interest or transaction or series
of transactions is of such magnitude that a reasonable person with
knowledge of the relevant facts would question the ability of the person
who has the interest or is party to such transaction(s) to perform his
or her official duties objectively and impartially and in the best
interest of the institution and its statutory purpose.
(k) Mineral interest means any interest in minerals, oil, or gas,
including, but not limited to, any right derived directly or indirectly
from a mineral, oil, or gas lease, deed, or royalty conveyance.
(l) OFI means other financing institutions that have established an
access relationship with a Farm Credit Bank or an agricultural credit
bank under section 1.7(b)(1)(B) of the Act.
(m) Officer means the chief executive officer, president, chief
operating officer, vice president, secretary, treasurer, general
counsel, chief financial officer, and chief credit officer of each
System institution, and any person not so designated who holds a similar
position of authority.
(n) Ordinary course of business, when applied to a transaction,
means: (1) A transaction that is usual and customary between two persons
who are in business together; or
(2) A transaction with a person who is in the business of offering
the goods or services that are the subject of the transaction on terms
that are not preferential. Preferential means that the transaction is
not on the same terms as those prevailing at the same time for
comparable transactions for other persons who are not directors or
employees of a System institution.
(o) Person means individual or entity.
(p) Relative means any member of the family as defined in paragraph
(g) of this section.
[[Page 86]]
(q) Service organization means each service organization authorized
by section 4.25 of the Act, and each unincorporated service organization
formed by one or more System institutions.
(r) Standards of Conduct Official means the official designated
under Sec. 612.2170 of these regulations.
(s) Supervised institution is a term which only applies within the
context of a System bank or an employee of a System bank and refers to
each association supervised by that bank.
(t) Supervising institution is a term that only applies within the
context of an association or an employee of an association and refers to
the bank that supervises that association.
(u) System institution and institution mean any bank, association,
or service organization in the Farm Credit System, including the Farm
Credit Banks, banks for cooperatives, agricultural credit banks, Federal
land bank associations, agricultural credit associations, Federal land
credit associations, production credit associations, the Federal Farm
Credit Banks Funding Corporation, and service organizations.
Sec. 612.2135 Director and employee responsibilities and conduct
--generally.
(a) Directors and employees of all System institutions shall
maintain high standards of industry, honesty, integrity, impartiality,
and conduct in order to ensure the proper performance of System business
and continued public confidence in the System and each of its
institutions. The avoidance of misconduct and conflicts of interest is
indispensable to the maintenance of these standards.
(b) To achieve these high standards of conduct, directors and
employees shall observe, to the best of their abilities, the letter and
intent of all applicable local, state, and Federal laws and regulations
and policy statements, instructions, and procedures of the Farm Credit
Administration and System institutions and shall exercise diligence and
good judgment in carrying out their duties, obligations, and
responsibilities.
Sec. 612.2140 Directors--prohibited conduct.
A director of a System institution shall not:
(a) Participate, directly or indirectly, in deliberations on, or the
determination of, any matter affecting, directly or indirectly, the
financial interest of the director, any relative of the director, any
person residing in the director's household, any business partner of the
director, or any entity controlled by the director or such persons
(alone or in concert), except those matters of general applicability
that affect all shareholders/borrowers in a nondiscriminatory way, e.g.,
a determination of interest rates.
(b) Divulge or make use of, except in the performance of official
duties, any fact, information, or document not generally available to
the public that is acquired by virtue of serving on the board of a
System institution.
(c) Use the director's position to obtain or attempt to obtain
special advantage or favoritism for the director, any relative of the
director, any person residing in the director's household, any business
partner of the director, any entity controlled by the director or such
persons (alone or in concert), any other System institution, or any
person transacting business with the institution, including borrowers
and loan applicants.
(d) Use the director's position or information acquired in
connection with the director's position to solicit or obtain, directly
or indirectly, any gift, fee, or other present or deferred compensation
or for any other personal benefit on behalf of the director, any
relative of the director, any person residing in the director's
household, any business partner of the director, any entity controlled
by the director or such persons (alone or in concert), any other System
institution, or any person transacting business with the institution,
including borrowers and loan applicants.
(e) Accept, directly or indirectly, any gift, fee, or other present
or deferred compensation that is offered or could reasonably be viewed
as being offered to influence official action or to obtain
[[Page 87]]
information that the director has access to by reason of serving on the
board of a System institution.
(f) Knowingly acquire, directly or indirectly, except by inheritance
or through public auction or open competitive bidding available to the
general public, any interest in any real or personal property, including
mineral interests, that was owned by the employing, supervising, or any
supervised institution within the preceding 12 months and that had been
acquired by any such institution as a result of foreclosure or similar
action; provided, however, a director shall not acquire any such
interest in real or personal property if he or she participated in the
deliberations or decision to foreclose or to dispose of the property or
in establishing the terms of the sale.
(g) Directly or indirectly borrow from, lend to, or become
financially obligated with or on behalf of a director, employee, or
agent of the employing, supervising, or a supervised institution or a
borrower or loan applicant of the employing institution, unless:
(1) The transaction is with a relative or any person residing in the
director's household;
(2) The transaction is undertaken in an official capacity in
connection with the institution's discounting, lending, or participation
relationships with OFIs and other lenders; or
(3) The Standards of Conduct Official determines, pursuant to
policies and procedures adopted by the board, that the potential for
conflict is insignificant because the transaction is in the ordinary
course of business or is not material in amount and the director does
not participate in the determination of any matter affecting the
financial interests of the other party to the transaction except those
matters affecting all shareholders/borrowers in a nondiscriminatory way.
(h) Violate an institution's policies and procedures governing
standards of conduct.
Sec. 612.2145 Director reporting.
