Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Proposed Rules 15931 

I. Obtaining Information and 

Submitting Comments 

A. Obtaining Information 

Please refer to Docket ID NRC–2015– 

0003 when contacting the NRC about 

the availability of information for this 

action. You may obtain publiclyavailable information related to this 

action by any of the following methods: 

• Federal rulemaking Web site: Go to 

http://www.regulations.gov and search 

for Docket ID NRC–2015–0003. 

• NRC’s Agencywide Documents 

Access and Management System 

(ADAMS): You may obtain publiclyavailable documents online in the 

ADAMS Public Documents collection at 

http://www.nrc.gov/reading-rm/

adams.html. To begin the search, select 

‘‘ADAMS Public Documents’’ and then 

select ‘‘Begin Web-based ADAMS 

Search.’’ For problems with ADAMS, 

please contact the NRC’s Public 

Document Room (PDR) reference staff at 

1–800–397–4209, 301–415–4737, or by 

email to pdr.resource@nrc.gov. The 

guidance for conducting technical 

analyses for 10 CFR part 61, Draft 

NUREG–2175, is available in ADAMS 

under Accession No. ML15056A516. 

• NRC’s PDR: You may examine and 

purchase copies of public documents at 

the NRC’s PDR, Room O1–F21, One 

White Flint North, 11555 Rockville 

Pike, Rockville, Maryland 20852. 

B. Submitting Comments 

Please include Docket ID NRC–2015– 

0003 in the subject line of your 

comment submission. 

The NRC cautions you not to include 

identifying or contact information that 

you do not want to be publicly 

disclosed in your comment submission. 

The NRC will post all comment 

submissions at http://

www.regulations.gov as well as enter the 

comment submissions into ADAMS. 

The NRC does not routinely edit 

comment submissions to remove 

identifying or contact information. 

If you are requesting or aggregating 

comments from other persons for 

submission to the NRC, then you should 

inform those persons not to include 

identifying or contact information that 

they do not want to be publicly 

disclosed in their comment submission. 

Your request should state that the NRC 

does not routinely edit comment 

submissions to remove such information 

before making the comment 

submissions available to the public or 

entering the comment into ADAMS. 

II. Discussion 

The guidance for conducting 

technical analyses for part 61 of Title 10 

of the Code of Federal Regulations 

(CFR), NUREG–2175, provides guidance 

on conducting technical analyses (i.e., 

performance assessment, inadvertent 

intruder assessment, assessment of the 

stability of a LLRW disposal site, 

defense-in-depth analyses, protective 

assurance period analyses, and 

performance period analyses) to 

demonstrate compliance with the 

performance objectives in the proposed 

10 CFR part 61, ‘‘Licensing 

Requirements for Land Disposal of 

Radioactive Waste.’’ This guidance 

should facilitate licensees’ 

implementation of the proposed 

amendments as well as assist regulatory 

authorities in reviewing the technical 

analyses. This guidance applies to all 

waste streams disposed of at a 10 CFR 

part 61 LLRW disposal facility, 

including large quantities of depleted 

uranium and blended waste. 

NUREG–2175 provides detailed 

guidance in new areas, such as the 

inadvertent intruder analysis, defensein-depth analyses, and analyses for the 

three phases of the analysis timeframe 

(compliance period, protective 

assurance period, and performance 

period). This guidance discusses the use 

of a graded level of effort needed to riskinform the analyses for the compliance 

period (1,000 years), the protective 

assurance period (from 1,000 years to 

10,000 years after disposal site closure), 

and also covers the performance period 

analyses that should be performed for 

analysis of long-lived waste beyond 

10,000 years. Additional topics covered 

in this document include: (1) 

Demonstration that radiation doses are 

minimized to the extent reasonably 

achievable; (2) identification and 

screening of the features, events, and 

processes to develop scenarios for 

technical analyses; (3) use of the waste 

classification tables or the results of the 

technical analyses to develop sitespecific waste acceptance criteria; and 

(4) use of performance confirmation to 

evaluate and verify the accuracy of 

information used to demonstrate 

compliance prior to site closure. 

III. Proposed Rulemaking 

On May 3, 2011, the NRC published 

preliminary proposed rule language (76 

FR 24831), ‘‘Part 61: Site Specific 

Analyses for Demonstrating Compliance 

with Subpart C Performance Objectives’’ 

(ADAMS Accession No. ML111150205). 

As a result of additional direction from 

the Commission in staff requirement 

memoranda (SRM)–COMWDM–11– 

0002/COMGEA–11–0002, ‘‘Revisions to 

Part 61,’’ dated January 19, 2012 

(ADAMS Accession No. ML120190360), 

the NRC staff published a second 

version of the preliminary proposed rule 

language (77 FR 72997; December 7, 

2012), ‘‘November 2012 Preliminary 

Rule Language for Proposed Revisions 

to Low-Level Waste Disposal 

Requirements (10 CFR part 61)’’ 

(ADAMS Accession No. 

