3172 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

testing practices and methodologies, 

validation, and use of stress testing 

results, as well as processes for updating 

the covered bank’s stress testing 

practices consistent with relevant 

supervisory guidance. 

(2) The board of directors and senior 

management of each covered bank shall 

approve and annually review the 

controls, oversight, and documentation, 

including policies and procedures of the 

covered bank pursuant to this subpart. 

§ 325.205 Report to the FDIC of stress test 

results and related information. 

(a) Report required for stress tests. On 

or before January 5 of each year, each 

covered bank must report the results of 

the stress test required under section 

325.203 to the FDIC in accordance with 

paragraph 325.205(b) . 

(b) Content of report for annual stress 

tests. Each covered bank must file a 

report in the manner, in such form, and 

containing the information established 

by the Corporation. 

(c) Confidential treatment of 

information submitted. The 

confidentiality of information submitted 

to the Corporation under this subpart 

and related materials shall be 

determined in accordance with 

applicable law including any available 

exemptions under the Freedom of 

Information Act (5 U.S.C. 552(b)) and 

the FDIC’s Rules and Regulations 

regarding the Disclosure of Information 

(12 CFR Part 309). 

(d) Extension. The Corporation may, 

in its discretion, and upon request by a 

covered bank, extend the time period for 

compliance established under paragraph 

325.205(a) for up to an additional 60 

days. 

§ 325.206 Supervisory review of stress 

tests and post-assessment actions. 

(a) Each covered bank shall take the 

results of the stress tests conducted 

under section 325.203 into account in 

making changes, as appropriate, to: The 

covered bank’s capital structure 

(including the level and composition of 

capital); its exposures, concentrations, 

and risk positions; any plans for 

recovery and resolution; and to improve 

overall risk management. 

§ 325.207 Publication of summary of 

results. 

(a) Public disclosure of results 

required for stress tests of covered 

banks. Within 90 days of the date 

required for submitting a report under 

§ 325.205(a) for its required stress test 

under § 325.203, a covered bank shall 

publicly disclose a summary of the 

results of the stress tests required under 

§ 325.203. 

(b) Information to be disclosed in the 

summary. The information disclosed by 

each covered bank shall, at a minimum, 

include— 

(1) A description of the types of risks 

being included in the stress test; 

(2) A general description of the 

methodologies employed to estimate 

losses, pre-provision net revenue, loss 

reserves, and changes in capital 

positions over the planning horizon; 

(3) Aggregate losses, pre-provision net 

revenue, loss reserves, net income, and 

pro forma capital levels and capital 

ratios (including regulatory and any 

other capital ratios specified by the 

Corporation) over the planning horizon 

under each scenario. 

Dated at Washington, DC this 17th day of 

January, 2012. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 2012–1135 Filed 1–20–12; 8:45 am] 

BILLING CODE 6714–01–P 

FARM CREDIT ADMINISTRATION 

12 CFR Parts 611, 612, 619, 620 and 

630 

RIN 3052–AC41 

Compensation, Retirement Programs, 

and Related Benefits 

AGENCY: Farm Credit Administration. 

ACTION: Proposed rule. 

SUMMARY: The Farm Credit 

Administration (FCA, us, we, or our) 

proposes to amend our regulations 

related to Farm Credit System (System) 

bank and association disclosures to 

shareholders and investors. The 

proposed rule would require reporting 

of supplemental retirement plans, a 

discussion of the link between senior 

officer compensation and performance, 

and timely and transparent reporting to 

shareholders of significant events that 

occur between annual reporting periods. 

We believe the proposed changes will 

provide full, transparent and consistent 

disclosures to shareholders. The 

proposed rule would identify the 

minimum responsibilities a 

compensation committee must perform 

to ensure it continues to exercise good 

stewardship, and require that System 

banks and associations provide for a 

nonbinding, advisory vote on senior 

officer compensation in order to engage 

shareholders in the management and 

control of their institution. Also, the 

proposed rule would bifurcate existing 

annual reporting requirements at § 620.5 

and make other conforming technical 

changes. 

DATES: Submit comments on or before 

March 23, 2012. 

ADDRESSES: We offer a variety of 

methods for you to submit your 

comments. For accuracy and efficiency 

reasons, commenters are encouraged to 

submit comments by email or through 

the FCA’s Web site. As facsimiles (faxes) 

are difficult for us to process and 

achieve compliance with section 508 of 

the Rehabilitation Act, we no longer 

accept comments submitted by fax. 

Regardless of the method you use, 

please do not submit your comments 

multiple times via different methods. 

You may submit comments by any of 

the following methods: 

• Email: Send an email to regcomm@fca.gov. 

• FCA Web site: http://www.fca.gov. 

Select ‘‘Public Commenters,’’ then 

‘‘Public Comments,’’ and follow the 

directions for ‘‘Submitting a Comment.’’ 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Gary K. Van Meter, Director, 

Office of Regulatory Policy, Farm Credit 

Administration, 1501 Farm Credit Drive, 

McLean, VA 22102–5090. 

You may review copies of all 

comments we receive at our office in 

McLean, Virginia or on our Web site at 

http://www.fca.gov. Once you are in the 

Web site, select ‘‘Public Commenters,’’ 

then ‘‘Public Comments,’’ and follow 

the directions for ‘‘Reading Submitted 

Public Comments.’’ We will show your 

comments as submitted, including any 

supporting data provided, but for 

technical reasons we may omit items 

such as logos and special characters. 

Identifying information that you 

provide, such as phone numbers and 

addresses, will be publicly available. 

However, we will attempt to remove 

email addresses to help reduce Internet 

spam. 

FOR FURTHER INFORMATION CONTACT:

Deborah Wilson, Senior Accountant, 

Office of Regulatory Policy, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4414, TTY 

(703) 883–4434, or 

Laura McFarland, Senior Counsel, 

Office of General Counsel, Farm 

Credit Administration, McLean, VA 

22102–5090, (703) 883–4020, TTY 

(703) 883–4020. 

SUPPLEMENTARY INFORMATION: 

I. Objective 

The objectives of this proposed rule 

are to: 

• Improve the transparency and 

completeness of disclosures in System 


srobinson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3173 

1All references to senior officer(s) in this 

proposed rule refer to a senior officer as defined in 

12 CFR 619.9310. 

2Public Law 92–181, 85 Stat. 583 (1971), 12 

U.S.C. 2001, et seq. 

3 12 U.S.C. 2252(a)(8), (9) and (10). 

4Public Law 102–552, 106 Stat. 4131 (1992). 

5Copies of the resolution may be obtained by 

contacting the FCA. 

6 75 FR 70619 (Nov. 18, 2010). 

7These topics include the use of a compensation 

consultant by an institution’s compensation 

committee and director of severance benefits and 

related payments. 

institution annual reports or annual 

meeting information statements 

(collectively, Report) by requiring 

disclosure of all components of senior 

officer 1 compensation and retirement 

benefits; 

• Promote the continued safety and 

soundness of System institutions by 

requiring certain oversight 

responsibilities of compensation 

committees; 

• Strengthen timely communication 

with System shareholders on significant 

events that occur between annual 

reporting periods; 

• Provide shareholders with a clear 

and complete understanding of their 

institution’s obligations and 

commitments related to supplemental 

retirement benefit plans (SRP) for 

employees other than the senior officer 

group; and 

• Encourage member participation in 

the control and management of their 

institution by providing voting 

shareholders an opportunity to cast a 

nonbinding, advisory vote on senior 

officer compensation. 

II. Background 

The Farm Credit Act of 1971, as 

amended (Act),2 authorizes the FCA to 

issue regulations implementing the 

Act’s provisions.3 Our regulations are 

intended to ensure the safe and sound 

operations of System institutions and to 

govern the disclosure of financial 

information to shareholders of, and 

investors in, the System. Congress 

explained in section 514 of the Farm 

Credit Banks and Associations Safety 

and Soundness Act of 1992 (1992 Act) 4

that disclosures of financial information 

and compensation paid to senior 

officers, among other disclosures, 

provide System shareholders with 

information necessary to better manage 

their institution and make informed 

decisions regarding the operation of 

their institution. 

Section 1.1(b) of the Act sets forth the 

objective to continue to encourage 

owners-borrowers to participate in the 

management, control, and ownership of 

their cooperative. In an October 14, 

2010, Resolution of the Farm Credit 

Administration Board, we declared our 

commitment to support the cooperative 

business model and structure of System 

banks and associations.5 The FCA 

emphasizes the cooperative structure 

and principles by advancing regulatory 

proposals that encourage borrowers to 

participate in the management, control 

and ownership of their institution. 

A. Comments Received 

On November 18, 2010, we issued an 

advance notice of proposed rulemaking 

(ANPRM) on disclosure of senior officer 

compensation and related topics in 

order to gather information for the 

development of a proposed 

rulemaking.6 We received 99 comment 

letters in response to the ANPRM from 

individuals and entities associated with 

the System, including the Farm Credit 

Council (FCC), acting for its 

membership, and the Federal Farm 

Credit Banks Funding Corporation 

(Funding Corporation). We reviewed all 

comment letters and evaluated their 

recommendations in recognition of 

existing law and policy considerations 

and the cooperative nature of the 

System. We are proposing rules and 

amendments related to senior officer 

compensation disclosures and related 

topics that were discussed in the 

ANPRM. Other topics in the ANPRM 

not included in this rulemaking may be 

considered in future rulemakings.7

We are actively reviewing the 

authority of the Funding Corporation’s 

System Audit Committee (SAC) to have 

‘‘unfettered ability to engage outside 

advisors.’’ Section 630.6 authorizes the 

Funding Corporation board to deny, by 

a two-thirds majority vote of the full 

board, any SAC request for resources. 

