Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43633

Done at Washington, DC, on: August 4,

1997.

Thomas J. Billy,

Administrator.

[FR Doc. 97–21672 Filed 8–14–97; 8:45 am]

BILLING CODE 3410–DM–U

FARM CREDIT ADMINISTRATION

12 CFR Part 650

RIN 3052–AB72

Federal Agricultural Mortgage

Corporation; Receivers and

Conservators

AGENCY: Farm Credit Administration.

ACTION: Final rule.

SUMMARY: The Farm Credit

Administration (FCA or Agency),

through the FCA Board (Board), issues

a final rule amending its regulations that

apply to the Federal Agricultural

Mortgage Corporation (Farmer Mac or

Corporation) by adding a subpart to

govern a receivership or

conservatorship. The final rule

implements the receivership/

conservatorship authorities granted to

the FCA by the Farm Credit System

Reform Act of 1996 (1996 Reform Act),

Pub. L. 104–105 (Feb. 10, 1996) and by

previous law.

DATES: This regulation shall become

effective 30 days after publication in the

Federal Register during which either or

both houses of Congress are in session.

Notice of the effective date will be

published in the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Larry W. Edwards, Director, Office of

Secondary Market Oversight, Farm

Credit Administration, McLean, VA

22102–5090, (703) 883–4051, TDD (703)

883–4444.

SUPPLEMENTARY INFORMATION: The FCA

proposed amendments to its regulations

governing Farmer Mac on February 24,

1997 (62 FR 8190). The 1996 Reform Act

added section 8.41 to the Farm Credit

Act of 1971, as amended (Act), which

grants the FCA the authority to place the

Corporation into receivership and

expands the FCA’s existing authority to

place the Corporation into

conservatorship. This final rule

implements these statutory provisions.

Public Comments Received

The 30-day comment period expired

on March 26, 1997. The FCA received

three comments, one from the

Corporation, one from the Farm Credit

Council (FCC) on behalf of its member

Farm Credit System (FCS) institutions,

and one from the United States

Department of the Treasury (Treasury).

The following is a discussion of the

comments and FCA’s responses.

A. Comments of the Farm Credit

Council

Several of the FCC’s comments were

related to the slightly different language

used in the proposed regulation

compared to FCA’s receivership and

conservatorship regulations in part 627

of this chapter, which was the model for

the proposed rule. The FCC indicated

that for the most part, the differences

were called to FCA’s attention to make

sure that they were intentional.

Proposed § 650.56(b)(1) provides that a

receiver of Farmer Mac may exercise all

powers as are conferred upon the

officers and directors of the Corporation

under law and the articles and bylaws

of the Corporation, while

§ 627.2725(b)(1) refers to powers as

conferred under law and the ‘‘charter,’’

articles, and bylaws of the institution.

Although the FCA may cancel the

charter of the Corporation upon the

appointment of a receiver, it may also

leave the charter in existence until the

conclusion of the receivership. In light

of this, the FCA has included the word

‘‘charter’’ in the final regulation.

Another difference between proposed

part 650 and existing part 627 of this

chapter noted by the FCC is that

proposed § 650.59(b) begins with a

reference to the ‘‘stock and other

equities of the Corporation’’ and

concludes with a reference to payment

of a liquidating dividend to Farmer

Mac’s ‘‘stockholders.’’ Section

627.2735(b)(2) begins with a similar

reference to ‘‘the stock and other

equities’’ of a liquidating institution, but

concludes with a reference to payment

of a liquidating dividend to the ‘‘owners

of such equities.’’ The FCC believes that

the reference to owners of equities is

broader than the simple reference to

stockholders in proposed § 650.59(b).

The FCA agrees, but notes that, with

respect to the Corporation, all equity

owners are stockholders. Therefore, the

FCA makes no change to § 650.59.

The FCC also indicated that the

phrase ‘‘or applied against any

indebtedness of the owners of such

equities,’’ which appears in the first

sentence of paragraph (b) of proposed

§ 650.58, is not found in paragraph (a)

of that section although the same phrase

appears in both paragraphs (a) and (b)

of § 627.2730. The phrase was

intentionally omitted from proposed

§ 650.58(a) because, unlike the equity

holders of Farm Credit institutions who

in most cases are also borrowers of the

institutions, the equity holders of the

Corporation will most likely not be

indebted to the Corporation. Also, the

restriction against retirement of equities

in § 650.58(b) is broad enough to

include applying stock against the

indebtedness of the owner of the stock

should any stockholders be indebted to

the Corporation. As a result, the FCA

omitted the phrase ‘‘or applied against

any indebtedness of the owners of such

equities’’ from § 650.58(b) of the final

regulation. The final comparison to part

627 of this chapter that the FCC pointed

out is that proposed § 650.65(d), like its

counterpart § 627.2775(c), provides that,

upon the issuance of an order placing

the Corporation in conservatorship, all

rights, privileges, and powers of the

‘‘members,’’ board of directors, officers,

and employees of the Corporation are

vested exclusively in the conservator,

and questioned whether the reference to

‘‘members’’ is appropriate and relevant

in the case of the Corporation. The FCA

agrees that the term ‘‘members’’ is not

appropriate with reference to the

Corporation and removed that term in

the final regulation.