ML12311A444). Based on comments 

received, the NRC published in the 

Proposed Rules section of this issue of 

the Federal Register a third version of 

the proposed rule language. Documents 

related to the proposed rule, including 

public comments, are available on the 

Federal rulemaking Web site at http://

www.regulations.gov under Docket ID 

NRC–2011–0012. 

Dated at Rockville, Maryland, this 5th day 

of February 2015. 

For the Nuclear Regulatory Commission. 

Andrew Persinko, 

Deputy Director, Division of 

Decommissioning, Uranium Recovery, and 

Waste Programs, Office of Nuclear Material 

Safety and Safeguards. 

[FR Doc. 2015–06536 Filed 3–25–15; 8:45 am] 

BILLING CODE 7590–01–P 

FARM CREDIT ADMINISTRATION 

12 CFR Parts 650, 651, 653, and 655 

RIN 3052–AC89 

Federal Agricultural Mortgage 

Corporation General Provisions; 

Federal Agricultural Mortgage 

Corporation Governance; Federal 

Agricultural Mortgage Corporation 

Risk Management; Federal Agricultural 

Mortgage Corporation Disclosure and 

Reporting; Farmer Mac Corporate 

Governance and Standards of Conduct 

AGENCY: Farm Credit Administration. 

ACTION: Proposed rule. 

SUMMARY: The Farm Credit 

Administration (FCA, we, or our) is 

proposing new regulations, and 

clarifying and enhancing existing 

regulations, related to the Federal 

Agricultural Mortgage Corporation 

(Farmer Mac or Corporation) Board 

governance and standards of conduct, 

including director election procedures, 

conflict-of-interest, and risk governance. 

We also propose enhancements to 

existing disclosure and reporting 

requirements to remove repetitive 

reporting and allow for electronic filing 

of reports. In keeping with today’s 

financial and economic environment, 

we believe it prudent and timely to 

undertake a review of our regulatory 

guidance on the identified areas. We 

also propose rules on the examination 

and enforcement authorities held by the 

mstockstill on DSK4VPTVN1PROD with PROPOSALS

15932 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Proposed Rules 

1Agricultural Credit Act of 1987 (Pub. L. 100– 

233, January 6, 1988). 

2According to the 1987 Act, Farmer Mac, in 

certain circumstances, may borrow up to $1.5 

billion from the U.S. Treasury to ensure timely 

payment of any guarantee obligations of the 

corporation. Pub. L. 100–233. 

3Section 8.2(b) of the Act (12 U.S.C. 2279aa– 

2(b)). 

4Section 8.2(b)(2)(A) and (B) of the Act (12 U.S.C. 

2279aa–2(b)(2)(A) and (B)). 

5Section 8.2(b)(6) of the Act (12 U.S.C. 2279aa– 

2(b)(6)). 

6Section 701 of the 1987 Act. 

FCA Office of Secondary Market 

Oversight (OSMO) over Farmer Mac. 

DATES: You may send comments on or 

before June 24, 2015. 

ADDRESSES: We offer a variety of 

methods for you to submit your 

comments. For accuracy and efficiency 

reasons, commenters are encouraged to 

submit comments by email or through 

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

are difficult for us to process and 

achieve compliance with section 508 of 

the Rehabilitation Act, we are no longer 

accepting 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 us an email at 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: Laurie A. Rea, Director, Office 

of Secondary Market Oversight, 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: Joe 

Connor, Associate Director for Policy 

and Analysis, Office of Secondary 

Market Oversight, Farm Credit 

Administration, McLean, VA 22102– 

5090, (703) 883–4364, TTY (703) 883– 

4056, or Laura McFarland, Senior 

Counsel, Office of General Counsel, 

Farm Credit Administration, McLean, 

VA 22102–5090, (703) 883–4020, TTY 

(703) 883–4056. 

SUPPLEMENTARY INFORMATION: 

I. Objective 

The purpose of this proposed rule is 

to: 

• Enhance risk governance at Farmer 

Mac to further its long-term safety and 

soundness and mission achievement; 

• Clarify the roles of the board and 

voting stockholders in the Farmer Mac 

director nomination and election 

process; 

• Enhance the usefulness, 

transparency, and consistency of 

conflict-of-interest reporting; 

• Clarify conflict-of-interest 

prohibitions; 

• Clarify the appropriate balance 

between a director’s representational 

requirements and duties as director of 

Farmer Mac; and 

• Remove repetitious disclosure and 

reporting requirements, given the dual 

reporting responsibilities of Farmer Mac 

to the FCA and the Securities and 

Exchange Commission (SEC). 

II. Background 

Farmer Mac is a stockholder-owned, 

federally chartered instrumentality that 

is an institution of the Farm Credit 

System (System) and a Governmentsponsored enterprise (GSE). Farmer Mac 

was established and chartered by the 

Agricultural Credit Act of 1987 (1987 

Act) 1 to create a secondary market for 

agricultural real estate mortgage loans, 

rural housing mortgage loans, rural 

utility cooperative loans, and the 

guaranteed portions of USDAguaranteed farm and rural development 

loans. Title VIII of the Farm Credit Act 

of 1971, as amended, (Act) governs 

Farmer Mac. 