The SAC requested we consider 

amending our regulations to remove this 

authority. We addressed this issue in 

the ANPRM and most commenters 

responded that it would be imprudent 

to provide absolute discretion on the 

use of resources to any bank or 

association board committee. The FCC 

expressed the view of its membership 

that existing FCA regulations 

appropriately balance audit committee 

need with the board’s ultimate 

responsibility to the customershareholder for the safety and financial 

stability of the institution. However, the 

FCC also noted that its membership 

supported the Funding Corporation’s 

request. The SAC’s response to the 

ANPRM was that the SAC believed it 

must have every resource it requires at 

its disposal to effectively perform its 

function. We are not proposing changes 

to this authority in this rulemaking, but 

may revisit the matter in future 

rulemakings. 

B. Proposed Rule 

We periodically review and update 

our disclosure regulations to ensure 

they are appropriate for current business 

practices, provide shareholders with 

necessary information, and provide 

investors with information necessary to 

assist them in making investment 

decisions. In keeping with today’s 

changing economic and business 

environments, and in accordance with 

the findings of Congress under the 1992 

Act and the FCA Board Resolution of 

October 14, 2010, we believe it is 

appropriate to review and update our 

rules on senior officer compensation 

disclosures and other related topics. We 

believe that banks and associations can 

continue to support the cooperative 

business model, fulfill the System’s 

public policy mission in a safe and 

sound manner, and best serve their 

members by providing shareholders: 

• Complete disclosure that allows 

them to understand senior officer 

compensation and retirement policies 

and practices and all compensation and 

retirement benefit obligations; 

• Timely and transparent 

communication on significant or 

material events affecting their 

institution; and 

• A nonbinding, advisory vote on 

senior officer compensation. 

We believe the proposed rule continues 

to balance meaningful disclosures, 

committee oversight, and shareholder 

rights with institution safety and 

soundness. 

III. Section-by-Section Analysis 

A. Bifurcation of Annual Reporting 

Requirements Sections [Existing 

§ 620.5(h) Through (k); New § 620.6] 

To enhance the clarity and 

organization of our rules, we propose 

moving the disclosure requirements for 

directors and senior officers in 

§ 620.5(h) through (k) to new § 620.6. 

Also, we propose that § 620.5(h) contain 

a reference to § 620.6, stating that the 

presentation of the § 620.6 disclosures 

would continue to be required in the 

annual report. We propose no changes 

to the current requirements of existing 

§ 620.5(h), (j), and (k), except for minor 

rewording of the language and cross 

citations to recognize the proposed new 

locations at § 620.6(a), (b), (d), (e), and 

(f). However, in the process of moving 

§ 620.5(h) through (k) to new § 620.6, 

some regulatory language is proposed to 

be changed in existing § 620.5(i) to 

remove redundancy and enhance 

clarity. Specifically, we propose 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3174 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

clarifying how highly compensated 

employees, who are not senior officers, 

are treated in the Summary 

Compensation Table (Compensation 

Table) at new § 620.6(c)(2)(i). 

Also, we propose clarifying where to 

disclose the required statement that the 

information on compensation for any 

individual senior officer, as disclosed in 

the Compensation Table, is available to 

shareholders upon request. In new 

§ 620.6(c)(2)(ii), we propose that the 

statement must be presented directly 

beneath the Compensation Table 

because we believe the notice of this 

right should be in close proximity to the 

related disclosure. We propose new 

disclosure requirements that would be 

contained in new § 620.6(c) and are 

discussed in Part III.B. of the preamble 

to this proposed rule. 

As conforming technical changes, we 

propose changing references to the 

annual report’s director and senior 

officer compensation and conflicts of 

interest disclosures, made in other areas 

of our rules, to their location in new 

§ 620.6. Specifically changing references 

contained in § 611.330(b) of our rules 

from § 620.5(j) and (k) to § 620.6(e) and 

(f); changing references contained in 

§ 612.2145(a)(2) of our rules from 

§ 620.5(k) to § 620.6(f); changing 

references contained in § 612.2155(a)(2) 

of our rules from § 620.5(k) to § 620.6(f); 

adding § 620.6 to the references 

contained in §§ 612.2165(b)(12) and 

620.4(c); renumbering existing § 620.5(l) 

through (n) as (i) through (k); and 

changing references in § 620.21(a)(3)(i) 

of our rules from § 620.5(j) 

(‘‘Transactions with senior officers and 

directors’’) to § 620.6(e) and § 620.5(k) 

(‘‘Involvement in certain legal 

proceedings’’) to § 620.6(f). 

B. Enhanced Disclosures of Senior 

Officer Compensation [§ 620.5(i) and 

New § 620.6(c)] 

Existing § 620.5(i) requires that 

compensation paid to or earned by 

senior officers be disclosed in the 

Compensation Table, and include 

discussion of benefits paid in 

connection with resignation, retirement, 

or termination. 

In developing this proposed rule, we 

recognized that: 

• Compensation and retirement 

benefit practices at many System 

institutions are increasingly more 

complex and diverse; 

• Our current disclosure 

requirements may not capture all 

current practices; and 

• Disclosures should include a clear 

discussion of the relationship between 

the risks and rewards of compensation 

practices. 

Consequently, we believe our disclosure 

rules should be amended to ensure that 

all such practices are addressed in an 

institution’s disclosure of senior officer 

compensation. 

In new § 620.6(c)(4), we propose 

requiring that institutions disclose 

information related to supplemental 

executive retirement plans (SERP), if 

provided to chief executive officers 

(CEOs), senior officers or other highly 

compensated employees (collectively, 

senior officers). If the CEO and senior 

officers participate solely in pension 

and retirement plans offered to all 

employees, the disclosures would not be 

required. The information to be 

disclosed would include, at a minimum: 

• Funded and unfunded present 

value of accumulated benefits for all 

CEO and senior officers’ pension and 

retirement benefit plans, including the 

SERP. 

• Years of credited service for the 

CEO and for the senior officers. 

• Vested and unvested dollar 

amounts. 

We propose that the disclosures be 

included in a separate pension and 

retirement benefits table, and that it be 

presented in the report with the 

Compensation Table. 

In addition to requiring disclosure of 

SERPs, we propose institutions: 

• Include all compensation, benefit 

and retirement plans when discussing 

compensation programs; 

• Describe the overall risk and reward 

structure of compensation, benefit and 

retirements plans; and 

• Discuss the link between the CEO’s 

and senior officers’ total compensation, 

as reported, and both the institution’s 

overall performance and the CEO’s and 

senior officers’ performance. 

In making these disclosures, we would 

expect an institution to discuss the 

criteria used in determining its overall 

performance (e.g., capital and risk 

management, credit risk and risk 

exposure to earnings, liquidity 

management, and compliance with the 

general financing agreement). Also, we 

would expect institutions to discuss the 

benchmarks or other factors used to 

determine compensation, including 

incentive-based compensation. 

Disclosures would be specific to the 

institution, rather than being general or 

boilerplate. 

We further propose at new 

§ 620.6(c)(3)(ii)(B) that institutions 

disclose in the Compensation Table the 

dollar amount of tax reimbursements or 

tax payments provided by the 

institution to senior officers. The 

disclosure would be classified as a 

perquisite and other personal benefit 

and would be reported in the period in 

which payment is made. We are not 

proposing to change the threshold for 

perquisite disclosures. 

We believe improved transparency 

and consistency in disclosures of senior 

officer compensation provides 

meaningful and complete disclosure to 

members-owners and investors. 

Enhanced disclosures assist membersowners and investors in making 

informed decisions regarding the 

financial condition and operations of 

the institution. 

We also propose adding a new 

§ 619.9335 to our general definition 

rules to define SRP and SERP. A SRP or 

SERP would be defined to mean a 

nonqualified retirement plan that 

provides benefits above and beyond 

those covered by other retirement plans 

for all employees, and that is funded in 

whole or in part by the institution. 

C. Compensation Committee 

Responsibilities [§§ 620.31 and 630.6(b)] 

Our existing rules at §§ 620.31 and 

630.6(b) require a compensation 

committee to review and approve the 

overall compensation programs for 

senior officers and to review the 

compensation policies and plans for all 

employees. Our July 9, 2009, FCA 

Bookletter, ‘‘Compensation 

Committees’’ (BL–060), provides 

guidance on how compensation 

committees should fulfill their duties. 

However, we believe it is appropriate to 

enhance our regulations to include the 

minimum responsibilities a 

compensation committee must perform 

in order to carry out its duties. 

Therefore, in order that a 

compensation committee continues to 

effectively fulfill its stewardship role, 

maintain effective and active oversight, 

and ensure compensation and 

retirement benefit practices do not 

jeopardize the institution’s safety and 

soundness, we propose clarifying that 

the compensation committee is 

accountable for: 

• Monitoring the terms and 

provisions of the incentive-based 

compensation programs for senior 

officers, 

• Analyzing the institution’s 

projected long-term obligations for 

compensation and retirement benefits, 

and 

• Balancing financial rewards to 

senior officers against the risks to the 

institution. 

The proposed rule would amend our 

regulations at §§ 620.31(b) and 

630.6(b)(2) to enhance compensation 

committee responsibilities to emphasize 

that the committee must ensure that: 


srobinson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3175 

8See 75 FR 64728, Oct. 20, 2010. 

• CEO and senior officers’ 

compensation promotes the continued 

safety and soundness of the institution 

and supports the institution’s long-term 

business strategy and goals, 

• Risks to the institution and the 

financial rewards to the CEO and senior 

officers are balanced (e.g., compensation 

and benefits are not excessive relative to 

the results of operations and financial 

condition of the institution), 

• The institution’s projected total 

long-term compensation and retirement 

obligations for the CEO and senior 

officers are analyzed, and 

• The compensation of employee 

groups, other than the CEO and senior 

officers, do not pose an imprudent risk 

to the institution (e.g., loan officers). 

In addition, we emphasize that 

compensation committees should 

ensure that incentive-based 

compensation programs: 

• Are not unreasonable or 

disproportionate to the services 

performed, and 

• Are structured so that the payout 

schedule considers the potential for 

future losses or risks to the institution 

from services performed in the current 

period. 