The FCC commented that the word

‘‘reasonable’’ should be inserted in

proposed § 650.56(b)(15) immediately

before the phrase ‘‘expenses of the

receivership.’’ The FCC noted in this

regard that proposed § 650.61(b),

concerning priority of claims, expressly

limits the administrative expenses of the

Corporation that may be afforded a

second priority to ‘‘reasonable’’

expenses incurred for services actually

provided by accountants, attorneys,

appraisers, examiners, or management

companies, or ‘‘reasonable’’ expenses

incurred by employees that were

authorized and reimbursable under a

preexisting expense reimbursement

policy. In response, the FCA notes that

the expenses covered by § 650.61(b) are

expenses of the Corporation incurred

prior to the appointment of a receiver.

All such expenses may not necessarily

be paid, as payment is limited to the

receiver’s judgment that the services

underlying the claims are of benefit to

the receivership. In contrast,

§§ 650.56(b)(15) and 650.61(a) relate

only to the authority of the receiver to

pay the administrative expenses of the

receivership and all costs associated

with carrying out the powers and duties

of a receiver. Furthermore, pursuant to

§ 650.56(a)(3), the receiver serves as the

trustee of the receivership estate and is

required to conduct all of its operations,

whether incurring and paying

administrative expenses or exercising

any other power conferred by the

regulations, for the benefit of the

creditors and stockholders of the

Corporation. Therefore, the FCA
43634 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

believes that addition of the term

‘‘reasonable’’ to § 650.56(b)(15) is

neither necessary nor appropriate and

adopts § 650.56(b)(15) as proposed.

The FCC made two comments with

regard to the preamble accompanying

the proposed and final regulations. The

FCC asserted that during the early

drafting stages of what became section

8.41 of the Act, consideration was given

to authorizing a receiver of the

Corporation to borrow from the Farm

Credit System Insurance Fund

(Insurance Fund) to meet the ongoing

administrative expenses and liquidity

needs of a Corporation receivership. The

authorization to borrow from the

Insurance Fund for such purposes was

opposed by the FCS. The FCC states

that, although express borrowing

authority was not adopted in section

8.41, FCS institutions would take

comfort from FCA’s insertion, into the

preamble to the final regulation, of a

statement expressly acknowledging that

neither section 8.41 nor the final

implementing regulations authorize the

Farm Credit System Insurance

Corporation (FCSIC) to loan moneys

from the Insurance Fund to a

Corporation receiver or conservator for

any reason whatsoever. In response, the

FCA acknowledges the comment and

notes that FCSIC’s authority to make use

of the Insurance Fund is governed by

title V, part E of the Act, not FCA

regulations.

The other comment regarding the

preamble to the proposed regulation

points out that the preamble states that

the Corporation will be required to

comply with the applicable provisions

of the Securities Act of 1933 and the

Securities Exchange Act of 1934, but

proposed § 650.67(c), while expressly

referring to the requirements of § 620.40

and part 621 of this chapter, makes no

reference to the securities acts. The FCC

questioned whether the omission was

intentional or inadvertent. The FCA

notes that § 620.40 and part 621 of this

chapter require the Corporation to

comply with the securities acts, and the

statement in the preamble was merely a

reference to the requirement. Therefore,

the FCA makes no change to § 650.67.

B. Federal Agricultural Mortgage

Corporation Comments

The Corporation commented on

§ 650.50 of the proposed regulation,

which provides the grounds for which

a receiver may be appointed for the

Corporation, and requested that the FCA

amend § 650.50(a)(1) to clarify the

definition of insolvency. Under the

proposed regulation, the Corporation

would be considered insolvent if its

assets are less than its obligations to its

creditors and others or if the

Corporation is unable to pay its debts in

the ordinary course of business. In

relation to the first criterion, the

Corporation guarantees mortgage-backed

securities that are sold to third-party

entities or individuals and then

classified for accounting purposes as

‘‘off-balance-sheet’’ contingent liabilities

of the guarantor. Because there is no

definition of the word ‘‘obligations’’ in

the Act, in the proposed regulations, or

in the regulations contained in part 627

of this chapter, the Corporation

questions whether obligations would

include contingent liabilities,

particularly guarantees. The Corporation

asserts that if obligations are interpreted

to include the contingent liabilities of

the Corporation as a guarantor of

securities pursuant to its authorities

under the Act, it could be deemed to be

insolvent today, which would not be a

result intended by Congress or reflective

of the Corporation’s true financial

condition. The amendment to § 650.50

suggested by the Corporation would

expressly exclude contingent liabilities

under guarantees issued by the

Corporation. Alternatively, the

Corporation commented that if the FCA

intended to include contingent

liabilities as obligations for the purposes

of determining insolvency, the value of

the liabilities should be adjusted based

upon an assessment of the probability

that the contingency of default will

occur and that the Corporation will be

called upon to pay under its guarantee

and should be net of the reserves for

losses of the Corporation. Further, the

assets of the Corporation should include

the value of any rights that the

Corporation would have against any

other parties in the event that it is called

upon to pay on a guarantee, including,

but not limited to, rights of subrogation

or reimbursement from a primary

obligor. The Corporation provided

suggested regulatory language to

implement the two alternatives.