(a) Annually, as of the institution's fiscal year end, and at such
other times as may be required to comply with paragraph (c) of this
section, each director shall file a written and signed statement with
the Standards of Conduct Official that fully discloses:
(1) The names of any immediate family members as defined in Sec.
620.1(e) of this chapter, or affiliated organizations, as defined in
Sec. 620.1(a) of this chapter, who had transactions with the
institution at any time during the year;
(2) Any matter required to be disclosed by Sec. 620.5(k) of this
chapter; and
(3) Any additional information the institution may require to make
the disclosures required by part 620 of this chapter.
(b) Each director shall, at such intervals as the institution's
board shall determine is necessary to effectively enforce this
regulation and the institution's standards-of-conduct policy adopted
pursuant to Sec. 612.2165, file a written and signed statement with the
Standards of Conduct Official that contains those disclosures required
by the regulations and such policy. At a minimum, these requirements
shall include:
(1) The name of any relative or any person residing in the
director's household, business partner, or any entity controlled by the
director or such persons (alone or in concert) if the director knows or
has reason to know that such individual or entity transacts business
with the institution or any institution supervised by the director's
institution; and
(2) The name and the nature of the business of any entity in which
the director has a material financial interest or on whose board the
director sits if the director knows or has reason to know that such
entity transacts business with:
(i) The director's institution or any institution supervised by the
director's institution; or
(ii) A borrower of the director's institution or any institution
supervised by the director's institution.
(c) Any director who becomes or plans to become involved in any
relationship, transaction, or activity that is required to be reported
under this section or could constitute a conflict of interest shall
promptly report such involvement in writing to the Standards of Conduct
Official for a determination
[[Page 88]]
of whether the relationship, transaction, or activity is, in fact, a
conflict of interest.
(d) Unless a disclosure as a director candidate under part 620 of
this chapter has been made within the preceding 180 days, a newly
elected or appointed director shall report matters required to be
reported in paragraphs (a), (b), and (c) of this section to the
Standards of Conduct Official within 30 days after the election or
appointment and thereafter shall comply with the requirements of this
section.
Sec. 612.2150 Employees--prohibited conduct.
An employee of a System institution shall not:
(a) Participate, directly or indirectly, in deliberations on, or the
determination of, any matter affecting, directly or indirectly, the
financial interest of the employee, any relative of the employee, any
person residing in the employee's household, any business partner of the
employee, or any entity controlled by the employee or such persons
(alone or in concert), except those matters of general applicability
that affect all shareholders/borrowers in a nondiscriminating way, e.g.
a determination of interest rates.
(b) Divulge or make use of, except in the performance of official
duties, any fact, information, or document not generally available to
the public that is acquired by virtue of employment with a System
institution.
(c) Use the employee's position to obtain or attempt to obtain
special advantage or favoritism for the employee, any relative of the
employee, any person residing in the employee's household, any business
partner of the employee, any entity controlled by the employee or such
persons (alone or in concert), any other System institution, or any
person transacting business with the institution, including borrowers
and loan applicants.
(d) Serve as an officer or director of an entity that transacts
business with a System institution in the district or of any commercial
bank, savings and loan, or other non-System financial institution,
except employee credit unions. For the purposes of this paragraph,
``transacts business'' does not include loans by a System institution to
a family-owned entity, service on the board of directors of the Federal
Agricultural Mortgage Corporation, or transactions with nonprofit
entities or entities in which the System institution has an ownership
interest. With the prior approval of the board of the employing
institution, an employee of a Farm Credit Bank or association may serve
as a director of a cooperative that borrows from a bank for
cooperatives. Prior to approving an employee request, the board shall
determine whether the employee's proposed service as a director is
likely to cause the employee to violate any regulations in this part or
the institution's policies, e.g., the requirements relating to devotion
of time to official duties.
(e) Use the employee's position or information acquired in
connection with the employee's position to solicit or obtain any gift,
fee, or other present or deferred compensation or for any other personal
benefit for the employee, any relative of the employee, any person
residing in the employee's household, any business partner of the
employee, any entity controlled by the employee or such persons (alone
or in concert), any other System institution, or any person transacting
business with the institution, including borrowers and loan applicants.
(f) Accept, directly or indirectly, any gift, fee, or other present
or deferred compensation that is offered or could reasonably be viewed
as being offered to influence official action or to obtain information
the employee has access to by reason of employment with a System
institution.
(g) Knowingly acquire, directly or indirectly, except by
inheritance, any interest in any real or personal property, including
mineral interests, that was owned by the employing, supervising, or any
supervised institution within the preceding 12 months and that had been
acquired by any such institution as a result of foreclosure or similar
action.
(h) Directly or indirectly borrow from, lend to, or become
financially obligated with or on behalf of a director, employee, or
agent of the employing, supervising, or a supervised institution
[[Page 89]]
or a borrower or loan applicant of the employing institution, unless:
(1) The transaction is with a relative or any person residing in the
employee's household;
(2) The transaction is undertaken in an official capacity in
connection with the institution's discounting, lending, or participation
relationships with OFIs and other lenders; or
(3) The Standards of Conduct Official determines, pursuant to
policies and procedures adopted by the board, that the potential for
conflict is insignificant because the transaction is in the ordinary
course of business or is not material in amount and the employee does
not participate in the determination of any matter affecting the
financial interests of the other party to the transaction except those
matters affecting all shareholders/borrowers in a nondiscriminatory way.
(i) Violate an institution's policies and procedures governing
standards of conduct.
(j) Act as a real estate agent or broker; provided that this
paragraph shall not apply to transactions involving the purchase or sale
of real estate intended for the use of the employee, a member of the
employee's family, or a person residing in the employee's household.