As a GSE, Farmer Mac has a public 

policy purpose embedded in its 

corporate mission. One aspect of this 

public policy mission includes financial 

services to customer-stakeholders 

(institutions that lend to farmers, 

ranchers, rural homeowners, and rural 

utility cooperatives) and the resulting 

flow-through benefits to rural 

borrowers. Another key aspect is the 

protection of taxpayer-stakeholders 

because the risk that Farmer Mac 

accepts in the course of business 

exposes both investors (debt and equity 

holders) and taxpayers to potential loss. 

The taxpayer’s exposure arises in part 

from Farmer Mac’s authority to issue 

debt to the Department of the Treasury 

to cover guarantee losses under certain 

adverse circumstances.2 Thus, an 

appropriately comprehensive approach 

to Board-level risk governance would 

acknowledge and consider all 

stakeholder groups. 

Farmer Mac has two classes of voting 

common stock: Class A and Class B. 

Class A voting common stock is owned 

by banks, insurance companies, and 

other financial institutions. Class B 

voting common stock is owned by 

System institutions. In addition, Farmer 

Mac has nonvoting common stock (Class 

C), the ownership of which is not 

restricted and is a means for Farmer 

Mac to raise capital. Farmer Mac may 

also issue nonvoting preferred stock. 

The Farmer Mac Board of Directors is, 

by statute, composed of 15 directors 

from three defined representative 

groups: Class A stockholders, Class B 

stockholders, and the general public.3

Each of the three groups has five 

directors on the Board. Congress further 

specified that the Farmer Mac elected 

directors ‘‘shall be elected by holders of 

common stock’’ from Class A and Class 

B.4 The directors representing the 

general public are appointed by the 

President of the United States 

(appointed directors). The Act limits the 

terms of elected directors to 1 year, 

while appointed directors serve for an 

unlimited duration ‘‘at the pleasure of 

the President’’ of the United States of 

America.5

Although the Farmer Mac Board is 

representative in nature, Congress chose 

a corporate structure to govern the 

operations of Farmer Mac. Common law 

corporate principles affirm the fiduciary 

duty of directors to act in the best 

interests of Farmer Mac and all of its 

stockholders. However, this fiduciary 

duty to stockholders must be 

understood in the context of the duty of 

the directors to further the statutory 

purpose and public mission of Farmer 

Mac.6

A. Board Governance and Risk 

Management 

The essence of corporate governance 

is to facilitate an entity’s proper 

accountability to all stakeholders and 

mitigate conflicts-of-interest. As part of 

this, it is essential that corporations 

practice sound risk management. Risk 

management includes the identification, 

assessment measurement, and 

controlling of risks that may arise from 

all aspects of business activities, pursuit 

of opportunities and the operating 

environment. In financial institutions, 

risk can be attributed to three broad 

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Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Proposed Rules 15933 

7Pub. L. 107–204, July 30, 2002. 

8Pub. L. 111–203, 124 Stat. 1376, (H.R. 4173), 

July 21, 2010. 

9See Dodd-Frank Act, sections 951–955 of 

Subtitle E of Title IX, ‘‘Investor Protections and 

Improvements to the Regulation of Securities,’’ and 

sections 971–972. 

10Section 8.11(a)(1) and (2) of the Act (12 U.S.C. 

2279aa–11). 

11 79 FR 10426. 12Pub. L. 102–552, 106 Stat. 4131. 

categories: Credit risk, market risk, and 

operational risk. Usually, it is the board 

of directors who approve the overall 

risk-appetite of a company and monitor 

internal controls. A strong board 

integrates risk management and 

corporate governance processes to steer 

the corporation towards policies 

supporting long-term sustainable growth 

and mission achievement, in a manner 

that promotes controlled risk-taking in 

achievement of long-term strategic 

objectives rather than, for example, for 

short-term increases in stock price 

performance. 

The Sarbanes-Oxley Act of 2002 

(Sarbanes-Oxley) 7 established stronger 

reporting requirements and enhanced 

oversight for publicly held companies 

by increasing the responsibility and 

independence of corporate boards. The 

SEC issued, and continues to issue, 

regulations implementing the provisions 

of Sarbanes-Oxley. Self-regulatory 

organizations (SROs), the New York 

Stock Exchange (NYSE) in Farmer Mac’s 

case, have also issued requirements 

designed to enhance the accountability 

and transparency of corporate business 

operations. Also, in response to the 

financial crisis of 2007–2008, Congress 

passed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act of 

2010 (Dodd-Frank Act).8 Six of the 

Dodd-Frank Act provisions imposed 

new corporate governance requirements 

on public corporations.9 Most of these 

relate to executive compensation and 

shareholder proxy access. 