The FCA does not believe that

contingent liabilities of the Corporation

as a guarantor of securities pursuant to

its authorities under the Act would

ordinarily be considered as obligations

for purposes of determining the

Corporation’s solvency under

§ 650.50(a)(1)(i). A loss contingency

related to such guarantees would affect

the determination of solvency (and

would likely be recorded in the

Corporation’s financial statements) if a

loss were probable and could be

reasonably estimated. Moreover, if a loss

contingency were both probable and

could be reasonably estimated, the

amount of such contingency that would

be included in the determination of

solvency would be based on an analysis

of the circumstances and would not

necessarily be the amount of the

guarantee itself. The treatment of

contingent liabilities for the purposes of

§ 650.50(a)(1)(i) is consistent with the

treatment of contingent liabilities under

Generally Accepted Accounting

Principles, specifically, Statement of

Financial Accounting Standards No. 5,

Accounting for Contingencies (SFAS

No. 5). SFAS No. 5 requires that an

estimated loss from a loss contingency

be recorded in the financial statements

if it is both probable that a liability has

been incurred at the date of the financial

statements and the amount of the loss

can be reasonably estimated. If a loss

contingency is not recorded in the

financial statements because one or both

of the above criteria are not met,

disclosure of the loss contingency may

or may not be required depending on

the likelihood that a loss will be

incurred. Disclosure of contingencies in

such circumstances, however, is made

in management’s discussion and

analysis and the contingencies are not

recorded as liabilities in the financial

statements.

Because the FCA generally would not

consider the Corporation’s contingent

guarantee obligations to be included in

the calculation of insolvency unless a

liability related to such guarantees was

probable and could be reasonably

estimated, the FCA has not amended

§ 650.50(a)(1)(i) in the manner suggested

by the commenter. A blanket exclusion

of such obligations would not be

appropriate because it could serve to

confuse rather than clarify the

requirements of the regulation. Further,

the FCA believes that it is unlikely that

investors would mistakenly conclude

that all of the Corporation’s contingent

guarantee obligations would be

included in the FCA’s calculation of

insolvency because the treatment of

contingent liabilities is a generally

widespread and well-known concept.

As a final note, although the FCA

generally would not include the amount

of the contingent guarantee obligations

in the calculation of insolvency for the

purpose of these regulations, the

Corporation’s general ability to meet its

contingent guarantee obligations are

considered by the FCA when making

any determination concerning the safety

and soundness of the Corporation.

The Corporation also commented

regarding § 650.60(b) of the proposed

regulation, which authorizes a receiver

of the Corporation to allow any claim

that is timely received and proved to the

receiver’s satisfaction. The receiver also

has the power to disallow claims in
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43635

whole or in part if not proved to the

receiver’s satisfaction. The disallowance

is final unless, within 30 days, a

claimant files a written request for

payment regardless of the disallowance.

Any such request is reconsidered by the

receiver, who may approve or

disapprove the claim in whole or in

part. The Corporation requested that the

FCA amend § 650.60 to provide that the

FCA (through an official of the FCA who

did not participate in the initial

disallowance of the claim) would

reconsider a disallowed claim upon the

request of a claimant in order to ensure

that a disallowed claim would be

reviewed by an entity other than the

person who initially disallowed the

claim. In addition, the Corporation

asserts that such an amendment would

ultimately make decisions regarding the

allowance of claims reviewable under

the provisions of the Administrative

Procedure Act (APA), 5 U.S.C. 500 et

seq., with all of its procedural

safeguards, including the availability of

judicial review. The Corporation

contends that it is important for

investors and others who do business

with it to know that, in the unlikely

event that a receiver were to be

appointed, procedures regarding the

recognition of their claims would be

fair, and any disallowance of their

claims would be subject to review by

the FCA.

The FCA does not believe it is

appropriate for it to review claims

disallowed by the receiver and has not

amended § 650.60. Unless the FCA,

pursuant to section 8.41(c) of the Act, is

the receiver of the Corporation, the FCA

will ordinarily leave administrative

decisions to the judgment of the

receiver. FCA’s regulations under part

627 of this chapter do not provide for

the Agency’s review of claim denial

decisions, and the FCA does not believe

it is appropriate to afford different

treatment to the creditors of the

Corporation. Further, these regulations

do not preclude any other avenues of

review that may be available to a claim

holder.

C. Treasury Comments

In the preamble discussion

accompanying proposed § 650.56(b), the

FCA noted that generally, a receiver or

conservator of the Corporation would

have all of the rights and powers that

the Corporation had prior to the

appointment of the receiver and

requested comment on whether there

should be any limits imposed on these

powers. The Treasury commented that

because the purpose of a receivership

would be to wind up the Corporation’s

affairs, the receiver should not be

conducting new business, such as

issuing guarantees, or expanding the

Corporation’s debt obligations. The

power of a receiver to exercise all

powers that are conferred upon the

Corporation is not intended to allow the

receiver to search out or engage in new

business opportunities. The power of

the receiver to issue guarantees, debt

obligations, or any other authority of the

Corporation is designed to enable the

receiver to conclude any transactions

that were in progress when the receiver

was appointed or take other similar

actions if such actions are in the best

interest of the receivership. Restricting

the receiver’s powers to less than those

of the Corporation may preclude the

receiver from acting in the best interest

of the receivership. Therefore, the FCA

is making no change as a result of this

comment.

D. Section 650.61—Priority of Claims

The Corporation, the FCC, and the

Treasury commented with regard to

§ 650.61, which establishes the priority

for payment of claims against the

Corporation in receivership. The

Corporation commented that proposed

§ 650.61 did not explicitly provide a

priority for claims of holders of

securities guaranteed by the Corporation

(guaranteed securities). Further, the

Corporation asserts that because

investors in guaranteed securities rely in

part on the right of Farmer Mac to sell

obligations to the Secretary of the

Treasury (12 U.S.C. 2279aa–13), any

inference in the regulations that the

claims of holders would not take

precedence over the claims of general

creditors could create uncertainty with

respect to the Corporation’s guarantee

and adversely affect the market for, and

pricing of, its guaranteed securities. The

Corporation recommended that the FCA

amend § 650.61 to provide for payment

of claims of holders of guaranteed

securities prior to the payment of

general, unsecured creditors.