(k) Act as an agent or broker in connection with the sale and
placement of insurance; provided that this paragraph shall not apply to
the sale or placement of insurance authorized by section 4.29 of the
Act.
Sec. 612.2155 Employee reporting.
(a) Annually, as of the institution's fiscal yearend, and at such
other times as may be required to comply with paragraph (c) of this
section, each senior officer, as defined in Sec. 620.1(o) of this
chapter, shall file a written and signed statement with the Standards of
Conduct Official that fully discloses:
(1) The names of any immediate family members, as defined in Sec.
620.1(e) of this chapter, or affiliated organizations, as defined in
Sec. 620.1(a) of this chapter, who had transactions with the
institution at any time during the year;
(2) Any matter required to be disclosed by Sec. 620.5(k) of this
chapter; and
(3) Any additional information the institution may require to make
the disclosures required by part 620 of this chapter.
(b) Each employee shall, at such intervals as the Board shall
determine necessary to effectively enforce this regulation and the
institution's standards-of-conduct policy adopted pursuant to Sec.
612.2165, file a written and signed statement with the Standards of
Conduct Official that contains those disclosures required by the
regulation and such policy. At a minimum, these requirements shall
include:
(1) The name of any relative or any person residing in the
employee's household, any business partner, or any entity controlled by
the employee or such persons (alone or in concert) if the employee knows
or has reason to know that such individual or entity transacts business
with the employing institution or any institution supervised by the
employing institution; and
(2) The name and the nature of the business of any entity in which
the employee has a material financial interest or on whose board the
employee sits if the employee knows or has reason to know that such
entity transacts business with:
(i) The employing institution or any institution supervised by the
employing institution; or
(ii) A borrower of the employing institution or any institution
supervised by the employing institution.
(c) Any employee who becomes or plans to become involved in any
relationship, transaction, or activity that is required to be reported
under this section or could constitute a conflict of interest shall
promptly report such involvement in writing to the Standards of Conduct
Official for a determination of whether the relationship, transaction,
or activity is, in fact, a conflict of interest.
(d) A newly hired employee shall report matters required to be
reported in paragraphs (a), (b), and (c) of this section to the
Standards of Conduct Official within 30 days after accepting an offer
for employment and thereafter shall comply with the requirements of this
section.
[[Page 90]]
Sec. 612.2157 Joint employees.
No officer of a Farm Credit Bank or an agricultural credit bank may
serve as an employee of an association in its district and no employee
of a Farm Credit Bank or an agricultural credit bank may serve as an
officer of an association in its district. Farm Credit Bank or
agricultural credit bank employees other than officers may serve as
employees other than officers of an association in its district provided
each institution appropriately reflects the expense of such employees in
its financial statements.
Sec. 612.2160 Institution responsibilities.
Each institution shall: (a) Ensure compliance with this part by its
directors and employees and act promptly to preserve the integrity of
and public confidence in the institution in any matter involving a
conflict of interest, whether or not specifically addressed by this part
or the policies and procedures adopted pursuant to Sec. 612.2165;
(b) Take appropriate measures to ensure that all directors and
employees are informed of the requirements of this regulation and
policies and procedures adopted pursuant to Sec. 612.2165;
(c) Adopt and implement policies and procedures that will preserve
the integrity of and public confidence in the institution and the System
pursuant to Sec. 612.2165;
(d) Designate a Standards of Conduct Official pursuant to Sec.
612.2170; and
(e) Maintain all standards-of-conduct policies and procedures,
reports, investigations, determinations, and evidence of compliance with
this part for a minimum of 6 years.
Sec. 612.2165 Policies and procedures.
(a) Each institution's board of directors shall issue, consistent
with this part, policies and procedures governing standards of conduct
for directors and employees.
(b) Board policies and procedures issued pursuant to paragraph (a)
of this section shall reflect due consideration of the potential adverse
impact of any activities permitted under the policies and shall at a
minimum:
(1) Establish such requirements and prohibitions as are necessary to
promote public confidence in the institution and the System, preserve
the integrity and independence of the supervisory process, and prevent
the improper use of official property, position, or information. In
developing such requirements and prohibitions, the institution shall
address such issues as the hiring of relatives, political activity,
devotion of time to duty, the exchange of gifts and favors among
directors and employees of the employing, supervising, and supervised
institution, and the circumstances under which gifts may be accepted by
directors and employees from outside sources, in light of the foregoing
objectives;
(2) Outline authorities and responsibilities of the Standards of
Conduct Official;
(3) Establish criteria for business relationships and transactions
not specifically prohibited by this part between employees or directors
and borrowers, loan applicants, directors, or employees of the
employing, supervised, or supervising institutions, or persons
transacting business with such institutions, including OFIs or other
lenders having an access or participation relationship;
(4) Establish criteria under which employees may accept outside
employment or compensation;
(5) Establish conditions under which employees may receive loans
from System institutions;
(6) Establish conditions under which employees may acquire an
interest in real or personal property that was mortgaged to a System
institution at any time within the preceding 12 months;
(7) Establish conditions under which employees may purchase any real
or personal property of a System institution acquired by such
institution for its operations. Farm Credit institutions must use open
competitive bidding whenever they sell surplus property above a stated
value (as established by the board) to their employees.
(8) Provide for a reasonable period of time for directors and
employees to terminate transactions, relationships, or activities that
are subject to prohibitions that arise at the time of adoption or
amendment of the policies.
[[Page 91]]
(9) Require new directors and new employees involved at the time of
election or hiring in transactions, relationships, and activities
prohibited by these regulations or internal policies to terminate such
transactions within the same time period established for existing
directors or employees pursuant to paragraph (b)(8) of this section,
beginning with the commencement of official duties, or such shorter time
period as the institution may establish.