Farmer Mac, as a publicly traded 

company, is subject to many of the 

governance requirements of SarbanesOxley, Dodd-Frank, and SEC disclosure 

regulations for publicly traded 

companies. However, with the recent 

events in the financial industry, 

increased sophistication in financial 

markets, and on-going scrutiny of GSE 

financial activities and related reporting 

practices, we believe it is prudent to 

update our current regulatory standards 

related to Farmer Mac’s Board 

governance and reporting and 

disclosures in the interest of continuing 

the safety and soundness and public 

mission achievement of Farmer Mac. 

Portions of this proposed rule are 

related to some of the key governance 

provisions of Sarbanes-Oxley and DoddFrank, such as director independence 

and conflict-of-interest reporting, but we 

are not addressing executive 

compensation disclosures at this time as 

we believe those are being adequately 

addressed by SEC regulations 

implementing Dodd-Frank, to which 

Farmer Mac is subject under section 

8.12 of the Act. 

B. Rulemaking 

Farmer Mac is regulated by FCA 

through the FCA Office of Secondary 

Market Oversight (OSMO). Congress 

charged us to issue regulations to ensure 

mission compliance and the safety and 

soundness of Farmer Mac. When issuing 

regulations for Farmer Mac, the Act 

requires FCA to consider: 

• The purpose for which Farmer Mac 

was created; 

• The practices are appropriate to the 

conduct of secondary markets in 

agricultural loans; and 

• The reduced levels of risks 

associated with appropriately structured 

secondary market transactions.10

We issued an Advance Notice of 

Proposed Rulemaking (ANPRM) on 

February 25, 2014, to solicit opinions 

and suggestions from investors, 

stockholders, and other interested 

parties on ways to enhance our 

regulation of Farmer Mac’s governance 

activities.11 The comment period for the 

ANPRM ended April 28, 2014. We 

received seven comment letters in 

response to the ANPRM, including 

letters from Farmer Mac, the Farm 

Credit Council (Council), System banks 

and associations, Zions National Bank 

(Zions), the National Rural Utilities 

Cooperative Financing Corporation 

(CFC), and the Weinberg Center for 

Corporate Governance at the University 

of Delaware (Weinberg Center). 

Commenters were divided on the need 

for additional regulatory guidance in the 

areas of corporate governance and 

standards of conduct. Farmer Mac, 

Zions, and CFC were generally opposed 

to modification to this section of the 

regulations. The Council and System 

banks and associations supported the 

overall initiative of improving 

regulatory provisions on Farmer Mac’s 

Board governance. The Weinberg Center 

was generally supportive but voiced a 

cautionary note and strong opposition to 

an overly prescriptive approach toward 

the regulation of conflicts-of-interest 

and the recusal process, stating that 

good directors result from a sound 

elections process and thus are more 

than capable of managing those 

processes with an appropriate level of 

independent judgment and personal 

integrity. 

Those opposing a rulemaking argued 

that FCA does not possess general 

rulemaking authority over Farmer Mac, 

with Farmer Mac specifically remarking 

that corporate governance is not a 

component of FCA’s safety and 

soundness oversight. Zions commented 

that the current practices at Farmer Mac, 

combined with current regulations, 

already result in best practices being in 

place at Farmer Mac. Those favoring a 

rulemaking commented that it is 

appropriate and necessary for FCA to 

establish regulations making clear that 

Class A and Class B directors are duty 

bound to represent the interest of their 

respective Class and clarify that this 

duty is not a conflict-of-interest. 

Commenters affiliated with the System 

asked that any rulemaking safeguard 

against reducing the rights of Class A 

and Class B shareholders. The Weinberg 

Center comment letter emphasized the 

importance of crisis management plans 

to guide a corporation’s response to 

adverse events, but discouraged overly 

prescriptive regulations. The Weinberg 

Center also noted that any required risk 

committee should be viewed as a 

supplemental oversight body and not a 

reassignment of risk management duties 

and authorities from other board 

committees. 

We last issued regulations on Farmer 

Mac Board governance and standards of 

conduct on March 1, 1994 (59 FR 9622). 

In that rulemaking, we implemented the 

requirements of section 514 of the Farm 

Credit Banks and Associations Safety 

and Soundness Act of 1992 (1992 Act) 12

by requiring Farmer Mac to adopt a 

conflict-of-interest policy defining the 

types of relationships, transactions, or 

activities that might reasonably be 

expected to give rise to potential 

conflicts. Congress explained in the 

1992 Act that disclosure of financial 

information and potential conflict-ofinterest reporting by institution 

directors, officers, and employees— 

including Farmer Mac—helps ensure 

the financial viability of the System. 

This concept is also reflected in many 

of the provisions of Sarbanes-Oxley. 

We believe this proposed rulemaking 

clarifies existing board responsibilities 

and authorities while providing the 

Corporation Board with more tools to 

carry out its fiduciary and oversight 

responsibilities. This rule would set 

forth a minimum level of good 

governance practices that would assure 

stakeholders of the continuing safe and 

sound operation of the Corporation. 