The FCA has not adopted this

suggestion because the Act does not

provide a priority in liquidation for

holders of guaranteed securities over

other creditors of the Corporation. In

addition, holders of guaranteed

securities already have significant

protection. They have direct access to

the assets of the specific pool securing

their securities as well as the guarantee

of the Corporation should the assets

backing the pool not be sufficient.

Further, the Corporation has borrowing

authority from Treasury to help enable

it to fulfill guarantees.

In the preamble to the proposed

regulation, the FCA stated that it was

considering whether to provide a

priority over other creditors for

obligations issued to the Treasury and

requested comment on the issue. The

FCC commented that the obligations

issued to the Treasury should have a

priority over other creditors only if one

is provided by statute. The Corporation

commented that because the statute

does not provide a priority for

obligations issued to the Treasury, no

such priority should be provided by

regulation. Further, the Corporation

asserted that giving a priority position

for the Treasury over other unsecured

general creditors of the Corporation

could adversely affect its dealings with

vendors who would be general creditors

in the unlikely event of a receivership.

The Treasury requested that the

regulations provide a priority over

unsecured general creditors for any

unsecured Farmer Mac obligations

issued to the Treasury.

The FCA believes that any priority

afforded to the Corporation’s obligations

should be determined by statute and the

terms of the obligations. The FCA notes

that other statutes may provide some

protection to the Treasury, but the Act

does not provide a priority in

liquidation for obligations issued to the

Treasury. Therefore, the FCA has not

included such a priority in § 650.61.

Obligations issued to the Secretary of

the Treasury will be paid in the class of

secured or unsecured creditors,

depending on the nature of the

obligations.

Other than the changes previously

noted to §§ 650.56, 650.58, and 650.65,

and minor editorial changes, the FCA

adopts the amendments to part 650 as

proposed.

List of Subjects in 12 CFR Part 650

Agriculture, Banks, banking, Conflicts

of interests, Rural areas.

For the reasons stated in the

preamble, part 650 of chapter VI, title 12

of the Code of Federal Regulations is

amended to read as follows:

PART 650—FEDERAL AGRICULTURAL

MORTGAGE CORPORATION

1. The authority citation for part 650

is revised to read as follows:

Authority: Secs. 4.12, 5.9, 5.17, 8.11, 8.37,

8.41 of the Farm Credit Act (12 U.S.C. 2183,

2243, 2252, 2279aa–11, 2279bb–6, 2279cc);

sec. 514 of Pub. L. 102–552, 106 Stat. 4102;

sec. 118 of Pub. L. 104–105, 110 Stat. 168.

2. Part 650 is amended by adding a

new subpart C to read as follows:
43636 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

Subpart C—Receiver and Conservator

Sec.

650.50 Grounds for appointment of a

receiver or conservator.

650.51 Action for removal of receiver or

conservator.

650.52 Voluntary liquidation.

650.55 Appointment of a receiver.

650.56 Powers and duties of the receiver.

650.57 Report to Congress.

650.58 Preservation of equity.

650.59 Notice to stockholders.

650.60 Creditor claims.

650.61 Priority of claims.

650.62 Payment of claims.

650.63 Inventory, audit, and reports.

650.64 Final discharge and release of the

receiver.

650.65 Appointment of a conservator.

650.66 Powers and duties of the

conservator.

650.67 Inventory, examination, and reports

to stockholders.

650.68 Final discharge and release of the

conservator.

Subpart C—Receiver and Conservator

§ 650.50 Grounds for appointment of a

receiver or conservator.

(a) The grounds for the appointment

of a receiver or conservator for the

Corporation are:

(1) The Corporation is insolvent. For

purposes of this paragraph, insolvent

means:

(i) The assets of the Corporation are

less than its obligations to its creditors

and others; or

(ii) The Corporation is unable to pay

its debts as they fall due in the ordinary

course of business;

(2) There has been a substantial

dissipation of the assets or earnings of

the Corporation due to the violation of

any law, rule, or regulation, or the

conduct of an unsafe or unsound

practice;

(3) The Corporation is in an unsafe or

unsound condition to transact business;

(4) The Corporation has committed a

willful violation of a final cease-anddesist order issued by the Farm Credit

Administration Board;

(5) The Corporation is concealing its

books, papers, records, or assets, or is

refusing to submit its books, papers,

records, assets, or other material relating

to the affairs of the Corporation for

inspection to any examiner or any

lawful agent of the Farm Credit

Administration Board.

(b) In addition to the grounds set forth

in paragraph (a) of this section, a

receiver can be appointed for the

Corporation if the Farm Credit

Administration Board determines that

the appointment of a conservator would

not be appropriate when one of the

following conditions exists:

(1) The authority of the Corporation to

purchase qualified loans or issue or

guarantee loan-backed securities is

suspended; or

(2) The Corporation is classified

under section 8.35 of the Act as within

enforcement level III or IV and the

alternative actions available under

subtitle B of title VIII of the Act are not

satisfactory.

(c) In addition to the grounds set forth

in paragraph (a) of this section, a

conservator can be appointed for the

Corporation if:

(1) The Corporation is classified

under section 8.35 of the Act as within

enforcement level III or IV; or

(2) The authority of the Corporation to

purchase qualified loans or issue or

guarantee loan-backed securities is

suspended.

§ 650.51 Action for removal of receiver or

conservator.