(10) Establish procedures providing for a director's or employee's
recusal from official action on any matter in which he or she is
prohibited from participating under these regulations or the
institution's policies.
(11) Establish documentation requirements demonstrating compliance
with standards-of-conduct decisions and board policy;
(12) Establish reporting requirements, consistent with this part, to
enable the institution to comply with Sec. 620.5 of this chapter,
monitor conflicts of interest, and monitor recusal compliance; and
(13) Establish appeal procedures available to any employee to whom
any required approval has been denied.
[59 FR 24894, May 13, 1994, as amended at 64 FR 43048, Aug. 9, 1999]
Sec. 612.2170 Standards of Conduct Official.
(a) Each institution's board shall designate a Standards of Conduct
Official who shall:
(1) Advise directors, director candidates, and employees concerning
the provisions of this part;
(2) Receive reports required by this part;
(3) Make such determinations as are required by this part;
(4) Maintain records of actions taken to resolve and/or make
determinations upon each case reported relative to provisions of this
part;
(5) Make appropriate investigations, as directed by the
institution's board; and
(6) Report promptly, pursuant to part 617 of this chapter, to the
institution's board and the Office of General Counsel, Farm Credit
Administration, all cases where:
(i) A preliminary investigation indicates that a Federal criminal
statute may have been violated;
(ii) An investigation results in the removal of a director or
discharge of an employee; or
(iii) A violation may have an adverse impact on continued public
confidence in the System or any of its institutions.
(b) The Standards of Conduct Official shall investigate or cause to
be investigated all cases involving:
(1) Possible violations of criminal statutes;
(2) Possible violations of Sec. Sec. 612.2140 and 612.2150, and
applicable policies and procedures approved under Sec. 612.2165;
(3) Complaints received against the directors and employees of such
institution; and
(4) Possible violations of other provisions of this part or when the
activities or suspected activities are of a sensitive nature and could
affect continued public confidence in the Farm Credit System.
(c) An association board may comply with this section by contracting
with the Farm Credit Bank or agricultural credit bank in its district to
provide a Standards of Conduct Official.
Sec. 612.2260 Standards of conduct for agents.
(a) Agents of System institutions shall maintain high standards of
honesty, integrity, and impartiality in order to ensure the proper
performance of System business and continued public confidence in the
System and all its institutions. The avoidance of misconduct and
conflicts of interest is indispensable to the maintenance of these
standards.
(b) System institutions shall utilize safe and sound business
practices in the engagement, utilization, and retention of agents. These
practices shall provide for the selection of qualified and reputable
agents. Employing System institutions shall be responsible for the
administration of relationships with their agents, and shall take
appropriate investigative and corrective action in the case of a breach
of fiduciary duties by the agent or failure of
[[Page 92]]
the agent to carry out other agent duties as required by contract, FCA
regulations, or law.
(c) System institutions shall be responsible for exercising
corresponding special diligence and control, through good business
practices, to avoid or control situations that have inherent potential
for sensitivity, either real or perceived. These areas include the
employment of agents who are related to directors or employees of the
institutions; the solicitation and acceptance of gifts, contributions,
or special considerations by agents; and the use of System and borrower
information obtained in the course of the agent's association with
System institutions.
Sec. 612.2270 Purchase of System obligations.
(a) Employees and directors of System institutions, other than the
Federal Farm Credit Banks Funding Corporation, may only purchase joint,
consolidated, or Systemwide obligations that are:
(1) Part of an offering available to the general public; and
(2) Purchased through a dealer or dealer bank affiliated with a
member of the selling group designated by the Federal Farm Credit Banks
Funding Corporation or purchased in the secondary market.
(b) No director or employee of the Federal Farm Credit Banks Funding
Corporation may purchase or otherwise acquire, directly or indirectly,
except by inheritance, any joint, consolidated, or Systemwide
obligation.
Subpart B_Referral of Known or Suspected Criminal Violations
Source: 62 FR 24566, May 6, 1997, unless otherwise noted.
Redesignated at 69 FR 10907, Mar. 9, 2004.
Sec. 612.2300 Purpose and scope.
(a) This part applies to all institutions of the Farm Credit System
as defined in section 1.2(a) of the Farm Credit Act of 1971, as amended,
(Act) (12 U.S.C. 2002(a)) including, but not limited to, associations,
banks, service corporations chartered under section 4.25 of the Act, the
Federal Farm Credit Banks Funding Corporation, the Farm Credit System
Financial Assistance Corporation, the Farm Credit Leasing Services
Corporation, and the Federal Agricultural Mortgage Corporation
(hereinafter, institutions). The purposes of this part are to ensure
public confidence in the Farm Credit System, to ensure the reporting of
known or suspected criminal activity, to reduce potential losses to
institutions, and to ensure the safety and soundness of institutions.
This part requires that institutions use the Farm Credit Administration
Criminal Referral Form (hereinafter FCA Referral Form) to notify the
appropriate Federal authorities when any known or suspected Federal
criminal violations of the type described in Sec. 612.2301 are
discovered by institutions.
(b) The specific referral requirements of this part apply to known
or suspected criminal violations of the United States Code involving the
assets, operations, or affairs of an institution. This part prescribes
procedures for referring those violations to the proper Federal
authorities and the Farm Credit Administration. No specific procedural
requirements apply to the referral of violations of State or local laws.
(c) Nothing in this part should be construed as reducing in any way
an institution's ability to report known or suspected criminal
activities to the appropriate investigatory or prosecuting authorities,
whether Federal, State, or local, even when the circumstances in which a
report is required under Sec. 612.2301 are not present.