Regulations necessarily place limits on 

mstockstill on DSK4VPTVN1PROD with PROPOSALS

15934 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Proposed Rules 

13 Discussions surrounding passage of the DoddFrank Act recognized the long-standing situation 

where, although only one regulator is the primary 

regulator, financial institutions are required to 

comply with various federal financial laws and 

regulations issued and enforced by several banking 

regulators. 

14These minimum supervisory authorities are 

designed to ensure that action is taken to avoid the 

emergence of problems that might entail serious 

risks to Farmer Mac. 

the Corporation’s flexibility, but in 

exchange ensure appropriate business 

practices are consistently followed in all 

operating environments. Our intent in 

this rulemaking is to provide 

performance criteria in some areas 

while also setting safe and sound 

operational directions in others to 

provide for an effective safety and 

soundness framework. Finally, the 

proposed rule gives full consideration to 

our examination of the Corporation and 

the role examinations play in ensuring 

its safe and sound operations. Taken 

together, we believe the following 

proposed regulatory changes on Farmer 

Mac corporate governance would 

improve the effectiveness and 

transparency of its governance practices, 

as well as promote its continued safe 

and sound operations. 

In addition to substantive changes, we 

propose reorganizing our rules 

addressing Farmer Mac’s operations by 

adding a new part 653 which is 

currently reserved, revising existing 

parts 650, 651, and 655, adding subparts 

to parts 650 and 651, and revising 

existing subparts in part 655. We also 

propose adding definition sections to all 

these parts. We propose no changes to 

part 652 or reserved part 654. 

III. Section-by-Section Analysis 

A. FCA Oversight and Rulemaking [Part 

650] 

Existing part 650 contains general 

provisions, without subparts, on the 

supervision of Farmer Mac. We propose 

adding a new subpart A, entitled 

‘‘Regulation, examination and 

enforcement,’’ to address the authorities 

of OSMO. We also propose moving 

existing §§ 650.1 through 650.80 into a 

new subpart B, entitled ‘‘Conservators, 

receivers, and liquidations.’’ We then 

propose redesignating existing §§ 650.1 

and 650.5 on appointing and removing 

receivers or conservators as new 

§§ 650.13 and 650.14 to make room for 

the provisions of new subpart A. We are 

proposing no other changes to these 

existing provisions. 

We propose adding a new § 650.1 in 

subpart A for definitions of certain 

terms used in part 650. We propose 

adding definitions for the following 

terms: 

• The Act; 

• Business day; 

• Corporation or Farmer Mac; 

• FCA, OSMO, our, and we; 

• NYSE and SEC; 

• Securities Act; and 

• Signed. 

We also propose a new § 650.2 to 

provide clarity on the situation of 

Farmer Mac having FCA as its primary 

regulator, while also being subject to 

certain SEC regulatory requirements. 

The proposed § 650.2 would identify 

FCA the ‘‘primary regulator’’ of Farmer 

Mac, possessing examination, 

enforcement, conservatorship, 

liquidation, and receivership authority 

over Farmer Mac. Section 8.11 of the 

Act specifies that FCA holds oversight, 

regulation, examination, and 

enforcement authority over Farmer Mac 

to ensure it operates in a safe and sound 

manner. Further, FCA has the authority 

to regulate how Farmer Mac performs its 

powers, functions, and duties in 

furtherance of its public policy 

purposes. The new § 650.2 would also 

recognize that Farmer Mac, as a publicly 

traded company, follows the SEC 

disclosure regulations for publicly 

traded companies. We selected the term 

‘‘primary regulator’’ to explain FCA’s 

role as the safety and soundness 

regulator of Farmer Mac based on the 

recent adoption of the term in the 

financial industry after passage of the 

Dodd-Frank Act, where it is used to 

distinguish the different roles of federal 

regulators in the financial industry.13

We next propose a new § 650.3 to 

incorporate into our regulations the 

supervision and enforcement authorities 

given us under the Act to provide 

reasonable assurance that, among other 

things, Farmer Mac is adequately 

capitalized and operating safely. 

Financial safety and soundness 

supervision involves monitoring, 

inspecting, and examining Farmer Mac 

to assess its condition and compliance 

with law and regulation. We believe 

identifying in our regulations the 

minimum authorities of OSMO to 

require corrective or remedial actions by 

Farmer Mac, as well as to take such 

enforcement action as deemed to be 

appropriate, will add clarity and 

facilitate the general supervision of 

Farmer Mac.14

We are proposing new § 650.4 to 

address our authority to access Farmer 

Mac records and personnel in the 

exercise of our examination and 

oversight authority. The FCA, acting 

through OSMO, examines and provides 

general supervision over the activities of 

Farmer Mac pursuant to section 8.11 of 

the Act. Section 5.17(a)(11) of the Act 

provides that FCA may ‘‘Exercise such 

incidental powers as may be necessary 

or appropriate to fulfill its duties and 

carry out the purposes of this Act.’’ 