Upon the appointment of a receiver or

conservator for the Corporation by the

Farm Credit Administration Board

pursuant to § 650.50 of this subpart, the

Corporation may, within 30 days of

such appointment, bring an action in

the United States District Court for the

District of Columbia, for an order

requiring the Farm Credit

Administration Board to remove the

receiver or conservator and, if the

charter has been canceled, to rescind the

cancellation of the charter.

Notwithstanding any other provision of

this part, the Corporation’s board of

directors is empowered to meet

subsequent to such appointment and

authorize the filing of an action for

removal. An action for removal may be

authorized only by the Corporation’s

board of directors.

§ 650.52 Voluntary liquidation.

(a) The Corporation may voluntarily

liquidate by a resolution of its board of

directors, but only with the consent of,

and in accordance with a plan of

liquidation approved by, the Farm

Credit Administration Board. Upon

adoption of such resolution, the

Corporation shall submit the resolution

and proposed voluntary liquidation

plan to the Farm Credit Administration

Board for preliminary approval. The

Farm Credit Administration Board, in

its discretion, may appoint a receiver as

part of an approved liquidation plan. If

a receiver is appointed for the

Corporation as part of a voluntary

liquidation, the receivership shall be

conducted pursuant to the regulations of

this part, except to the extent that an

approved plan of liquidation provides

otherwise.

(b) If the Farm Credit Administration

Board gives preliminary approval to the

liquidation plan, the board of directors

of the Corporation shall submit the

resolution to liquidate to the

stockholders for a vote in accordance

with the bylaws of the Corporation.

(c) The Farm Credit Administration

Board will consider final approval of the

resolution to voluntarily liquidate and

the liquidation plan after an affirmative

stockholder vote on the resolution.

§ 650.55 Appointment of a receiver.

(a) The Farm Credit Administration

Board may in its discretion appoint, ex

parte and without prior notice, a

receiver for the Corporation provided

that one or more of the grounds for

appointment as set forth in § 650.50 of

this subpart exist.

(b) Upon the appointment of the

receiver, the Chairman of the Farm

Credit Administration Board shall

immediately notify the Corporation and

shall publish a notice of the

appointment in the Federal Register.

(c) Upon the issuance of the order

placing the Corporation into liquidation

and appointing the receiver, all rights,

privileges, and powers of the board of

directors, officers, and employees of the

Corporation shall be vested exclusively

in the receiver. The Farm Credit

Administration Board may cancel the

charter of the Corporation on such date

as the Farm Credit Administration

Board determines is appropriate, but not

later than the conclusion of the

receivership and discharge of the

receiver.

§ 650.56 Powers and duties of the receiver.

(a) General. (1) Upon appointment as

receiver, the receiver shall take

possession of the Corporation in order

to wind up the business operations of

the Corporation, collect the debts owed

to the Corporation, liquidate its property

and assets, pay its creditors, and

distribute the remaining proceeds to

stockholders. The receiver is authorized

to exercise all powers necessary to the

efficient termination of the

Corporation’s operation as provided for

in this part.

(2) Upon its appointment as receiver,

the receiver automatically succeeds to:

(i) All rights, titles, powers, and

privileges of the Corporation and of any

stockholder, officer, or director of the

Corporation with respect to the

Corporation and the assets of the

Corporation; and

(ii) Title to the books, records, and

assets of the Corporation in the

possession of any other legal custodian

of the Corporation.

(3) The receiver of the Corporation

serves as the trustee of the receivership

estate and conducts its operations for
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43637

the benefit of the creditors and

stockholders of the Corporation.

(b) Specific powers. The receiver may:

(1) Exercise all powers as are

conferred upon the officers and

directors of the Corporation under law

and the charter, articles, and bylaws of

the Corporation.

(2) Take any action the receiver

considers appropriate or expedient to

carry on the business of the Corporation

during the process of liquidating its

assets and winding up its affairs.

(3) Borrow funds in accordance with

section 8.41(f) of the Act to meet the

ongoing administrative expenses or

other liquidity needs of the

receivership.

(4) Pay any sum the receiver deems

necessary or advisable to preserve,

conserve, or protect the Corporation’s

assets or property or rehabilitate or

improve such property and assets.

(5) Pay any sum the receiver deems

necessary or advisable to preserve,

conserve, or protect any asset or

property on which the Corporation has

a lien or in which the Corporation has

a financial or property interest, and pay

off and discharge any liens, claims, or

charges of any nature against such

property.

(6) Investigate any matter related to

the conduct of the business of the

Corporation, including, but not limited

to, any claim of the Corporation against

any individual or entity, and institute

appropriate legal or other proceedings to

prosecute such claims.

(7) Institute, prosecute, maintain,

defend, intervene, and otherwise

participate in any legal proceeding by or

against the Corporation or in which the

Corporation or its creditors or

stockholders have any interest, and

represent in every way the Corporation,

its stockholders and creditors.

(8) Employ attorneys, accountants,

appraisers, and other professionals to

give advice and assistance to the

receivership generally or on particular

matters, and pay their retainers,

compensation, and expenses, including

litigation costs.

(9) Hire any agents or employees

necessary for proper administration of

the receivership.

(10) Execute, acknowledge, and

deliver, in person or through a general

or specific delegation, any instrument

necessary for any authorized purpose,

and any instrument executed under this

paragraph shall be valid and effective as

if it had been executed by the

Corporation’s officers by authority of its

board of directors.

(11) Sell for cash or otherwise any

mortgage, deed of trust, chose in action,

note, contract, judgment or decree,

stock, or debt owed to the Corporation,

or any property (real or personal,

tangible or intangible).