(d) It shall be the responsibility of each System institution to
determine whether there appears to be a reasonable basis to conclude
that a criminal violation has been committed and, if so, to report the
matter to the proper law enforcement authorities for consideration of
prosecution.
(e) Each referral required by Sec. 612.2301(a) shall be made on the
FCA Referral Form in accordance with the FCA Referral Form instructions
relating to its filing and distribution.
[62 FR 24566, May 6, 1997. Redesignated and amended at 69 FR 10907, Mar.
9, 2004]
[[Page 93]]
Sec. 612.2301 Referrals.
(a) Each institution and its board of directors shall exercise due
diligence to ensure the discovery, appropriate investigation, and
reporting of criminal activity. Within 30 calendar days of determining
that there is a known or suspected criminal violation of the United
States Code involving or affecting its assets, operations, or affairs,
the institution shall refer such criminal violation to the appropriate
regional offices of the United States Attorney, and the Federal Bureau
of Investigation or the United States Secret Service or both, using the
FCA Referral Form. A copy of the completed FCA Referral Form,
accompanied by any relevant documentation, shall be provided at the same
time to the Farm Credit Administration's Office of General Counsel. In
the event that a Farm Credit bank makes a loan through a Federal land
bank association which services the loan, the Federal land bank
association must inform the Farm Credit bank of any known or suspected
violation involving that loan and the Farm Credit bank shall refer the
violation to Federal law enforcement authorities under this section. A
report is required in circumstances where there is:
(1) Any known or suspected criminal activity (e.g., theft,
embezzlement), mysterious disappearance, unexplained shortage,
misapplication, or other defalcation of property and/or funds,
regardless of amount, where an institution employee, officer, director,
agent, or other person participating in the conduct of the affairs of
such an institution is suspected;
(2) Any known or suspected criminal activity involving an actual or
potential loss of $5,000 or more, through false statements or other
fraudulent means, where the institution has a substantial basis for
identifying a possible suspect or group of suspects and the suspect(s)
is not an institution employee, officer, director, agent, or other
person participating in the conduct of the affairs of such an
institution;
(3) Any known or suspected criminal activity involving an actual or
potential loss of $25,000 or more, through false statements or other
fraudulent means, where the institution has no substantial basis for
identifying a possible suspect or group of suspects; or
(4) Any known or suspected criminal activity involving a financial
transaction in which the institution was used as a conduit for such
criminal activity (such as money laundering/structuring schemes).
(b) In circumstances where there is a known or suspected violation
of State or local criminal law, the institution shall notify the
appropriate State or local law enforcement authorities.
(c) In addition to the requirements of paragraph (a) of this
section, the institution shall immediately notify by telephone the
appropriate Federal law enforcement authorities and FCA offices
specified on the FCA Referral Form upon determining that a known or
suspected criminal violation of Federal law requiring urgent attention
has occurred or is ongoing. Such cases include, but are not limited to,
those where:
(1) There is a likelihood that the suspect(s) will flee;
(2) The magnitude or the continuation of the known or suspected
criminal violation may imperil the institution's continued operation; or
(3) Key institution personnel are involved.
Sec. 612.2302 Notification of board of directors and bonding company.
(a) The institution's board of directors shall be promptly notified
of any criminal referral by the institution, except that if the criminal
referral involves a member of the board of directors, discretion may be
exercised in notifying such member of the referral.
(b) The institution involved shall promptly make all required
notifications under any applicable surety bond or other contract for
protection.
Sec. 612.2303 Institution responsibilities.
Each institution shall establish effective policies and procedures
designed to ensure compliance with this part, including, but not limited
to, adequate internal controls.
[[Page 94]]
PART 613_ELIGIBILITY AND SCOPE OF FINANCING--Table of Contents
Subpart A_Financing Under Titles I and II of the Farm Credit Act
Sec.
613.3000 Financing for farmers, ranchers, and aquatic producers or
harvesters.
613.3005 Lending objective.
613.3010 Financing for processing or marketing operations.
613.3020 Financing for farm-related service businesses.
613.3030 Rural home financing.
Subpart B_Financing for Banks Operating Under Title III of the Farm
Credit Act
613.3100 Domestic lending.
613.3200 International lending.
Subpart C_Similar Entity Authority Under Sections 3.1(11)(B) and 4.18A
of the Act
613.3300 Participations and other interests in loans to similar
entities.
Authority: Secs. 1.5, 1.7, 1.9, 1.10, 1.11, 2.2, 2.4, 2.12, 3.1,
3.7, 3.8, 3.22, 4.18A, 4.25, 4.26, 4.27, 5.9, 5.17 of the Farm Credit
Act (12 U.S.C. 2013, 2015, 2017, 2018, 2019, 2073, 2075, 2093, 2122,
2128, 2129, 2143, 2206a, 2211, 2212, 2213, 2243, 2252).
Subpart A_Financing Under Titles I and II of the Farm Credit Act
Source: 62 FR 4441, Jan. 30, 1997, unless otherwise noted.
Sec. 613.3000 Financing for farmers, ranchers, and aquatic
producers or harvesters.
(a) Definitions. For purposes of this subpart, the following
definitions apply:
(1) Bona fide farmer or rancher means a person owning agricultural
land or engaged in the production of agricultural products, including
aquatic products under controlled conditions.
(2) Legal entity means any partnership, corporation, estate, trust,
or other legal entity that is established pursuant to the laws of the
United States, any State thereof, the Commonwealth of Puerto Rico, the
District of Columbia, or any tribal authority and is legally authorized
to conduct a business.
(3) Person means an individual who is a citizen of the United States
or a foreign national who has been lawfully admitted into the United
States either for permanent residency pursuant to 8 U.S.C. 1101(a)(20)
or on a visa pursuant to a provision in 8 U.S.C. 1101(a)(15) that
authorizes such individual to own property or operate or manage a
business or a legal entity.