Access to Farmer Mac’s documents and 

personnel is incidental to the 

supervision and examination of Farmer 

Mac. We believe new § 650.4 will clarify 

our expectations of the Corporation in 

providing us this access. 

Finally, we are proposing new 

§§ 650.5 and 650.6, containing crosscitations to existing regulatory 

provisions regarding access to FCA 

Reports of Examination and Farmer 

Mac’s obligation to make criminal 

referrals in certain circumstances. We 

believe these cross-cites will clarify the 

applicability of these provisions to 

Farmer Mac, and thereby facilitate 

compliance with them. 

B. Farmer Mac Corporate Governance 

[Part 651] 

Existing part 651 contains the 

corporate governance provisions for 

Farmer Mac, without subparts. We 

propose adding the following subparts: 

• Subpart A, entitled ‘‘General,’’ to 

address general corporate governance 

matters; 

• Subpart B, entitled ‘‘Standards of 

Conduct,’’ to contain the existing 

provisions of part 651; and 

• Subpart C, entitled ‘‘Board 

Governance,’’ to address Board-level 

activities, including director elections, 

fiduciary duties, and Board committees. 

We then propose placing existing 

§ 651.1 into new subpart A and placing 

existing §§ 651.2 through 651.4 into new 

subpart B, while also revising them. 

1. General Corporate Governance [New 

Subpart A] 

a. Definitions [Existing § 651.1] 

We propose placing the existing 

definitions of § 651.1 in new subpart A, 

modifying certain existing terms and 

adding new terms to the section. We 

propose modifying the existing meaning 

of ‘‘material’’ and ‘‘resolved’’ to cover 

all conflicts, not just potential ones, and 

modifying the existing meaning of a 

‘‘potential conflict-of-interest’’ to 

remove the list of imputed interests. We 

also propose adding to this part the 

definitions proposed for part 650 (listed 

in section III.A. of this preamble), 

except the terms in proposed § 650.1(e), 

(h), and (i). 

We propose the following additional 

terms for part 651: 

• Appointed director; 

• Class A stockholders; 

• Class B stockholders; 

• Director elections; 

• Elected director; and 

• Reasonable person. 

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Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Proposed Rules 15935 

15Under the Act, two-thirds of the Farmer Mac’s 

directors are elected by entities who own the only 

two classes of voting stock. These entities also have 

a business relationship with Farmer Mac. In 

addition, elected directors must possess a 

representational relationship to the class of 

stockholders electing them and this relationship 

must be ‘‘close’’ at the time of election. Because the 

elected directors are from entities that have 

financial relationships of varying degrees with 

Farmer Mac, it presents difficulties in adopting the 

common corporate governance practices and 

policies (i.e., ‘‘best practices’’). 

16Section 8.2(b)(2)(A) and (B) and (b)(5)(A) and 

(B) of the Act (12 U.S.C. 2279aa–2(b)). 

The above terms and their meanings, 

except ‘‘reasonable person’’, are based 

on sections 8.2 and 8.4 of the Act and 

the manner in which FCA has 

consistently applied them over the 

years. The proposed definition for the 

term ‘‘reasonable person’’ is based on 

use of the term in conflict-of-interest 

proceedings and substantially resembles 

the legal meaning of term. 

b. Indemnifications [New § 651.2] 

We propose new § 651.2 on 

indemnifications of directors, officers, 

and employees to address 

indemnifications that Farmer Mac may 

offer. The provision would recognize 

that the decision of whether to offer 

indemnification is a business decision 

of Farmer Mac and not required by law 

or regulation. However, new § 651.2 

would require Farmer Mac, in the 

interest of safety and soundness, to 

establish policies and procedures for 

offering indemnification insurance 

before any such indemnification occurs. 

As proposed, the required procedures 

would have to address: When and how 

indemnification is offered, safeguards to 

avoid over-indemnification, and reviews 

of any indemnification made. The 

policies and procedures may also 

address when indemnification 

payments will be made and how those 

payments will be calculated. For 

example, the policy might provide that 

Farmer Mac will give consideration to 

any other source of indemnification 

when calculating indemnification or 

prohibit indemnification when a 

director, officer, or employee is already 

covered by an indemnification policy 

separate from that offered by Farmer 

Mac. We proposed these provisions to 

set adequate controls over 

indemnification practices in order to 

prevent unintended consequences such 

as over-indemnification. Finally, the 

proposed § 651.2 would require notice 

to OSMO before an indemnification 

payment is made. The notice would 

provide the opportunity for OSMO to 

evaluate, prior to payment, the impact 

of an indemnification payment to the 

safety and soundness of Farmer Mac. 