Under the proposed rule, the 

compensation committee would be 

required to document in meeting 

minutes its actions related to the 

proposed enhanced responsibilities. 

Documenting its actions would facilitate 

board review of how the committee 

carried out its responsibilities and 

provide the current committee with an 

understanding of prior committee 

actions. 

For organizational reasons, we 

propose moving the requirements that 

all compensation committee members 

must be members of the board of 

directors and that the compensation 

committee report only to the board. The 

requirements would be moved to the 

section that discusses the formation of 

a compensation committee. Also, we 

propose replacing ‘‘function’’ with 

‘‘perform its duties’’ in §§ 620.31(c) and 

630.6(b)(3) for clarification. 

D. Notice to Shareholders [§§ 620.10, 

620.11, and 620.15] 

In FCA Board Policy Statement, 

‘‘Cooperative Operating Philosophy— 

Serving the Members of Farm Credit 

System Institutions,’’ 8 (FCA–PS–80) the 

FCA reaffirmed its commitment to the 

cooperative structure and its values and 

practices, including regular and relevant 

communication with members. As such, 

we believe that certain events may be of 

such significance or materiality to 

warrant communication to membersowners throughout the institution’s 

operating cycle. We believe that timely 

and transparent communication to 

members encourages their continued 

participation in the ownership, control 

and management of their institution. 

Existing §§ 620.15 and 620.17 require 

that System institutions provide notice 

to shareholders when the institution is 

not in compliance with minimum 

permanent capital standards. This 

notice is a supplement to annual and 

quarterly reporting requirements. 

In a similar manner, we propose 

adding a requirement in § 620.15 that 

significant events or circumstances 

occurring in interim or intervening 

periods be communicated to 

shareholders through separate notice. 

As proposed, notices would be made as 

soon as possible, but not later than 90 

calendar days after occurrence. As an 

alternative, we propose allowing the 

institution to issue the notice within its 

quarterly report, with prominent 

disclosure at the front of the report. 

The proposed rule would allow 

institutions to distribute the notice via 

electronic distribution (Web site) or by 

publication with circulation wide 

enough to be reasonably assured that all 

shareholders have timely access to the 

information. Also, we propose that the 

notice be provided to the FCA at the 

same time it is distributed to 

shareholders and that the notice be 

dated and signed. 

The proposed rule would include a 

list of events that must, at a minimum, 

be reported. If the event would be a 

‘‘significant’’ change to a compensation, 

retirement, benefit or capitalization 

plan, significance would be based on 

the change to the individual plan and 

not the impact of the change to the 

institution as a whole. 

As a related change to our rules, we 

propose consolidating the current 

contents of §§ 620.15 and 620.17 on 

notices regarding permanent capital into 

§ 620.17. This change would allow the 

placement of the above proposed notice 

of significant or material events to be 

located in § 620.15 while preserving 

existing requirements on notices for 

permanent capital. We believe the 

proposed consolidation would add 

clarity to our rules by keeping like 

subject matters together and removing 

redundant language. It is not intended 

that the meaning and requirements for 

permanent capital notices be changed. 

To conform our regulations in 

§ 620.10, ‘‘Preparing the quarterly 

report,’’ with the proposed notice of 

significant or material events, we 

propose adding a new paragraph (c) to 

existing § 620.10. The proposed 

addition would clarify that the quarterly 

report may be used for notices to 

shareholders, except minimum 

permanent capital notices. We also 

propose adding a similar provision to 

§ 620.11 on contents of quarterly 

reports, but including a proposed 

requirement that notices included in the 

quarterly report be located at the front 

of the report. We believe this proposed 

requirement preserves the objective of 

the notices, which is that membersowners receive timely and transparent 

communication of significant and 

material events. 

E. Disclosure of Supplemental 

Retirement Plans to Employees, 

Exclusive of the CEO and Senior 

Officers [§ 620.5(e)] 

We propose adding a new paragraph 

(4) to existing § 620.5(e) that would 

require disclosure of the institution’s 

obligations related to a SRP to 

employees, exclusive of any plan 

provided to the CEO and senior officers. 

The disclosure would include, at a 

minimum: 

• A description of the plan; 

• Funded and unfunded obligations 

of the plan; and 

• Vested and unvested dollar 

amounts. 

We believe that by disclosing an 

institution’s current and future 

supplemental benefit obligations, 

shareholders and investors will have a 

more complete understanding of the 

related liabilities and commitments, 

both on- and off-balance sheet. 

F. Nonbinding, Advisory Vote by 

Shareholders on Senior Officer 

Compensation [§§ 611.100, 620.5(a), 

and 630.20(i); New §§ 611.360, 611.410, 

and 620.6(c)(6)] 

Our existing regulations do not 

require a nonbinding, advisory vote by 

an institution’s shareholders on senior 

officer compensation. However, in FCA 

Informational Memorandum, ‘‘Serving 

the Members of Farm Credit System 

Institutions’’ (IM), dated November 4, 

2010, we noted that boards of directors 

can encourage member participation in 

the management and control of the 

institution by engaging members as 

owners and communicating with 

members. The IM highlighted our belief 

that effective boards use information 

obtained from members to establish 

strategic direction for their institutions 

and to ensure business activities remain 

member-focused. 

We continue to believe that a 

Government-sponsored enterprise 

comprised of cooperative institutions 

should continually strive to operate 

under high standards in order to achieve 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3176 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

the System’s public policy mission and 

encourage member-owner participation 

in their institution. Therefore, we 

propose adding a new § 611.410 

requiring that Farm Credit banks and 

associations provide shareholders the 

opportunity to cast a nonbinding, 

advisory vote on senior officer 

compensation. 

The proposed § 611.410 advisory vote 

would be required at banks and 

associations if either the CEO’s or the 

aggregate of all senior officers’ 

compensation, as disclosed in the 

Compensation Table, increased or 

decreased by 15 percent or more from 

the previous reporting period. The vote 

would not be required if the 15-percent 

change resulted solely from a change in 

the CEO or a change in the composition 

of personnel included in the senior 

officer group. Also, we propose that 

associations be required to hold a 

nonbinding, advisory vote on 

compensation if 5 percent of their 

voting shareholders petition for it. We 

did not propose this additional petition 

requirement for banks because there are 

fewer shareholders at the bank level, 

thereby allowing a few shareholders to 

control the petition process. 

We do not believe the vote would be 

burdensome to institutions since it 

would be required only when a 15- 

percent change in practice has occurred 

or, for associations, when 5 percent of 

their voting shareholders petition for the 

vote. We believe the proposed 

nonbinding, advisory vote would 

provide a means for shareholders to 

clearly express and communicate either 

their approval or disapproval of 

compensation practices for senior 

officers to their institution’s board. The 

board could then use the information, as 

appropriate, when establishing the 

institution’s strategic direction and 

ensure that it remains member-focused. 

We selected 15 percent as a threshold 

change in compensation based on the 

recent range of percentage changes to 

bank and association CEO’s and senior 

officers’ compensation. We consider the 

15-percent threshold to be reasonable. 

We selected 5 percent as the maximum 

percentage of voting shareholders 

required to petition their association for 

the vote because 5 percent is generally 

accepted as a criteria for assessing 

significance or materiality. 

We are also proposing general 

procedures for advisory votes in new 

§ 611.360. The proposed procedures 

would apply to all advisory votes held 

by an institution including, but not 

limited to, the proposed advisory vote 

on compensation. As proposed, 

advisory votes would be subject to the 

same confidentiality and security in 

voting requirements of § 611.340 and 

would be cast on a one-member, onevote basis, including votes cast by 

shareholders of Farm Credit banks. We 

propose that weighted and cumulative 

voting not be allowed in advisory votes 

in order to further the objective of giving 

equal voice to each shareholder. Also, 

new § 611.360 would require that 

institutions develop voting procedures 

and provide notice to shareholders of 

any advisory vote and the procedures 

used in casting the vote. In addition, 

proposed § 611.360 would permit the 

advisory votes to be made in-person, by 

proxy, and by mail. 

We propose disclosure in the annual 

report when an advisory vote is held, 

including disclosure of the results of the 

vote. We propose adding a new 

§ 620.5(a)(11) to the ‘‘Description of 

business’’ section of the annual report, 

requiring a discussion of the types of 

advisory votes held during the reporting 

period. We further propose that 

disclosure of nonbinding, advisory votes 

on senior officer compensation be 

included with senior officer 

compensation disclosures in new 

§ 620.6(c)(6). This disclosure 

requirement is proposed to be carried 

forward into the System-wide report to 

investors at § 630.20(i). 

We propose in new § 611.410(c)(6) 

that associations disclose that 

shareholders may petition for an 

advisory vote, disclose when a petition 

is received and disclose the results of 

the petition. The proposal would 

require that the disclosures be presented 

with the Compensation Table. We 

believe that providing the disclosures 

with the Compensation Table ensures 

that shareholders are aware of their right 

to express their opinion on senior 

officer compensation practices of their 

associations. 

In addition, we propose adding a 

definition of ‘‘advisory vote’’ at 

§ 611.100(a) to ensure a consistent 

meaning of the term. 

G. Miscellaneous 

1. Technical Changes [§§ 611.330(c), 

611.400, 620.2(c), 620.4(c), and 620.11] 

Our proposed amendments require 

additional conforming and clarifying 

changes to other regulatory provisions. 