(4) Producer or harvester of aquatic products means a person engaged
in producing or harvesting aquatic products for economic gain in open
waters under uncontrolled conditions.
(b) Eligible borrower. Farm Credit institutions that operate under
titles I or II of the Act may provide financing to a bona fide farmer or
rancher, or producer or harvester of aquatic products for any
agricultural or aquatic purpose and for other credit needs.
Sec. 613.3005 Lending objective.
It is the objective of each bank and association, except for banks
for cooperatives, to provide full credit, to the extent of
creditworthiness, to the full-time bona fide farmer (one whose primary
business and vocation is farming, ranching, or producing or harvesting
aquatic products); and conservative credit to less than full-time
farmers for agricultural enterprises, and more restricted credit for
other credit requirements as needed to ensure a sound credit package or
to accommodate a borrower's needs as long as the total credit results in
being primarily an agricultural loan. However, the part-time farmer who
needs to seek off-farm employment to supplement farm income or who
desires to supplement off-farm income by living in a rural area and is
carrying on a valid agricultural operation, shall have availability of
credit for mortgages, other agricultural purposes, and family needs in
the preferred position along with full-time farmers. Loans to farmers
shall be on an increasingly conservative basis as the emphasis moves
away from the full-time bona fide farmer to the point where agricultural
needs only will be financed for the applicant whose business is
essentially other than farming. Credit shall not be extended where
investment in agricultural assets for speculative appreciation is a
primary factor.
[[Page 95]]
Sec. 613.3010 Financing for processing or marketing operations.
(a) Eligible borrowers. A borrower is eligible for financing for a
processing or marketing operation under titles I and II of the Act, only
if the borrower meets the following requirements:
(1) The borrower is either a bona fide farmer, rancher, or producer
or harvester of aquatic products, or is a legal entity in which eligible
borrowers under Sec. 613.3000(b) own more than 50 percent of the voting
stock or equity; and
(2) The borrower or an owner of the borrowing legal entity regularly
produces some portion of the throughput used in the processing or
marketing operation.
(b) Portfolio restrictions for certain processing and marketing
loans. Processing or marketing loans to eligible borrowers who regularly
supply less than 20 percent of the throughput are subject to the
following restrictions:
(1) Bank limitation. The aggregate of such processing and marketing
loans made by a Farm Credit bank shall not exceed 15 percent of all its
outstanding retail loans at the end of the preceding fiscal year.
(2) Association limitation. The aggregate of such processing and
marketing loans made by all direct lender associations affiliated with
the same Farm Credit bank shall not exceed 15 percent of the aggregate
of their outstanding retail loans at the end of the preceding fiscal
year. Each Farm Credit bank, in conjunction with all its affiliated
direct lender associations, shall ensure that such processing or
marketing loans are equitably allocated among its affiliated direct
lender associations.
(3) Calculation of outstanding retail loans. For the purposes of
this paragraph, ``outstanding retail loans'' includes loans, loan
participations, and other interests in loans that are either bought
without recourse or sold with recourse.
Sec. 613.3020 Financing for farm-related service businesses.
(a) Eligibility. An individual or legal entity that furnishes farm-
related services to farmers and ranchers that are directly related to
their agricultural production is eligible to borrow from a Farm Credit
bank or association that operates under titles I or II of the Act.
(b) Purposes of financing. A Farm Credit Bank, agricultural credit
bank, or direct lender association may finance:
(1) All of the farm-related business activities of an eligible
borrower who derives more than 50 percent of its annual income (as
consistently measured on either a gross sales or net sales basis) from
furnishing farm-related services that are directly related to the
agricultural production of farmers and ranchers; or
(2) Only the farm-related services activities of an eligible
borrower who derives 50 percent or less of its annual income (as
consistently measured on either a gross sales or net sales basis) from
furnishing farm-related services that are directly related to the
agricultural production of farmers and ranchers.
(c) Limitation. The authority of Farm Credit banks and associations
operating under section 1.7(a) of the Act to finance eligible farm-
related service businesses under paragraphs (b)(1) and (b)(2) of this
section is limited to necessary capital structures, equipment, and
initial working capital.
[62 FR 4441, Jan. 30, 1997, as amended at 66 FR 28643, May 24, 2001]
Sec. 613.3030 Rural home financing.
(a) Definitions.
(1) Rural homeowner means an individual who resides in a rural area
and is not a bona fide farmer, rancher, or producer or harvester of
aquatic products.
(2) Rural home means a single-family moderately priced dwelling
located in a rural area that will be owned and occupied as the rural
homeowner's principal residence.
(3) Rural area means open country within a State or the Commonwealth
of Puerto Rico, which may include a town or village that has a
population of not more than 2,500 persons.
(4) Moderately priced means the price of any rural home that either:
(i) Satisfies the criteria in section 8.0 of the Act pertaining to
rural home loans that collateralize securities that are guaranteed by
the Federal Agricultural Mortgage Corporation; or
[[Page 96]]
(ii) Is otherwise determined to be moderately priced for housing
values for the rural area where it is located, as documented by data
from a credible, independent, and recognized national or regional
source, such as a Federal, State, or local government agency, or an
industry source. Housing values at or below the 75th percentile of
values reflected in such data will be deemed moderately priced.
(b) Eligibility. Any rural homeowner is eligible to obtain financing
on a rural home. No borrower shall have a loan from the Farm Credit
System on more than one rural home at any one time.
(c) Purposes of financing. Loans may be made to rural homeowners for
the purpose of buying, building, remodeling, improving, repairing rural
homes, and refinancing existing indebtedness thereon.