(12) Purchase or lease office space,

automobiles, furniture, equipment, and

supplies, and purchase insurance,

professional, and technical services

necessary for the conduct of the

receivership.

(13) Release any assets or property of

any nature, regardless of whether the

subject of pending litigation, and

repudiate, with cause, any lease or

executory contract the receiver

considers burdensome.

(14) Settle, release, or obtain release

of, for cash or other consideration,

claims and demands against or in favor

of the Corporation or receiver.

(15) Pay, out of the assets of the

Corporation, all expenses of the

receivership (including compensation to

personnel employed to represent or

assist the receiver) and all costs of

carrying out or exercising the rights,

powers, privileges, and duties as

receiver.

(16) Pay, out of the assets of the

Corporation, all approved claims of

indebtedness in accordance with the

priorities established in this part.

(17) Take all actions and have such

rights, powers, and privileges as are

necessary and incident to the exercise of

any specific power.

(18) Take such actions, and have such

additional rights, powers, privileges,

immunities, and duties as the Farm

Credit Administration Board authorizes

by order or by amendment of any order

or by regulation.

§ 650.57 Report to Congress.

On a determination by the receiver

that there are insufficient assets of the

receivership to pay all valid claims

against the receivership, the receiver

shall submit to the Secretary of the

Treasury and Congress a report on the

financial condition of the receivership.

§ 650.58 Preservation of equity.

(a) Except as provided for upon final

distribution of the assets of the

Corporation pursuant to § 650.62 of this

subpart, no capital stock, equity

reserves, or other allocated equities of

the Corporation in receivership shall be

issued, allocated, retired, sold,

distributed, transferred, or assigned.

(b) Immediately upon the adoption of

a resolution by its board of directors to

voluntarily liquidate the Corporation,

the capital stock, equity reserves, and

allocated equities of the Corporation

shall not be issued, allocated, retired,

sold, distributed, transferred, or

assigned. Such activities could resume

if the stockholders of the Corporation or

the Farm Credit Administration Board

disapprove the resolution. In the event

the resolution is approved by the

stockholders of the Corporation and the

Farm Credit Administration Board, the

liquidation plan shall govern

disposition of the equities of the

Corporation as provided in § 650.52 of

this subpart.

§ 650.59 Notice to stockholders.

As soon as practicable after a receiver

takes possession of the Corporation, the

receiver shall notify, by first class mail,

each holder of stock of the following

matters:

(a) The number of shares such holder

owns;

(b) That the stock and other equities

of the Corporation may not be retired or

transferred until the liquidation is

completed, whereupon the receiver will

distribute a liquidating dividend, if any,

to the stockholders; and

(c) Such other matters as the receiver

or the Farm Credit Administration

Board deems necessary.

§ 650.60 Creditor claims.

(a) Upon appointment, the receiver

shall promptly publish a notice to

creditors to present their claims against

the Corporation, with proof thereof, to

the receiver by a date specified in the

notice, which shall be not less than 90

calendar days after the first publication.

The notice shall be republished

approximately 30 days and 60 days after

the first publication. The receiver shall

promptly send, by first class mail, a

similar notice to any creditor shown on

the Corporation’s books at the creditor’s

last address appearing thereon. Claims

filed after the specified date shall be

disallowed except as the receiver may

approve them for full or partial payment

from the Corporation’s assets remaining

undistributed at the time of approval.

(b) The receiver shall allow any claim

that is timely received and proved to the

receiver’s satisfaction. The receiver may

disallow in whole or in part any

creditor’s claim or claim of security,

preference, or priority that is not proved

to the receiver’s satisfaction or is not

timely received and shall notify the

claimant of the disallowance and reason

therefor. Sending the notice of

disallowance by first class mail to the

claimant’s address appearing on the

proof of claim shall be sufficient notice.

The disallowance shall be final unless,

within 30 days after the notice of

disallowance is mailed, the claimant

files a written request for payment

regardless of the disallowance. The

receiver shall reconsider any claim

upon the timely request of the claimant
43638 Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations

and may approve or disapprove such

claim in whole or in part.

(c) Creditors’ claims that are allowed

shall be paid by the receiver from time

to time, to the extent funds are available

therefor and in accordance with the

priorities established in this part and in

such manner and amounts as the

receiver deems appropriate. In the event

the Corporation has a claim against a

creditor of the Corporation, the receiver

shall offset the amount of such claim

against the claim asserted by such

creditor.

§ 650.61 Priority of claims.

The following priority of claims shall

apply to the distribution of the assets of

the Corporation in liquidation:

(a) All costs, expenses, and debts

incurred by the receiver in connection

with the administration of the

receivership, all Farm Credit

Administration assessments for the

costs of supervising and examining the

Corporation, and any amounts borrowed

pursuant to § 650.56(b)(3).

(b) Administrative expenses of the

Corporation, provided that such

expenses were incurred within 60 days

prior to the receiver’s taking possession,

and that such expenses shall be limited

to reasonable expenses incurred for

services actually provided by

accountants, attorneys, appraisers,

examiners, or management companies,

or reasonable expenses incurred by

employees that were authorized and

reimbursable under a preexisting

expense reimbursement policy and that,

in the opinion of the receiver, are of

benefit to the receivership, and shall not

include wages or salaries of employees

of the Corporation.

(c) If authorized by the receiver,

claims for wages and salaries, including

vacation pay, earned prior to the

appointment of the receiver by an

employee of the Corporation whom the

receiver determines it is in the best

interest of the receivership to engage or

retain for a reasonable period of time.