Likewise, in the proposed process of 

consolidating provisions, some 

regulatory language is proposed to be 

changed to remove redundancy and 

enhance clarity. We propose making the 

following technical and conforming 

changes: 

a. We propose adding a definition for 

‘‘business day’’ to § 611.100 to clarify 

our longstanding position that when our 

rules reference business day it means a 

day the institution is open for business, 

but excludes Federal holidays. As a 

technical change, we propose 

renumbering existing § 611.100 

paragraphs (a) through (f) as (c) through 

(h). 

b. In subpart D of part 611, we 

propose revising the name of the 

subpart from ‘‘Rules for Compensation 

of Board Members’’ to ‘‘Compensation 

Practices of Farm Credit Banks and 

Associations.’’ The change will clarify 

that the provisions of subpart D relate to 

various compensation issues at the bank 

and association level and not just to 

bank board members. As a conforming 

change, in § 611.400, we propose 

revising the name of the section from 

‘‘Compensation of bank board 

members’’ to ‘‘Compensation of Farm 

Credit bank board members’’ to align 

terminology to that used in our general 

definitions of part 619. We also propose 

replacing the phrase ‘‘Farm Credit 

System bank’’ with ‘‘Farm Credit bank’’ 

everywhere it appears to update the 

section for the same reason. 

c. We propose updating the language 

in § 611.400(b) regarding annual 

inflationary changes in the statutory 

salary limit for Farm Credit bank 

directors. The proposed change would 

continue to require that we 

communicate the annual changes to the 

System, but remove the requirement 

that we use a bookletter to do so. This 

will expedite communication of the 

information. 

d. We propose clarifying that the 

director-nominee disclosures discussed 

in § 611.330(c)(1) relate to the annual 

meeting information statement by 

providing a corresponding rule citation 

to § 620.21(b). 

e. We propose changing the language 

in § 620.2(c) regarding the electronic 

delivery of reports to shareholders to 

clarify that the provision applies only to 

those reports individually sent to 

shareholders, not all reports. 

f. We propose a minor grammatical 

change to § 620.4(c) on contents of the 

annual report by breaking out the 

sentence into two sentences. No change 

to the meaning of the paragraph is 

intended. 

g. We propose to reorganize and 

renumber the existing provisions of 

§ 620.11 to enhance clarity. No changes 

to the meaning of existing language is 

proposed, although we propose adding 

an additional provision to this section 

on incorporating shareholder notices 

into a quarterly report, as discussed 

earlier. 


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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3177 

9See 74 FR 28597, June 17, 2009. 

2. Incorporating by Reference 

[§ 620.2(d)] 

We propose changing the language in 

§ 620.2(d), which allows System 

institutions to incorporate by reference 

in their reports. The proposed change is 

to specify that information disclosed in 

any part of the report may be 

incorporated by reference in that report 

unless instructions state otherwise. In a 

prior rulemaking, we explained that 

§ 620.2(d) allowed institutions to 

provide information required to be in a 

specific section of the annual report 

through a reference to another section of 

the report.9 The proposed limit on 

incorporating by reference would only 

exist when a rule limits the location of 

a specific disclosure. 

3. Signatures on Reports [§ 620.10(c)] 

In developing this proposed rule on 

disclosures in annual and quarterly 

reports, we noticed an inadvertent 

omission in the preparation 

requirements of quarterly reports. While 

quarterly reports are not required to be 

mailed to shareholders, we have always 

expected them to contain signatures and 

certifications used for other reports. 

However, existing § 620.10(a) does not 

clearly state this requirement. Therefore, 

we propose adding a new paragraph 

(a)(3) requiring quarterly reports to be 

signed and financial statements 

contained in the report to be certified as 

complete and accurate. 

IV. Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.), the FCA hereby certifies that the 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

Each of the banks in the Farm Credit 

System, considered together with its 

affiliated associations, has assets and 

annual income in excess of the amounts 

that would qualify them as small 

entities. Therefore, Farm Credit System 

institutions are not ‘‘small entities’’ as 

defined in the Regulatory Flexibility 

Act. 

List of Subjects 

12 CFR Part 611 

Agriculture, Banks, banking, Rural 

areas. 

12 CFR Part 612 

Agriculture, Banks, Banking, Conflict 

of interests, Crime, Investigations, Rural 

areas. 

12 CFR Part 619 

Agriculture, Banks, banking, Rural 

areas. 

12 CFR Part 620 

Accounting, Agriculture, Banks, 

Banking, Reporting and recordkeeping 

requirements, Rural areas. 

12 CFR Part 630 

Accounting, Agriculture, Banks, 

Banking, Organization and functions 

(Government agencies), Reporting and 

recordkeeping requirements, Rural 

areas. 

For the reasons stated in the 

preamble, parts 611, 612, 619, 620, and 

630 of chapter VI, title 12 of the Code 

of Federal Regulations are proposed to 

be amended as follows: 

PART 611—ORGANIZATION 

1. The authority citation for part 611 

is revised to read as follows: 

Authority: Secs. 1.2, 1.3, 1.4, 1.5, 1.13, 2.0, 

2.1, 2.2, 2.10, 2.11, 2.12, 3.0, 3.1, 3.2, 3.21, 

4.12, 4.12A, 4.15, 4.20, 4.21, 5.9, 5.17, 6.9, 

6.26, 7.0–7.13, 8.5(e) of the Farm Credit Act 

(12 U.S.C. 2002, 2011, 2012, 2013, 2021, 

2071, 2072, 2073, 2091, 2092, 2093, 2121, 

2122, 2123, 2142, 2183, 2184, 2203, 2208, 

2209, 2243, 2252, 2278a–9, 2278b–6, 2279a– 

2279f–1, 2279aa–5(e)); secs. 411 and 412 of 

Pub. L. 100–233, 101 Stat. 1568, 1638; sec. 

414 of Pub. L. 100–399, 102 Stat. 989, 1004. 

Subpart A—General 

2. Section 611.100 is amended by: 

a. Redesignating existing paragraphs 

(a) through (f) as paragraphs (c) through 

(h), respectively; and 

b. Adding new paragraphs (a) and (b) 

to read as follows: 

§ 611.100 Definitions. 

* * * * * 

(a) Advisory vote means a nonbinding 

vote by the voting stockholders on 

certain events of the institution, 

including compensation practices. 

(b) Business day means a day the 

institution is open for business, 

excluding the legal public holidays 

identified in 5 U.S.C. 6103(a). 

* * * * * 

Subpart C—Election of Directors and 

Other Voting Procedures 

§ 611.330 [Amended] 

3. Section 611.330 is amended by: 

a. Removing the reference ‘‘§ 620.5(j) 

and (k)’’ and adding in its place, the 

reference, ‘‘§ 620.6(e) and (f)’’ in the first 

sentence of paragraphs (b)(1) and (b)(2); 

and 

b. Adding the words ‘‘in accordance 

with § 620.21(b)’’ to the end of 

paragraph (c)(1). 

4. Subpart C is amended by adding a 

new § 611.360 to read as follows: 

§ 611.360 Stockholder advisory votes. 

(a) Each Farm Credit bank and 

association must establish and maintain 

written procedures to implement 

advisory votes. The procedures, at a 

minimum, must: 

(1) Identify the subject of the advisory 

vote. 

(2) Establish the timing, manner, and 

notice of the vote. 

(i) If the vote will be held in 

connection with a stockholder meeting 

or director election, notice of the 

advisory vote must be part of the 

Annual Meeting Information Statement, 

pursuant to § 620.21(d). 

(ii) The vote may be in-person, by 

proxy, or by mail, or any combination 

thereof. 

(3) For associations, explain the 

process for petitioning for an advisory 

vote. 

(b) Advisory votes are subject to the 

requirements of § 611.340 and the 

confidential voting provisions of section 

4.20 of the Act (12 U.S.C. 2208). 

(c) Advisory votes must be cast using 

a ‘‘one-member, one-vote’’ voting 

scheme and are not subject to the 

provisions in § 615.5230 allowing 

weighted, cumulative, and other voting 

schemes. 

Subpart D—Compensation Practices of 

Farm Credit Banks and Associations 

5. Revise the heading of subpart D to 

read as set forth above. 

§ 611.400 [Amended] 

6. Section 611.400 is amended by: 

a. Removing the words ‘‘Farm Credit 

System bank’’ and adding in their place 

‘‘Farm Credit bank’’ in paragraphs (a) 

and (d)(1); and 

b. Removing the words ‘‘distribute a 

bookletter to all FCS banks that 

communicates’’ and adding in their 

place the word ‘‘communicate’’ in the 

last sentence of paragraph (b). 

7. Subpart D is amended by adding a 

new § 611.410 to read as follows: 

§ 611.410 Compensation of senior officers. 

(a) If compensation for the chief 

executive officer either increases or 

decreases 15 percent or more from the 

previous reporting period, then the bank 

or association must present the 

compensation to voting stockholders for 

an advisory vote. Such advisory vote 

must be held in accordance with the 

provisions of § 611.360. Advisory votes 

on compensation resulting solely from a 

change in the chief executive officer 

during the reporting period are not 

required. 


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3178 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

(b) If senior officer compensation, as 

reported in the aggregate, either 

increases or decreases 15 percent or 

more from the previous reporting 

period, then the bank or association 

must present the compensation to 

voting stockholders for an advisory vote. 

Such advisory vote must be held in 

accordance with the provisions of 

§ 611.360. Advisory votes on 

compensation resulting solely from a 

change in senior officers included in the 

aggregate during the reporting period 

are not required. 

(c) Each association must hold an 

advisory vote on compensation paid to 

chief executive officers, or senior 

officers in the aggregate, in accordance 

with the provisions of § 611.360 when 5 

percent of the association’s voting 

stockholders petition for an advisory 

vote. 

(d) Each association must disclose in 

its annual report to shareholders the 

authority to petition for an advisory vote 

on senior officer compensation. The 

disclosure must also state if a petition 

was submitted during the reporting 

period, disclosing if it was certified and 

a vote held and, if applicable, the results 

of the vote. 

PART 612—STANDARDS OF 

CONDUCT AND REFERRAL OF 

KNOWN OR SUSPECTED CRIMINAL 

VIOLATIONS 

8. The authority citation for part 612 

continues to read as follows: 

Authority: Secs. 5.9, 5.17, 5.19 of the Farm 

Credit Act (12 U.S.C. 2243, 2252, 2254). 