(d) Portfolio limitations. (1) The aggregate of retail rural home
loans by any Farm Credit Bank or agricultural credit bank shall not
exceed 15 percent of the total of all of its outstanding loans at any
one time.
(2) The aggregate of rural home loans made by each direct lender
association shall not exceed 15 percent of the total of its outstanding
loans at the end of its preceding fiscal year, except with the prior
approval of its funding bank.
(3) The aggregate of rural home loans made by all direct lender
associations that are funded by the same Farm Credit bank shall not
exceed 15 percent of the total outstanding loans of all such
associations at the end of the funding bank's preceding fiscal year.
[62 FR 4441, Jan. 30, 1997, as amended at 66 FR 28643, May 24, 2001]
Subpart B_Financing for Banks Operating Under Title III of the Farm
Credit Act
Source: 62 FR 4442, Jan. 30, 1997, unless otherwise noted.
Sec. 613.3100 Domestic lending.
(a) Definitions. For purposes of this subpart, the following
definitions apply:
(1) Cooperative means any association of farmers, ranchers,
producers or harvesters of aquatic products, or any federation of such
associations, or a combination of such associations and farmers,
ranchers, or producers or harvesters of aquatic products that conducts
business for the mutual benefit of its members and has the power to:
(i) Process, prepare for market, handle, or market farm or aquatic
products;
(ii) Purchase, test, grade, process, distribute, or furnish farm or
aquatic supplies; or
(iii) Furnish business and financially related services to its
members.
(2) Farm or aquatic supplies and farm or aquatic business services
are any goods or services normally used by farmers, ranchers, or
producers and harvesters of aquatic products in their business
operations, or to improve the welfare or livelihood of such persons.
(3) Public utility means a cooperative or other entity that is
licensed under Federal, State, or local law to provide electric,
telecommunication, cable television, water, or waste treatment services.
(4) Rural area means all territory of a State that is not within the
outer boundary of any city or town having a population of more than
20,000 inhabitants based on the latest decennial census of the United
States.
(5) Service cooperative means a cooperative that is involved in
providing business and financially related services (other than public
utility services) to farmers, ranchers, aquatic producers or harvesters,
or their cooperatives.
(b) Cooperatives and other entities that serve agricultural or
aquatic producers. (1) Eligibility of cooperatives. A bank for
cooperatives or an agricultural credit bank may lend to a cooperative
that satisfies the following requirements:
(i) Unless the bank's board of directors establishes by resolution a
higher voting control threshold for any type of cooperative, the
percentage of voting control of the cooperative held by farmers,
ranchers, producers or harvesters of aquatic products, or cooperatives
shall be 80 percent except:
(A) Sixty (60) percent for a service cooperative;
(B) Sixty (60) percent for local farm supply cooperatives that have
historically served the needs of a community
[[Page 97]]
that would not be adequately served by other suppliers and have
experienced a reduction in the percentage of membership by agricultural
or aquatic producers due to changed circumstances beyond their control;
and
(C) Sixty (60) percent for local farm supply cooperatives that
provide or will provide needed services to a community, and are or will
be in competition with a cooperative specified in Sec.
613.3100(b)(1)(i)(B);
(ii) The cooperative deals in farm or aquatic products, or products
processed therefrom, farm or aquatic supplies, farm or aquatic business
services, or financially related services with or for members in an
amount at least equal in value to the total amount of such business it
transacts with or for non-members, excluding from the total of member
and non-member business, transactions with the United States, or any
agencies or instrumentalities thereof, or services or supplies furnished
by a public utility; and
(iii) The cooperative complies with one of the following two
conditions:
(A) No member of the cooperative shall have more than one vote
because of the amount of stock or membership capital owned therein; or
(B) The cooperative restricts dividends on stock or membership
capital to 10 percent per year or the maximum percentage per year
permitted by applicable State law, whichever is less.
(iv) Any cooperative that has received a loan from a bank for
cooperatives or an agricultural credit bank shall, without regard to the
requirements in paragraph (b)(1) of this section, continue to be
eligible for as long as more than 50 percent (or such higher percentage
as is established by the bank board) of the voting control of the
cooperative is held by farmers, ranchers, producers or harvesters of
aquatic products, or other eligible cooperatives.
(2) Other eligible entities. The following entities are eligible to
borrow from banks for cooperatives and agricultural credit banks:
(i) Any legal entity that holds more than 50 percent of the voting
control of a cooperative that is an eligible borrower under paragraph
(b)(1) of this section and uses the proceeds of the loan to fund the
activities of its cooperative subsidiary on the terms and conditions
specified by the bank;
(ii) Any legal entity in which an eligible cooperative (or a
subsidiary or other entity in which an eligible cooperative has an
ownership interest) has an ownership interest, provided that if the
percentage of ownership attributable to the eligible cooperative is less
than 50 percent, financing may not exceed the percentage of ownership
attributable to the eligible cooperative multiplied by the value of the
total assets of such entity; or
(iii) Any creditworthy private entity operated on a non-profit basis
that satisfies the requirements for a service cooperative and complies
with the requirements of either paragraphs (b)(1)(i)(A) and (b)(1)(iii)
of this section, or paragraph (b)(1)(iv) of this section, and any
subsidiary of such entity. An entity that is eligible to borrow under
this paragraph shall be organized to benefit agriculture in furtherance
of the welfare of the farmers, ranchers, and aquatic producers or
harvesters who are its members.