2. Standards of Conduct [New Subpart 

B] 

a. Code of Conduct [New § 651.21] 

We propose adding a new § 651.21 in 

new subpart B to require a written code 

of conduct that establishes ethical 

benchmarks for the professional 

behavior of Farmer Mac directors, 

officers, employees, and agents. The 

proposed code of conduct would 

resemble existing § 651.4(a)(1) and the 

‘‘Code of Business Conduct and Ethics’’ 

currently maintained by Farmer Mac 

pursuant to section 406 of SarbanesOxley, with the key difference being 

that the Code would set benchmarks for 

professional integrity, competence, and 

respect. The proposed provision would 

require a review of the Code every 3 

years. 

b. Conflict-of-Interest Policy [Existing 

§§ 651.2 and 651.3(b); New § 651.22] 

We propose moving existing § 651.2, 

which requires Farmer Mac to have a 

conflict-of-interest policy, to new 

subpart B and redesignating it as new 

§ 651.22. In addition, we propose 

changes and additions to the existing 

provision. Some of the proposed 

changes are organizational and 

grammatical changes, as well as 

intended to incorporate the proposed 

new terms from revised § 651.1. 

Organizational changes mainly consist 

of consolidating like provisions with 

each other, such as moving existing 

§ 651.3(b), requiring release of the 

conflict-of-interest policy, to new 

§ 651.22(d). 

We propose the following substantive 

changes and additions for new § 651.22: 

• Requiring that the conflict-ofinterest policy consider the required 

representational affiliations of elected 

directors.15

• Moving to new paragraph (b)(1) the 

list of imputed interests that are 

currently part of the existing definition 

of a ‘‘potential conflict-of-interest’’ 

(proposed to be removed from the 

definition). 

• Revising the list of imputed interest 

in new paragraph (b)(1) by removing 

highly specific relationships such as 

‘‘spouse’’ and ‘‘child’’ and replacing 

them with language to address all 

persons residing in the household or 

who are otherwise legal dependents. 

This change is premised on the everevolving understanding of what is 

considered a family as well as intended 

to address non-residential dependents 

whose activities and interests may 

create a conflict-of-interest for a 

director, officer, or employee. 

• Adding as new paragraph (b)(1)(iv) 

an exception to the imputed interest list 

for relationships maintained solely 

because of the representational nature of 

elected directorships. Since this 

relationship is required by the Act, it 

should not be treated as a conflict-ofinterest.16 Instead, we are proposing 

other provisions in new §§ 651.21, 

651.24 and 651.40 to address how 

directors are to handle this affiliation 

while also maintaining their duty of 

loyalty to the Corporation. 

• Adding as new paragraph (b)(4) a 

requirement that conflict-of-interest 

procedures address recusals when 

conflicts are identified. We believe this 

requirement is necessary to ensure a 

standard approach to recusals is used by 

the Corporation and to ensure directors, 

officers, and employees have notice of 

the expectation to recuse themselves 

when a conflict-of-interest exists. 

• Adding as new paragraph (b)(5) a 

requirement that conflict-of-interest 

procedures define documentation and 

reporting requirements to ensure 

compliance with conflict-of-interest 

decisions. 

• Removing the requirement for 

negative conflict-of-interest reports from 

directors, officers, and employees. This 

negative reporting is unnecessary as 

other proposed changes would require 

an annual filing from all directors, 

officers and employees, in which it may 

be reported that no conflicts exist. 

As a GSE, the Corporation has 

strategic objectives that are both 

commercially and public policy 

oriented. Conflicts-of-interest must be 

understood and interpreted not only in 

the context of the fiduciary 

responsibilities to the Corporation and 

its shareholders, but also in the context 

of the statutory duty to further the 

Congressional purposes the Corporation 

was chartered to achieve. We believe 

conflict-of-interest to be among the most 

potentially complex and nuanced areas 

of corporate governance. We intend the 

minimum specifications set forth in the 

proposed rule to facilitate the uniform 

disclosure, identification, and treatment 

of directors, officers, employees and 

agent holding employment, contractual 

business relationships, or other 

relationships and interests that may 

interfere with that person’s ability to 

serve the interests of the Corporation 

before serving personal interests. 

c. Conflict-of-Interest Disclosure and 

Reporting [Existing §§ 651.2(b) and (f) 

and 651.3; New § 651.23] 

We propose moving existing § 651.2, 

regarding conflict-of-interest reports, to 

new subpart B and redesignating it as 

new § 651.23. In addition, we propose 

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changes to the existing provision. Some 

of the proposed changes are 

organizational and grammatical 

changes, as well as intended to 

incorporate the proposed new terms 

from revised § 651.1. Organizational 

changes mainly consist of consolidating 

reporting and disclosure provisions 

currently located in both existing 

§§ 651.2 and 651.3. Included in the 

organization proposal is to move 

existing § 651.2(b), requiring annual 

conflict-of-interest reports, to new 

§ 651.23(a) and moving existing 

§ 651.2(f), requiring internal controls for 

conflict-of-interest disclosures, to new 

§ 651.23(e). 