Subpart A—Standards of Conduct 

§ 612.2145 [Amended] 

9. Section 612.2145 is amended by 

removing the reference ‘‘§ 620.5(k)’’ and 

adding in its place, the reference 

‘‘§ 620.6 (f)’’ in paragraph (a)(2). 

§ 612.2155 [Amended] 

10. Section 612.2155 is amended by 

removing the reference ‘‘§ 620.5 (k)’’ and 

adding in its place, the reference 

‘‘§ 620.6 (f)’’ in paragraph (a)(2). 

§ 612.2165 [Amended] 

11. Section 612.2165 is amended by 

removing the reference ‘‘§ 620.5’’ and 

adding in its place ‘‘§§ 620.5 and 620.6’’ 

in paragraph (b)(12). 

PART 619—DEFINITIONS 

12. The authority citation for part 619 

is revised to read as follows: 

Authority: Secs. 1.4, 1.5, 1.7, 2.1, 2.2, 2.4, 

2.11, 2.12, 3.1, 3.2, 3.21, 4.9, 5.9, 5.17, 5.19, 

7.0, 7.1, 7.6, 7.8 and 7.12 of the Farm Credit 

Act (12 U.S.C. 2012, 2013, 2015, 2072, 2073, 

2075, 2092, 2093, 2122, 2123, 2142, 2160, 

2243, 2252, 2254, 2279a, 2279a–1, 2279b, 

2279c–1, 2279f); sec. 514 of Pub. L. 102–552, 

106 Stat. 4102. 

13. Part 619 is amended by adding a 

new § 619.9335 to read as follows: 

§ 619.9335 Supplemental retirement plan 

or supplemental executive retirement plan. 

A nonqualified retirement plan that 

provides benefits in addition to those 

covered by other retirement plans for all 

employees and funded in whole or part 

by a Farm Credit bank or association. 

PART 620—DISCLOSURE TO 

SHAREHOLDERS 

14. The authority citation for part 620 

is revised to read as follows: 

Authority: Secs. 4.3, 4.3A, 4.19, 5.9, 5.17, 

5.19 of the Farm Credit Act (12 U.S.C. 2154, 

2154a, 2207, 2243, 2252, 2254); sec. 424 of 

Pub. L. 100–233, 101 Stat. 1568, 1656; sec. 

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

Subpart A—General 

15. Section 620.2 is amended by 

revising paragraphs (c) and (d) to read 

as follows: 

§ 620.2 Preparing and filing reports. 

* * * * * 

(c) The reports sent to shareholders 

must comply with the requirements of 

§ 620.3 of this part and shareholders 

must agree to electronic delivery of 

those reports. 

(d) Information in any part of a report 

may be incorporated by reference in 

answer or partial answer to any other 

item of the report, unless instructions 

for the report state otherwise. 

* * * * * 

Subpart B—Annual Report to 

Shareholders 

16. Section 620.4 is amended by 

revising paragraph (c) to read as follows: 

§ 620.4 Preparing and providing the 

annual report. 

* * * * * 

(c) The report must contain, at a 

minimum, the information required by 

§§ 620.5 and 620.6. In addition, the 

report must contain such other 

information as is necessary to make the 

required statements, in light of the 

circumstances under which they are 

made, not misleading. 

17. Section 620.5 is amended by: 

a. Adding new paragraphs (a)(11) and 

(e)(4); 

b. Revising paragraph (h); 

c. Removing paragraphs (i), (j), and 

(k); and 

d. Redesignating existing paragraphs 

(l), (m), and (n) as paragraphs (i), (j), and 

(k), respectively, to read as follows: 

§ 620.5 Contents of the annual report to 

shareholders. 

* * * * * 

(a) Description of business. 

* * * * * 

(11) The types of advisory votes held 

during the reporting period and the 

results of the vote(s). 

* * * * * 

(e) Description of liabilities. 

* * * * * 

(4) Describe any supplemental 

retirement plans funded by the 

institution on behalf of employees 

whose benefits are not included in the 

Pension Benefits Table in § 620.6(c) of 

this part. Disclose the present value of 

the aggregate accumulated benefits of 

funded, unfunded, and unvested 

obligations related to the plan(s). 

* * * * * 

(h) Directors and senior officers. In a 

separate section of the annual report, 

make the disclosures required in § 620.6 

of this part. 

* * * * * 

18. Subpart B is amended by adding 

a new § 620.6 to read as follows: 

§ 620.6 Disclosures in the annual report to 

shareholders relating to directors and 

senior officers. 

(a) General. 

(1) List the names of all directors and 

senior officers of the institution, 

indicating the position title and term of 

office of each director, and the position, 

title, and date each senior officer 

commenced employment in his or her 

current position. 

(2) Briefly describe the business 

experience during the past 5 years of 

each director and senior officer, 

including each person’s principal 

occupation and employment during the 

past 5 years. 

(3) For each director and senior 

officer, list any other business interest 

where the director or senior officer 

serves on the board of directors or as a 

senior officer. Name the position held 

and state the principal business in 

which the business is engaged. 

(b) Compensation of directors. 

Describe the arrangements under which 

directors of the institution are 

compensated for all services as a 

director (including total cash 

compensation and noncash 

compensation). Noncash compensation 

with an annual aggregate value of less 

than $5,000 does not have to be 

reported. State the total cash and 

reportable noncash compensation paid 

to all directors as a group during the last 

fiscal year. For the purposes of this 

paragraph, disclosure of compensation 

paid to and days served by directors 


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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3179 

applies to any director who served in 

that capacity at any time during the 

reporting period. If applicable, describe 

any exceptional circumstances 

justifying the additional director 

compensation as authorized by 

§ 611.400(c) of this chapter. For each 

director, state: 

(1) The number of days served at 

board meetings; 

(2) The total number of days served in 

other official activities, including any 

board committee(s); 

(3) Any additional compensation paid 

for service on a board committee, 

naming the committee; and 

(4) The total cash and noncash 

compensation paid to each director 

during the last fiscal year. Reportable 

compensation includes cash and the 

value of noncash items provided by a 

third party to a director for services 

rendered by the director on behalf of the 

reporting Farm Credit institution. 

Noncash compensation with an annual 

aggregate value of less than $5,000 does 

not have to be reported. 

(c) Compensation of senior officers. 

Disclose the information on senior 

officer compensation and compensation 

plans as required by this paragraph. The 

institution must disclose the total 

amount of compensation paid to senior 

officers in substantially the same 

manner as the tabular form specified in 

the Summary Compensation Table 

(Compensation Table), located in 

paragraph (c)(3) of this section. 

(1) For each of the last 3 completed 

fiscal years, report the total amount of 

compensation paid and the amount of 

each component of compensation paid 

to the institution’s chief executive 

officer (CEO), naming the individual. If 

more than one person served in the 

capacity of CEO during any given fiscal 

year, individual compensation 

disclosures must be provided for each 

CEO. 

(2) For each of the last 3 completed 

fiscal years, report the aggregate amount 

of compensation paid, and the 

components of compensation paid, to 

all senior officers as a group, stating the 

number of officers in the group without 

naming them. 

(i) If applicable, when any employee 

who is not a senior officer has annual 

compensation at a level that is among 

the five highest paid by the institution 

during the reporting period, include the 

highly compensated employee(s) in the 

aggregate number and amount of 

compensation reported in the 

Compensation Table. 

(ii) The report containing the 

aggregate compensation disclosure must 

include a statement that disclosure of 

information on the total compensation 

paid during the last fiscal year to any 

senior officer, or to any other employee 

included in the aggregate, is available 

and will be disclosed to shareholders of 

the institution and shareholders of 

related associations (if applicable) upon 

request. This statement must be located 

directly beneath the Compensation 

Table. 

(3) The institution must complete the 

Compensation Table, or something 

substantially similar, according to the 

following instructions: 

SUMMARY COMPENSATION TABLE

Annual 

Name of individual or number in group Year Salary Bonus Deferred/ 

perquisite Other Total 

(a) (b) (c) (d) (e) (f) (g) 

CEO ......................................................... 20XX 

20XX 

20XX 

$ $ $ $ $ 

Aggregate number of Senior Officers (& 

other highly compensated employees, 

if applicable): 

(X) ..................................................... 20XX 

(X) ..................................................... 20XX 

(X) ..................................................... 20XX 

(i) Amounts shown as ‘‘Salary’’ 

(column (c)) and ‘‘Bonus’’ (column (d)) 

must reflect the dollar value of salary 

and bonus earned by the senior officer 

during the fiscal year. Amounts 

contributed during the fiscal year by the 

senior officer pursuant to a plan 

established under section 401(k) of the 

Internal Revenue Code, or similar plan, 

must be included in the salary column 

or bonus column, as appropriate. If the 

amount of salary or bonus earned during 

the fiscal year is not calculable by the 

time the report is prepared, the 

reporting institution must provide its 

best estimate of the compensation 

amount(s) and disclose that fact in a 

footnote to the table. 

(ii) Amounts shown as ‘‘deferred/ 

perquisites’’ (column (e)) must reflect 

the dollar value of other annual 

compensation not properly categorized 

as salary or bonus, including but not 

limited to: 

(A) Deferred compensation earned 

during the fiscal year, whether or not 

paid in cash; or 

(B) Perquisites and other personal 

benefits, including the value of noncash 

items, unless the annual aggregate value 

of such perquisites is less than $5,000. 

Reportable perquisites include cash and 

the value of noncash items provided by 

a third party to a senior officer for 

services rendered by the officer on 

behalf of the reporting institution. 

Reportable other personal benefits 

include the dollar value of any tax 

reimbursement provided by the 

institution. 

(iii) Compensation amounts reported 

under the category ‘‘Other’’ (column (f)) 

must reflect the dollar value of all other 

compensation not properly reportable in 

any other column. Items reported in this 

column must be specifically identified 

and described in a footnote to the table, 

including compensation relating to 

pensions and defined benefit plans that 

may also be reported in the ‘‘Pension 

Benefits Table’’ at paragraph (c)(4) of 

this section. ‘‘Other’’ compensation 

includes, but is not limited to: 

(A) The amount paid to the senior 

officer pursuant to a plan or 

arrangement in connection with the 

resignation, retirement, or termination 

of such officer’s employment with the 

institution; 

(B) The amount of contributions by 

the institution on behalf of the senior 

officer to a vested or unvested defined 

contribution plan unless the plan is 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3180 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

made available to all employees on the 

same basis. 