(c) Electric and telecommunication utilities. (1) Eligibility. A
bank for cooperatives or an agricultural credit bank may lend to:
(i) Electric and telephone cooperatives as defined by section
3.8(a)(4)(A) of the Act that satisfy the eligibility criteria in
paragraph (b)(1) of this section;
(ii) Cooperatives and other entities that:
(A) Have received a loan, loan commitment, insured loan, or loan
guarantee from the Rural Utilities Service of the United States
Department of Agriculture to finance rural electric and
telecommunication services;
(B) Have received a loan or a loan commitment from the Rural
Telephone Bank of the United States Department of Agriculture; or
(C) Are eligible under the Rural Electrification Act of 1936, as
amended, for a loan, loan commitment, or loan guarantee from the Rural
Utilities Service or the Rural Telephone Bank.
(iii) The subsidiaries of cooperatives or other entities that are
eligible under paragraph (c)(1)(ii) of this section.
[[Page 98]]
(iv) Any legal entity that holds more than 50 percent of the voting
control of any public utility that is an eligible borrower under
paragraph (c)(1)(ii) of this section, and uses the proceeds of the loan
to fund the activities of the eligible subsidiary on the terms and
conditions specified by the bank.
(v) Any legal entity in which an eligible utility under paragraph
(c)(1)(ii) of this section (or a subsidiary or other entity in which an
eligible utility under paragraph (c)(1)(ii) has an ownership interest)
has an ownership interest, provided that if the percentage of ownership
attributable to the eligible utility is less than 50 percent, financing
may not exceed the percentage of ownership attributable to the eligible
utility multiplied by the value of the total assets of such entity.
(2) Purposes for financing. A bank for cooperatives or agricultural
credit bank may extend credit to entities that are eligible to borrow
under paragraph (c)(1) of this section in order to provide electric or
telecommunication services in a rural area. A subsidiary that is
eligible to borrow under paragraph (c)(1)(iii) of this section may also
obtain financing from a bank for cooperatives or agricultural credit
bank for energy-related or public utility-related purposes that cannot
be financed by the lenders referred to in paragraph (c)(1)(ii),
including, without limitation, financing to operate a licensed cable
television utility.
(d) Water and waste disposal facilities. (1) Eligibility. A
cooperative or a public agency, quasi-public agency, body, or other
public or private entity that, under the authority of State or local
law, establishes and operates water and waste disposal facilities in a
rural area, as that term is defined by paragraph (a)(5) of this section,
is eligible to borrow from a bank for cooperatives or an agricultural
credit bank.
(2) Purposes for financing. A bank for cooperatives or agricultural
credit bank may extend credit to entities that are eligible under
paragraph (d)(1) of this section solely for installing, maintaining,
expanding, improving, or operating water and waste disposal facilities
in rural areas.
(e) Domestic lessors. A bank for cooperatives or agricultural credit
bank may lend to domestic parties to finance the acquisition of
facilities or equipment that will be leased to shareholders of the bank
for use in their operations located inside of the United States.
[62 FR 4442, Jan. 30, 1997; 62 FR 33746, June 23, 1997, as amended at 69
FR 43514, July 21, 2004]
Sec. 613.3200 International lending.
(a) Definitions. For the purpose of this section only, the following
definitions apply:
(1) Agricultural supply includes:
(i) A farm supply; and
(ii) Agriculture-related processing equipment, agriculture-related
machinery, and other capital goods related to the storage or handling of
agricultural commodities or products.
(2) Farm supply refers to an input that is used in a farming or
ranching operation.
(b) Import transactions. The following parties are eligible to
borrow from a bank for cooperatives or an agricultural credit bank
pursuant to section 3.7(b) of the Act for the purpose of financing the
import of agricultural commodities or products therefrom, aquatic
products, and agricultural supplies into the United States:
(1) An eligible cooperative as defined by Sec. 613.3100(b);
(2) A counterparty with respect to a specific import transaction
with a voting stockholder of the bank for the substantial benefit of the
shareholder; and
(3) Any foreign or domestic legal entity in which eligible
cooperatives hold an ownership interest.
(c) Export transactions. Pursuant to section 3.7(b)(2) of the Act, a
bank for cooperatives or an agricultural credit bank is authorized to
finance the export (including the cost of freight) of agricultural
commodities or products therefrom, aquatic products, or agricultural
supplies from the United States to any foreign country. The board of
directors of each bank for cooperatives and agricultural credit bank
shall adopt policies that ensure that exports of agricultural products
and commodities, aquatic products, and agricultural supplies which
originate from eligible cooperatives are financed on a priority basis.
The total amount
[[Page 99]]
of balances outstanding on loans made under this paragraph shall not, at
any time, exceed 50 percent of the capital of any bank for cooperatives
or agricultural credit bank for loans that:
(1) Finance the export of agricultural commodities and products
therefrom, aquatic products, or agricultural supplies that are not
originally sourced from an eligible cooperative; and
(2) At least 95 percent of the loan amount is not guaranteed by a
department, agency, bureau, board, or commission of the United States or
a corporation that is wholly owned directly or indirectly by the United
States.
(d) International business operations. A bank for cooperatives or an
agricultural credit bank may finance a domestic or foreign entity which
is at least partially owned by eligible cooperatives described in Sec.
613.3100(b), and facilitates the international business operations of
such cooperatives.
(e) Restrictions. (1) When eligible cooperatives own less than 50
percent of a foreign or domestic legal entity, the amount of financing
that a bank for cooperatives or agricultural credit bank may provide to
the entity for imports, exports, or international business operations
shall not exceed the percentage of ownership that eligible cooperatives
hold in such entity multiplied by the value of the total assets of such
entity; and
(2) A bank for cooperatives or agricultural credit bank shall not
finance the relocation of any plant or facility from the United States
to a foreign country.
[62 FR 4442, Jan. 30, 1997, as amended at 69 FR 43514, July 21, 2004]