(d) If authorized by the receiver,

claims for wages and salaries, including

vacation pay, earned prior to the

appointment of the receiver, up to a

maximum of three thousand dollars

($3,000) per person as adjusted for

inflation, by an employee of the

Corporation not engaged or retained by

the receiver. The adjustment for

inflation shall be the percentage by

which the Consumer Price Index (as

prepared by the Department of Labor)

for the calendar year preceding the

appointment of the receiver exceeds the

Consumer Price Index for the calendar

year 1992.

(e) All claims for taxes.

(f) All claims of creditors which are

secured by specific assets of the

Corporation, with priority of conflicting

claims of creditors within this same

class to be determined in accordance

with priorities of applicable Federal or

State law.

(g) All claims of general creditors.

§ 650.62 Payment of claims.

(a) All claims of each class described

in § 650.61 of this subpart shall be paid

in full or provisions shall be made for

such payment prior to the payment of

any claim of a lesser priority. If there are

insufficient funds to pay all claims in a

class in full, distribution to that class

will be on a pro rata basis.

(b) Following the payment of all

claims, the receiver shall distribute the

remainder of the assets of the

Corporation, if any, to the owners of

stock and other equities in accordance

with the priorities for impairment set

forth in section 8.4(e)(3) of the Act and

the bylaws of the Corporation.

§ 650.63 Inventory, audit, and reports.

(a) As soon as practicable after taking

possession of the Corporation, the

receiver shall take an inventory of the

assets and liabilities as of the date

possession was taken.

(b) The receivership shall be audited

on an annual basis by a certified public

accountant selected by the receiver.

(c) The receiver shall make an annual

accounting or report, as appropriate,

available for review upon request to any

stockholder of the Corporation or any

member of the public, with a copy

provided to the Farm Credit

Administration.

(d) As soon as practicable after final

distribution, the receiver shall send to

each stockholder of record a report

summarizing the disposition of the

assets of the receivership and claims

against the receivership.

§ 650.64 Final discharge and release of the

receiver.

After the receiver has made a final

distribution of the assets of the

receivership, the receivership shall be

terminated, the charter shall be canceled

by the Farm Credit Administration

Board if such cancellation has not

previously occurred, and the receiver

shall be finally discharged and released.

§ 650.65 Appointment of a conservator.

(a) The Farm Credit Administration

Board may in its discretion appoint, ex

parte and without prior notice, a

conservator for the Corporation

provided that one or more of the

grounds for appointment as set forth in

§ 650.50 of this subpart exist;

(b) Upon the appointment of a

conservator, the Chairman of the Farm

Credit Administration shall

immediately notify the Corporation and

shall publish a notice of the

appointment in the Federal Register.

(c) As soon as practicable after the

conservator takes possession of the

Corporation, the conservator shall

notify, by first class mail, each holder of

stock in the Corporation of the

establishment of the conservatorship

and shall describe the effect of the

conservatorship on the Corporation’s

operations and equity holdings.

(d) Upon the issuance of the order

placing the Corporation in

conservatorship, all rights, privileges,

and powers of the board of directors,

officers, and employees of the

Corporation are vested exclusively in

the conservator.

(e) The Farm Credit Administration

Board may, at any time, terminate the

conservatorship and direct the

conservator to turn over the

Corporation’s operations to such

management as the Farm Credit

Administration Board may designate, in

which event the provisions of this

subpart shall no longer apply.

§ 650.66 Powers and duties of the

conservator.

(a) The conservator shall direct the

Corporation’s further operation until the

Farm Credit Administration Board

decides that the Corporation can operate

without the conservatorship or places

the Corporation into receivership. Upon

correction or resolution of the problem

or condition that provided the basis for

the appointment, the Farm Credit

Administration Board may turn the

Corporation over to such management

as the Farm Credit Administration

Board may direct.

(b) The conservator shall exercise all

powers necessary to continue the

ongoing operations of the Corporation,

to conserve and preserve the

Corporation’s assets and property, and

otherwise protect the interests of the

Corporation, its stockholders, and

creditors as provided in this subpart.

(c) The conservator serves as the

trustee of the Corporation and conducts

its operations for the benefit of the

creditors and stockholders of the

Corporation.

(d) The conservator may exercise the

powers that a receiver of the

Corporation may exercise under any of

the provisions of § 650.56(b) of this

subpart, except paragraphs (b)(2) and

(b)(16). In interpreting the applicable

paragraphs for purposes of this section,

the terms ‘‘conservator’’ and
Federal Register / Vol. 62, No. 158 / Friday, August 15, 1997 / Rules and Regulations 43639

‘‘conservatorship’’ shall be read for

‘‘receiver’’ and ‘‘receivership’’.

(e) The conservator may also take any

other action the conservator considers

appropriate or expedient to the

continuing operation of the Corporation.

§ 650.67 Inventory, examination, and

reports to stockholders.

(a) As soon as practicable after taking

possession of the Corporation, the

conservator shall take an inventory of

the assets and liabilities of the

Corporation as of the date possession

was taken. One copy of the inventory

shall be filed with the Farm Credit

Administration.

(b) The conservatorship shall be

examined by the Farm Credit

Administration in accordance with

section 8.11 of the Act.

(c) The conservatorship shall prepare

and file financial reports and other

documents in accordance with the

requirements of § 620.40 and part 621 of

this chapter. The conservator of the

Corporation shall provide the

certification required in § 621.14 of this

chapter.

§ 650.68 Final discharge and release of the

conservator.