(iv) Amounts displayed under ‘‘Total’’ 

(column (g)) shall reflect the sum total 

of amounts reported in columns (c), (d), 

(e), and (f). 

(4) If the institution provides a 

defined benefit plan or a supplemental 

executive retirement plan (SERP) to its 

senior officers, the institution must 

complete the following Pension Benefits 

Table, or something substantially 

similar, for each plan according to the 

following instructions: 

PENSION BENEFITS TABLE

Annual 

Name of individual 

Years of 

credited 

service 

Funded Unfunded Unvested Total 

CEO ..................................................................................... ........................ $ $ $ $ 

Senior Officers as a Group (& other highly compensated 

employees, if applicable). 

(i) Report separately the present value 

of accumulated benefits for the CEO and 

the senior officer group. 

(ii) Report the number of credited 

years of service in ‘‘Years of credited 

service’’ column. 

(iii) Report the amount of the plan(s) 

that is unfunded in ‘‘Unfunded’’ 

column. 

(iv) Report any off-balance sheet 

commitments, such as benefits earned 

but not yet vested, in the ‘‘unvested’’ 

column. 

(v) Report the sum of the funded, 

unfunded, and unvested columns in the 

‘‘Total’’ column. 

(5) Provide a description of all 

compensation, retirement, incentive, 

performance, and other benefit plans 

(plans) pursuant to which cash or 

noncash compensation was paid or 

distributed during the last fiscal year, or 

is proposed to be paid or distributed in 

the future for performance during the 

last fiscal year, to those individuals 

included in the Compensation Table. 

The description of each plan must 

include, but not be limited to: 

(i) A summary of how each plan 

operates and who is covered by the 

plan. The summary must include the 

criteria used to determine amounts 

payable, including any performance 

formula or measure, as well as the time 

period over which the measurement of 

compensation will be determined, 

payment schedules, and any material 

amendments to the plan during the last 

fiscal year. 

(ii) The overall risk and reward 

structure of the plan as it relates to 

senior officers’ compensation. The 

description must include, at a 

minimum, how each plan is compatible 

with and promotes the institution’s 

goals and business strategy and the 

mission as a Government-sponsored 

enterprise. 

(iii) A discussion of the relationship 

between the CEO and senior officers’ 

compensation to the reporting 

institution’s overall performance. The 

disclosure must also discuss the 

relationship between the CEO’s and 

senior officers’ compensation to their 

performance. 

(6) In the same vicinity as the 

Compensation Table, discuss any 

advisory votes that were held under the 

provisions of § 611.410 of this chapter 

during the reporting period and the 

results of the vote(s). For associations, 

include a discussion of whether or not 

the vote resulted from a shareholder 

petition. Each association must disclose 

in this same location the authority of 

shareholders to petition for an advisory 

vote on CEO and senior officer 

compensation. 

(7) Associations may disclose the 

information required by paragraph (c) of 

this section in the Annual Meeting 

Information Statement (AMIS) pursuant 

to subpart E of this part. Associations 

exercising this option must include a 

reference in the annual report stating 

that the senior officer compensation 

information is included in the AMIS 

and that the AMIS is available for public 

inspection at the reporting association 

offices pursuant to § 620.2(b). 

(d) Travel, subsistence, and other 

related expenses. 

(1) Briefly describe your policy 

addressing reimbursements for travel, 

subsistence, and other related expenses 

as it applies to directors and senior 

officers. The report shall include a 

statement that a copy of the policy is 

available to shareholders of the 

institution and shareholders of related 

associations (if applicable) upon 

request. 

(2) For each of the last 3 fiscal years, 

state the aggregate amount of 

reimbursement for travel, subsistence, 

and other related expenses for all 

directors as a group. 

(e) Transactions with senior officers 

and directors. 

(1) State the institution’s policies, if 

any, on loans to and transactions with 

officers and directors of the institution. 

(2) Transactions other than loans. For 

each person who served as a senior 

officer or director on January 1 of the 

year following the fiscal year of which 

the report is filed, or at any time during 

the fiscal year just ended, describe 

briefly any transaction or series of 

transactions other than loans that 

occurred at any time since the last 

annual meeting between the institution 

and such person, any member of the 

immediate family of such person, or any 

organization with which such person is 

affiliated. 

(i) For transactions relating to the 

purchase or retirement of preferred 

stock issued by the institution, state the 

name of each senior officer or director 

that held preferred stock issued by the 

institution during the reporting period, 

the current amount of preferred stock 

held by the senior officer or director, the 

average dividend rate on the preferred 

stock currently held, and the amount of 

purchases and retirements by the 

individual during the reporting period. 

(ii) For all other transactions, state the 

name of the senior officer or director 

who entered into the transaction or 

whose immediate family member or 

affiliated organization entered into the 

transaction, the nature of the person’s 

interest in the transaction, and the terms 

of the transaction. No information need 

be given where the purchase price, fees, 

or charges involved were determined by 

competitive bidding or where the 

amount involved in the transaction 

(including the total of all periodic 

payments) does not exceed $5,000, or 

the interest of the person arises solely as 

a result of his or her status as a 

stockholder of the institution and the 

benefit received is not a special or extra 

benefit not available to all stockholders. 

(3) Loans to senior officers and 

directors. 


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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3181 

(i) To the extent applicable, state that 

the institution (or in the case of an 

association that does not carry loans to 

its senior officers and directors on its 

books, its related bank) has had loans 

outstanding during the last full fiscal 

year to date to its senior officers and 

directors, their immediate family 

members, and any organizations with 

which such senior officers or directors 

are affiliated that: 

(A) Were made in the ordinary course 

of business; and 

(B) Were made on the same terms, 

including interest rate, amortization 

schedule, and collateral, as those 

prevailing at the time for comparable 

transactions with other persons. 

(ii) To the extent applicable, state that 

no loan to a senior officer or director, or 

to any organization affiliated with such 

person, or to any immediate family 

member who resides in the same 

household as such person or in whose 

loan or business operation such person 

has a material financial or legal interest, 

involved more than the normal risk of 

collectability; provided that no such 

statement need be made with respect to 

any director or senior officer who has 

resigned before the time for filing the 

applicable report with the Farm Credit 

Administration (but in no case later 

than the actual filing), or whose term of 

office will expire or terminate no later 

than the date of the meeting of 

stockholders to which the report relates. 

(iii) If the conditions stated in 

paragraphs (e)(3)(i) and (ii) of this 

section do not apply to the loans of the 

persons or organizations specified 

therein, with respect to such loans state: 

(A) The name of the officer or director 

to whom the loan was made or to whose 

relative or affiliated organization the 

loan was made. 

(B) The largest aggregate amount of 

each indebtedness outstanding at any 

time during the last fiscal year. 

(C) The nature of the loan(s). 

(D) The amount outstanding as of the 

latest practicable date. 

(E) The reasons the loan does not 

comply with the criteria contained in 

paragraphs (e)(3)(i) and (e)(3)(ii) of this 

section. 

(F) If the loan does not comply with 

paragraph (e)(3)(i)(B) of this section, the 

rate of interest payable on the loan and 

the repayment terms. 

(G) If the loan does not comply with 

paragraph (e)(3)(ii) of this section, the 

amount past due, if any, and the reason 

the loan is deemed to involve more than 

a normal risk of collectability. 

(f) Involvement in certain legal 

proceedings. Describe any of the 

following events that occurred during 

the past 5 years and that are material to 

an evaluation of the ability or integrity 

of any person who served as director or 

senior officer on January 1 of the year 

following the fiscal year for which the 

report is filed or at any time during the 

fiscal year just ended: 

(1) A petition under the Federal 

bankruptcy laws or any State insolvency 

law was filed by or against, or a 

receiver, fiscal agent, or similar officer 

was appointed by a court for the 

business or property of such person, or 

any partnership in which such person 

was a general partner at or within 2 

years before the time of such filing, or 

any corporation or business association 

of which such person was a senior 

officer at or within 2 years before the 

time of such filing; 

(2) Such person was convicted in a 

criminal proceeding or is a named party 

in a pending criminal proceeding 

(excluding traffic violations and other 

misdemeanors); 

(3) Such person was the subject of any 

order, judgment, or decree, not 

subsequently reversed, suspended, or 

vacated, by any court of competent 

jurisdiction, permanently or temporarily 

enjoining or otherwise limiting such 

person from engaging in any type of 

business practice. 

Subpart C—Quarterly Report 

19. Section 620.10 is amended by: 

a. Revising paragraph (a); and 

b. Adding a new paragraph (c) to read 

as follows: 

§ 620.10 Preparing the quarterly report. 

(a) Each institution of the Farm Credit 

System must: 

(1) Prepare and send to the Farm 

Credit Administration an electronic 

copy of its quarterly report within 40 

calendar days after the end of each fiscal 

quarter, except that no report need be 

prepared for the fiscal quarter that 

coincides with the end of the fiscal year 

of the institution; 

(2) Publish a copy of its quarterly 

report on its Web site when it 

electronically sends the report to the 

Farm Credit Administration; and 

(3) Ensure the report complies with 

the applicable provisions of §§ 620.2 

and 620.3 of this part. 

* * * * * 

(c) Institutions may use the quarterly 

report to deliver any notice required 

under § 620.15 of this part. Notices 

required under § 620.17 must be issued 

separately from the quarterly report, 

unless otherwise authorized by the 

Farm Credit Administration. 

20. Section 620.11 is amended by: 

a. Revising the introductory text of 

paragraph (b), paragraphs (c) and (d); 

and 

b. Removing paragraphs (e) and (f) to 

read as follows: 

§ 620.11 Content of quarterly report to 

shareholders. 

* * * * * 

(b) Rules for condensation. For 

purposes of this section, major captions 

to be provided in the financial 

statements are the same as those 

provided in the financial statements 

contained in the institution’s annual 

report to shareholders, except that the 

financial statements included in the 

quarterly report may be condensed into 

major captions in accordance with the 

rules prescribed under this paragraph. If 

any amount that would otherwise be 

required to be shown by this subpart 

with respect to any item is not material, 

it need not be separately shown. The 

combination of insignificant items is 

permitted. 

* * * * * 

(c) Required content. A quarterly 

report must, at a minimum, contain the 

following items: 

(1) Management’s discussion and 

analysis of financial condition and 

results of operations. Discuss material 

changes, if any, to the information 

provided to shareholders pursuant to 

§ 620.5(g) that have occurred during the 

periods specified in paragraphs (c)(2)(i) 

and (ii) of this section. Such additional 

information as is needed to enable the 

reader to assess material changes in 

financial condition and results of 

operations between the periods 

specified in paragraphs (c)(2)(i) and (ii) 

of this section shall be provided. 

(i) Material changes in financial 

condition. Discuss any material changes 

in financial condition from the end of 

the preceding fiscal year to the date of 

the most recent interim balance sheet 

provided. If the interim financial 

statements include an interim balance 

sheet as of the corresponding interim 

date of the preceding fiscal year, any 

material changes in financial conditions 

from that date to the date of the most 

recent interim balance sheet provided 

also shall be discussed. If discussions of 

changes from both the end and the 

corresponding interim date of the 

preceding fiscal year are required, the 

discussions may be combined at the 

discretion of the institution. 

(ii) Material changes in results of 

operations. Discuss any material 

changes in the institution’s results of 

operations with respect to the most 

recent fiscal year-to-date period for 

which an income statement is provided 

and the corresponding year-to-date 

period of the preceding fiscal year. Such 

discussion also shall cover material 

changes with respect to that fiscal 


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3182 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

quarter and the corresponding fiscal 

quarter in the preceding fiscal year. In 

addition, if the institution has elected to 

provide an income statement for the 12- 

month period ended as of the date of the 

most recent interim balance sheet 

provided, the discussion also shall 

cover material changes with respect to 

that 12-month period and the 12-month 

period ended as of the corresponding 

interim balance sheet date of the 

preceding fiscal year. 

(2) Interim financial statements. The 

following financial statements must be 

provided: 

(i) An interim balance sheet as of the 

end of the most recent fiscal quarter and 

as of the end of the preceding fiscal 

year. A balance sheet for the comparable 

quarter of the preceding fiscal year is 

optional. 

(ii) Interim statements of income for 

the most recent fiscal quarter, for the 

period between the end of the preceding 

fiscal year and the end of the most 

recent fiscal quarter, and for the 

comparable periods for the previous 

fiscal year. 

(iii) Interim statements of changes in 

protected borrower capital and at-risk 

capital for the period between the end 

of the preceding fiscal year and the end 

of the most recent fiscal quarter, and for 

the comparable period for the preceding 

fiscal year. 

(iv) For banks, interim statements of 

cash flows for the period between the 

end of the preceding fiscal year and the 

end of the most recent fiscal quarter, 

and for the comparable period for the 

preceding fiscal year. For associations, 

interim statements of cash flows are 

optional. 

(3) Other related financial items. State 

that the financial statements were 

prepared under the oversight of the 

audit committee. The interim financial 

information need not be audited or 

reviewed by a qualified public 

accountant or external auditor prior to 

filing. If, however, a review of the data 

is made in accordance with the 

established professional standards and 

procedures for such a review, the 

institution may state that a qualified 

public accountant or external auditor 

has performed such a review under the 

supervision of the institution’s audit 

committee. If such a statement is made, 

the report of a qualified public 

accountant or external auditor on such 

review must accompany the interim 

financial information. 

(d) Notices. Institutions using the 

quarterly report to deliver any notice 

required under § 620.15 of this part 

must put the notice information at the 

beginning of the quarterly report. The 

notice must be conspicuous and may 

not be part of any footnotes to the 

quarterly report. Notices that are made 

part of the quarterly report must comply 

with the provisions of both this section 

and § 620.15. 

Subpart D—Notice to Shareholders 

21. Subpart D is amended by revising 

§§ 620.15 and 620.17 to read as follows: 

§ 620.15 Notice of significant or material 

events. 

(a) When a Farm Credit bank or 

association determines that it has a 

significant or material event, the 

institution must prepare and provide to 

its shareholders and the Farm Credit 

Administration a notice disclosing the 

event(s). 

(1) Events covered under this 

provision include significant events 

defined in § 620.1(q) and material 

events defined in § 620.1(h). 

(2) At a minimum, a notice must be 

issued for significant or material events 

involving compensation, retirement and 

benefit plans, capitalization plans or 

bylaws, results of shareholder votes, 

early director departures, unplanned 

departure of a senior officer, letters of 

intent to merge, changes in external 

auditors, and reportable Farm Credit 

Administration supervisory and 

enforcement actions. 

(b) A notice issued under this section 

must be made as soon as possible, but 

not later than 90 days after occurrence 

of the event. 

(1) Each institution must 

electronically provide the notice to the 

Farm Credit Administration at the same 

time as distribution of the notice to 

shareholders. 

(2) Delivery of the notice to 

shareholders may be accomplished by 

direct communications with the 

shareholders, posting the notice on the 

institution’s Web site, as part of the 

quarterly report to shareholders, or by 

publishing the notice in any publication 

with circulation wide enough to 

reasonably assure that all of the 

institution’s shareholders have access to 

the information in a timely manner. 

(c) Every notice must be dated and 

signed in a manner similar to the 

requirements of § 620.3(b). 

(d) The information required to be 

included in a notice issued under this 

section must be conspicuous, easily 

understandable, complete, accurate, and 

not misleading. 

§ 620.17 Special notice provisions for 

events related to minimum permanent 

capital. 

(a) When a Farm Credit bank or 

association determines that it is not in 

compliance with the minimum 

permanent capital standard prescribed 

under § 615.5205 of this chapter, that 

institution must prepare and provide to 

its shareholders and the Farm Credit 

Administration a notice stating that the 

institution has initially determined it is 

not in compliance with minimum 

permanent capital standards. Such 

notice must be given within 30 days 

following the month end. 

(b) When notice is given under 

paragraph (a) of this section, the 

institution must also notify its 

shareholders and the Farm Credit 

Administration when the institution’s 

permanent capital ratio decreases by 

one half of 1 percent or more from the 

level reported in the original notice, or 

from that reported in a subsequent 

notice provided under this paragraph. 

This notice must be given within 45 

days following the end of every quarter 

at which the institution’s permanent 

capital ratio decreases as specified. 

(c) Each institution required to 

prepare a notice under paragraphs (a) or 

(b) of this section shall provide the 

notice to shareholders or publish it in 

any publication with circulation wide 

enough to be reasonably assured that all 

of the institution’s shareholders have 

access to the information in a timely 

manner. The information required to be 

included in this notice must be 

conspicuous, easily understandable, and 

not misleading. 

(d) A notice, at a minimum, shall 

include: 

(1) A statement that: 

(i) Briefly describes the regulatory 

minimum permanent capital standard 

established by the Farm Credit 

Administration and the notice 

requirement of paragraph (a) of this 

section; 

(ii) Indicates the institution’s current 

level of permanent capital; and 

(iii) Notifies shareholders that the 

institution’s permanent capital is below 

the Farm Credit Administration 

regulatory minimum standard. 

(2) A statement of the effect that 

noncompliance has had on the 

institution and its shareholders, 

including whether the institution is 

currently prohibited by statute or 

regulation from retiring stock or 

distributing earnings or whether the 

Farm Credit Administration has issued 

a capital directive or other enforcement 

action to the institution. 

(3) A complete description of any 

event(s) that may have significantly 

contributed to the institution’s 

noncompliance with the minimum 

permanent capital standard. 

(4) A statement that the institution is 

required by regulation to provide 

another notice to shareholders within 45 


srobinson on DSK4SPTVN1PROD with PROPOSALS
Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 3183 

days following the end of any 

subsequent quarter at which the 

institution’s permanent capital ratio 

decreases by one half of 1 percent or 

more from the level reported in the 

notice. 

Subpart E—Annual Meeting 

Information Statements and Other 

Information To Be Furnished in 

Connection With Annual Meetings and 

Director Elections 

22. Section 620.21 is amended by 

revising paragraph (a)(3)(i) to read as 

follows: 

§ 620.21 Contents of the information 

statement. 

(a) * * * 

(3) * * * 

(i) If any transactions between the 

institution and its senior officers and 

directors of the type required to be 

disclosed in the annual report to 

shareholders under § 620.6(e), or any of 

the events required to be disclosed in 

the annual report to shareholders under 

§ 620.6(f) have occurred since the end of 

the last fiscal year and were not 

disclosed in the annual report to 

shareholders, the disclosures required 

by § 620.6(e) and (f) shall be made with 

respect to such transactions or events in 

the information statement. If any 

material change in the matters disclosed 

in the annual report to shareholders 

pursuant to § 620.6(e) and (f) has 

occurred since the annual report to 

shareholders was prepared, disclosure 

shall be made of such change in the 

information statement. 

* * * * * 

Subpart F—Bank and Association 

Audit and Compensation Committees 

23. Section 620.31 is revised to read 

as follows: 

§ 620.31 Compensation committees. 

Each Farm Credit bank and 

association must establish and maintain 

a compensation committee by adopting 

a written charter describing the 

committee’s composition, authorities, 

and responsibilities in accordance with 

this section. The compensation 

committee must report only to the board 

of directors. All compensation 

committees will be required to maintain 

records of meetings, including 

attendance, for at least 3 fiscal years. 