At such time as the conservator shall

be relieved of its conservatorship duties,

the conservator shall file a report on the

conservator’s activities with the Farm

Credit Administration. The conservator

shall thereupon be completely and

finally released.

Dated: August 7, 1997.

Floyd Fithian,

Secretary, Farm Credit Administration Board.

[FR Doc. 97–21671 Filed 8–14–97; 8:45 am]

BILLING CODE 6705–01–P

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

21 CFR Part 314

New Drug Applications and

Abbreviated New Drug Applications;

Editorial Amendments

AGENCY: Food and Drug Administration,

HHS.

ACTION: Final rule.

SUMMARY: The Food and Drug

Administration (FDA) is amending its

new drug application (NDA) and

abbreviated new drug application

(ANDA) regulations to reflect a

reorganization in the Center for Drug

Evaluation and Research (CDER). This

action will improve the accuracy of the

regulations.

EFFECTIVE DATE: August 15, 1997.

FOR FURTHER INFORMATION CONTACT:

Olivia A. Vieira, Center for Drug

Evaluation and Research (HFD–7), Food

and Drug Administration, 5600 Fishers

Lane, Rockville, MD 20857, 301–594–

2041.

SUPPLEMENTARY INFORMATION: FDA is

amending its NDA and ANDA

regulations to reflect a reorganization in

CDER. The name of the former Division

of Regulatory Affairs (HFD–360) has

been changed to the Regulatory Policy

Staff (HFD–7). Furthermore, the division

is no longer part of the Office of

Compliance and now reports to the

Associate Director for Policy (HFD–5).

The regulations are being amended in

21 CFR 314.110 (a)(3) and (b),

314.120(a)(3), and 314.440(a)(3) to

reflect this change.

Publication of this document

constitutes final action on these changes

under the Administrative Procedures

Act (5 U.S.C. 553). Because the

amendments are wholly editorial and

nonsubstantive in nature, FDA finds

that notice and public procedure are

unnecessary.

List of Subjects in 21 CFR Part 314

Administrative practice and

procedure, Confidential business

information, Drugs, Reporting and

recordkeeping requirements.

Therefore, under the Federal Food,

Drug, and Cosmetic Act and under

authority delegated to the Commissioner

of Food and Drugs, 21 CFR part 314 is

amended as follows:

PART 314—APPLICATIONS FOR FDA

APPROVAL TO MARKET A NEW DRUG

OR AN ANTIBIOTIC DRUG

1. The authority citation for 21 CFR

part 314 continues to read as follows:

Authority: Secs. 201, 301, 501, 502, 503,

505, 506, 507, 701, 704, 721 of the Federal

Food, Drug, and Cosmetic Act (21 U.S.C. 321,

331, 351, 352, 353, 355, 356, 357, 371, 374,

379e).

§ 314.110 [Amended]

2. Section 314.110 Approvable letter

to the applicant is amended in

paragraphs (a)(3) and (b) by removing

the phrase ‘‘Division of Regulatory

Affairs (HFD–360)’’ and adding in its

place the phrase ‘‘Associate Director for

Policy (HFD–5)’’.

§ 314.120 [Amended]

3. Section 314.120 Not approvable

letter to the applicant is amended in

paragraph (a)(3) by removing the phrase

‘‘Division of Regulatory Affairs (HFD–

360)’’ and adding in its place the phrase

‘‘Associate Director for Policy (HFD–5)’’.

§ 314.440 [Amended]

4. Section 314.440 Addresses for

applications and abbreviated

applications is amended in paragraph

(a)(3) by removing the phrase ‘‘Division

of Regulatory Affairs (HFD–360)’’ and

adding in its place the phrase

‘‘Associate Director for Policy (HFD–5)’’.

Dated: August 8, 1997.

William K. Hubbard,

Associate Commissioner for Policy

Coordination.

[FR Doc. 97–21649 Filed 8–14–97; 8:45 am]

BILLING CODE 4160–01–M

PENSION BENEFIT GUARANTY

CORPORATION

29 CFR Part 4044

Allocation of Assets in SingleEmployer Plans; Interest Assumptions

for Valuing Benefits

AGENCY: Pension Benefit Guaranty

Corporation.

ACTION: Final rule.

SUMMARY: The Pension Benefit Guaranty

Corporation’s regulation on Allocation

of Assets in Single-Employer Plans

prescribes interest assumptions for

valuing benefits under terminating

single-employer plans. This final rule

amends the regulation to adopt interest

assumptions for plans with valuation

dates in September 1997.

EFFECTIVE DATE: September 1, 1997.

FOR FURTHER INFORMATION CONTACT:

Harold J. Ashner, Assistant General

Counsel, Office of the General Counsel,

Pension Benefit Guaranty Corporation,

1200 K Street, NW., Washington, DC

20005, 202–326–4024 (202–326–4179

for TTY and TDD).

SUPPLEMENTARY INFORMATION: The

PBGC’s regulation on Allocation of

Assets in Single-Employer Plans (29

CFR part 4044) prescribes actuarial

assumptions for valuing plan benefits of

terminating single-employer plans

covered by title IV of the Employee

Retirement Income Security Act of 1974.

Among the actuarial assumptions

prescribed in part 4044 are interest

assumptions. These interest

assumptions are intended to reflect

current conditions in the financial and

annuity markets.

Two sets of interest assumptions are

prescribed, one set for the valuation of

benefits to be paid as annuities and one

set for the valuation of benefits to be

paid as lump sums. This amendment

adds to appendix B to part 4044 the

annuity and lump sum interest

assumptions for valuing benefits in