(a) Composition. Each compensation 

committee must consist of at least three 

members and all committee members 

must be members of the institution’s 

board of directors. Every member must 

be free from any relationship that, in the 

opinion of the board, would interfere 

with the exercise of independent 

judgment as a committee member. 

(b) Responsibilities. It is the 

responsibility of each compensation 

committee to review the compensation 

policies and plans for senior officers 

and employees and to approve the 

overall compensation program for senior 

officers. In fulfilling its responsibilities, 

the compensation committee must 

document that it: 

(1) Analyzed the institution’s 

projected long-term compensation and 

retirement benefit obligations and 

determined such obligations are 

appropriate to the services performed 

and not excessive. 

(2) Reviewed incentive-based 

compensation programs and payments 

and determined that they were not 

unreasonable or disproportionate to the 

services performed and were structured 

so the payout schedule considered the 

potential for future losses or risks to the 

institution. 

(3) Reviewed senior officer 

compensation, incentive and benefit 

programs and determined that they 

support the institution’s long-term 

business strategy, as well as promote 

safe and sound business practices. 

(4) Reviewed compensation programs 

designed for specific groups of 

employees, other than senior officers, to 

ensure the plan(s) pose no imprudent 

risk to the institution. 

(c) Resources. Each institution must 

provide monetary and nonmonetary 

resources to enable its compensation 

committee to perform its duties. 

PART 630—DISCLOSURE TO 

INVESTORS IN SYSTEM–WIDE AND 

CONSOLIDATED BANK DEBT 

OBLIGATIONS OF THE FARM CREDIT 

SYSTEM 

24. The authority citation for part 630 

is revised to read as follows: 

Authority: Secs. 4.2, 4.9, 5.9, 5.17, 5.19 of 

the Farm Credit Act (12 U.S.C. 2153, 2160, 

2243, 2252, 2254); sec. 424 of Pub. L. 100– 

233, 101 Stat. 1568, 1656; sec. 514 of Pub. L. 

102–552, 106 Stat. 4102. 

Subpart A—General 

25. Section 630.6 is amended by 

revising paragraph (b) to read as follows: 

§ 630.6 Funding Corporation committees. 

* * * * * 

(b) Compensation committee. The 

Funding Corporation must establish and 

maintain a compensation committee by 

adopting a written charter describing 

the committee’s composition, 

authorities, and responsibilities in 

accordance with this section. The 

compensation committee must report 

only to the board of directors. The 

compensation committee will be 

required to maintain records of 

meetings, including attendance, for at 

least 3 fiscal years. 

(1) Composition. The committee must 

consist of at least three members and all 

members must be members of the 

Funding Corporation’s board of 

directors. Every compensation 

committee member must be free from 

any relationship that, in the opinion of 

the board, would interfere with the 

exercise of independent judgment as a 

committee member. 

(2) Responsibilities. It is the 

responsibility of the compensation 

committee to review the compensation 

policies and plans for senior officers 

and employees and to approve the 

overall compensation program for senior 

officers. In fulfilling its responsibilities, 

the compensation committee must 

document that it: 

(i) Analyzed the Funding 

Corporation’s projected long-term 

compensation and retirement benefit 

obligations and determined such 

obligations are appropriate to the 

services performed and not excessive. 

(ii) Reviewed incentive-based 

compensation programs and payments 

and determined that they were not 

unreasonable or disproportionate to the 

services performed and were structured 

so the payout schedule considered the 

potential for future losses or risks to the 

Funding Corporation. 

(iii) Reviewed senior officer 

compensation, incentive and benefit 

programs and determined that they 

support the Funding Corporation’s longterm business strategy and mission, as 

well as continue to promote safe and 

sound business practices. 

(3) Resources. The Funding 

Corporation must provide monetary and 

nonmonetary resources to enable its 

compensation committee to perform its 

duties. 

Subpart B—Annual Report to Investors 

26. Section 630.20 is amended by 

revising paragraph (i) to read as follows: 

§ 630.20 Contents of the annual report to 

investors. 

* * * * * 

(i) Compensation of directors and 

senior officers. State that information on 

the compensation of directors and 

senior officers of Farm Credit banks is 

contained in each bank’s annual report 

to shareholders and that the annual 

report of each bank is available to 

investors upon request pursuant to 

§ 630.3(g). State whether advisory votes 

were held in any of the disclosure 


srobinson on DSK4SPTVN1PROD with PROPOSALS
3184 Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Proposed Rules 

entities during the reporting period and 

the results of such vote. 

* * * * * 

Dated: January 12, 2012. 

Dale L. Aultman, 

Secretary, Farm Credit Administration Board. 

[FR Doc. 2012–901 Filed 1–20–12; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2012–0034; Directorate 

Identifier 2011–NM–153–AD] 

RIN 2120–AA64 

Airworthiness Directives; Bombardier, 

Inc. Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for certain 

Bombardier, Inc. Model CL–600–2B19 

(Regional Jet Series 100 & 440) 

airplanes. This proposed AD was 

prompted by a report of a fire which 

started in the vicinity of an electrical 

panel that was fed by oxygen escaping 

from a damaged third crew person 

oxygen line that occurred while the 

airplane was on the ground. This 

proposed AD would require replacing 

and changing the routing of the flexible 

oxygen hose of the third crew person 

oxygen line and modifying the entrance 

compartment assembly. We are 

proposing this AD to prevent the 

possibility of damage to the third crew 

person oxygen line and an oxygen-fed 

fire in the airplane. 

DATES: We must receive comments on 

this proposed AD by March 8, 2012. 

ADDRESSES: You may send comments by 

any of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE., 

Washington, DC 20590. 

• Hand Delivery: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE., 

Washington, DC, between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this proposed AD, contact Bombardier, 

Inc., 400 Coˆte-Vertu Road West, Dorval, 

Que ́bec H4S 1Y9, Canada; telephone 

(514) 855–5000; fax (514) 855–7401; 

email thd.crj@aero.bombardier.com; 

Internet http://www.bombardier.com. 

You may review copies of the 

referenced service information at the 

FAA, Transport Airplane Directorate, 

1601 Lind Avenue SW., Renton, 

Washington. For information on the 

availability of this material at the FAA, 

call (425) 227–1221. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Operations office between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this proposed AD, the 

regulatory evaluation, any comments 

received, and other information. The 

street address for the Docket Operations 

office (telephone (800) 647–5527) is in 

the ADDRESSES section. Comments will 

be available in the AD docket shortly 

after receipt. 

FOR FURTHER INFORMATION CONTACT: 

Cesar Gomez, Aerospace Engineer, 

Airframe and Mechanical Systems 

Branch, ANE–171, FAA, New York 

Aircraft Certification Office, 1600 

Stewart Avenue, Suite 410, Westbury, 

New York 11590; telephone (516) 228– 

7318; fax (516) 794–5531. 

SUPPLEMENTARY INFORMATION: 

Comments Invited 

We invite you to send any written 

relevant data, views, or arguments about 

this proposed AD. Send your comments 

to an address listed under the 

ADDRESSES section. Include ‘‘Docket No. 

FAA–2012–0034; Directorate Identifier 

2011–NM–153–AD’’ at the beginning of 

your comments. We specifically invite 

comments on the overall regulatory, 

economic, environmental, and energy 

aspects of this proposed AD. We will 

consider all comments received by the 

closing date and may amend this 

proposed AD based on those comments. 

We will post all comments we 

receive, without change, to http:// 

www.regulations.gov, including any 

personal information you provide. We 

will also post a report summarizing each 

substantive verbal contact we receive 

about this proposed AD. 

Discussion 

Transport Canada Civil Aviation 

(TCCA), which is the aviation authority 

for Canada, has issued Canadian 

Airworthiness Directive CF–2011–23, 

dated July 14, 2011 (referred to after this 

as ‘‘the MCAI’’), to correct an unsafe 

condition for the specified products. 

The MCAI states: 

An operator has reported a ground fire in 

the CL–600–2B19 aeroplane. The fire burnt 

an 18 inch hole through the left upper 

fuselage skin panel in the cockpit area. The 

fire started in the vicinity of the Junction Box 

1 (JB1) electrical panel, and was fed by 

oxygen escaping from a damaged third 

crewman oxygen line. 

This [TCCA] Airworthiness Directive (AD) 

was issued to prevent the possibility of 

damage to the third crewman oxygen line 

and an oxygen fed fire in the aeroplane. 

The required actions include 

replacing and changing the routing of 

the flexible oxygen hose of the third 

crew person oxygen line and modifying 

the entrance compartment assembly. 

You may obtain further information by 

examining the MCAI in the AD docket. 

Relevant Service Information 

Bombardier has issued Service 

Bulletin 601R–35–017, Revision A, 

dated June 9, 2011. The actions 

described in this service information are 

intended to correct the unsafe condition 

identified in the MCAI. 

FAA’s Determination and Requirements 

of This Proposed AD 

This product has been approved by 

the aviation authority of another 

country, and is approved for operation 

in the United States. Pursuant to our 

bilateral agreement with the State of 

Design Authority, we have been notified 

of the unsafe condition described in the 

MCAI and service information 

referenced above. We are proposing this 

AD because we evaluated all pertinent 

information and determined an unsafe 

condition exists and is likely to exist or 

develop on other products of the same 

type design. 

Costs of Compliance 

Based on the service information, we 

estimate that this proposed AD would 

affect about 588 products of U.S. 

registry. We also estimate that it would 

take about 13 work-hours per product to 

comply with the basic requirements of 

this proposed AD. The average labor 

rate is $85 per work-hour. Required 

parts would cost about $108 per 

product. Where the service information 

lists required parts costs that are 

covered under warranty, we have 

assumed that there will be no charge for 

these parts. As we do not control 

warranty coverage for affected parties, 

some parties may incur costs higher 

than estimated here. Based on these 

figures, we estimate the cost of the 

proposed AD on U.S. operators to be 

$713,244, or $1,213 per product. 


srobinson on DSK4SPTVN1PROD with PROPOSALS