We propose the following substantive 

changes and additions for new § 651.23: 

• Specifying that the sufficiency of a 

conflict-of-interest report is based on a 

‘‘reasonable person’’ standard. 

• Requiring in new paragraph (a) that 

conflict-of-interest reports be signed. 

While the signature element may have 

been implied in the past, we believe it 

is best to specify it as a requirement. 

• Specifying in new paragraph (a)(1) 

that the transactions, relationships, and 

activities identified as creating real or 

potential conflicts are based on (1) the 

opinion of the person filing the report, 

(2) conflicts specifically identified in 

Farmer Mac’s policies, and (3) conflicts 

identified in FCA regulation. We are 

proposing this specificity to ensure a 

common understanding of the basis 

used by persons completing conflict-ofinterest reports. By specifying the 

sources used when determining if a 

transaction, relationship, or activity 

creates a conflict, it should be easier to 

identify omissions and remove doubts 

as to what needs to be reported. 

However, if doubt remains, we 

encourage every person completing a 

conflict-of-interest report to err on the 

side of inclusion, rather than omission. 

• Requiring in new paragraph (b) that 

Farmer Mac review conflict-of-interest 

reports within 10 business days of 

receipt, and if a conflict is identified as 

material, to document its findings. We 

believe time is of the essence in 

identifying material conflicts in order to 

take necessary actions to minimize the 

impact of the conflict on the operations 

of Farmer Mac. We believe it is 

important that conflicts identified as 

‘‘material’’ be clearly documented, as 

well as the rationale used to make the 

determination. It is essential that the 

basis for any ‘‘materiality’’ 

determination be supported by 

appropriate documentation to avoid 

misunderstandings and to minimize the 

potential for abuse of the process. 

• Requiring in new paragraph (b)(2) 

that Farmer Mac notify a filer within 3 

business days when a reported conflict 

has been identified as material and 

provide filers with an opportunity to 

respond to the materiality 

determination. We believe that material 

conflict determinations should be 

explained to those impacted by such 

determinations. We also believe it is 

necessary for the Corporation and the 

person with the conflict to hold 

discussions about the conflict. These 

discussions could add clarity to the 

process, help avoid mistaken 

‘‘materiality’’ determination, and 

provide the opportunity for the person 

with the conflict to resolve it quickly. 

• Requiring in new paragraph (c) that 

Farmer Mac document material 

conflicts-of-interest and the efforts made 

to address the conflicts. The 

requirement for documentation of 

conflicts is a good business practice, 

which we recognize Farmer Mac has 

already been employing. However, we 

believe a regulatory requirement is 

necessary to ensure the practice 

continues. 

• Clarifying that the existing 

disclosure to shareholders and investors 

of unresolved material conflicts applies 

to those conflicts that remain 

unresolved as of the date of the annual 

report or proxy statement. The 

requirement does not include conflicts 

resolved during the reporting period 

beyond updating those previously 

reported as ‘‘unresolved.’’ 

• Requiring in new paragraph (d)(3) 

that Farmer Mac notify OSMO of 

unresolved material conflicts-of-interest. 

As the safety and soundness regulatory, 

we need to remain informed of any 

conflicts that could potentially affect the 

on-going operations of Farmer Mac. For 

example, if a conflict remains 

unresolved for months and that person 

has been recused from performing their 

full duties, we would want to know 

what Farmer Mac has done to address 

the impact of that recusal. This is 

especially true if a director or senior 

officer holds the unresolved conflict. 

• Limiting the existing requirement 

that reports of conflicts must be 

maintained for 6 years to only material 

conflicts. We believe this change will 

balance the recordkeeping burden with 

the value obtained from the longevity of 

the records. Material conflicts are the 

ones that will result in recusal actions 

and most likely to last or reappear. As 

such, they are more valuable to retain 

for historical reference. However, this 

provision would not prevent Farmer 

Mac from retaining all records for the 6- 

year period, if it so desires. 

• Requiring in new paragraph (g) that 

Farmer Mac establish procedures for 

obtaining conflict-of-interest disclosures 

from agents of the Corporation. Agents 

of any corporation have a standing that 

differs from directors, officers, and 

employees. As such, we believe Farmer 

Mac should have procedures in place to 

provide reasonable assurance that their 

agents hold no material conflicts that 

could adversely affect the work those 

agents perform on behalf of Farmer Mac. 

As Farmer Mac’s operations grow and 

its products and lines of business 

diversify, identification and prevention 

of potential conflicts become more 

challenging and make our enhanced 

regulatory focus on this topic timely and 

appropriate. 

d. Director, Officer, Employee, and 

Agent Responsibilities [Existing § 651.4; 

New § 651.24] 

We propose moving existing § 651.4 

to new subpart B and redesignating the 

section as new § 651.24. This section 

addresses director, officer, employee, 

and agent responsibilities. We also 

propose replacing the contents of 

existing § 651.4(a)(1) requiring directors, 

officers, employees, and agents to 

maintain a high standard of behavior 

with the earlier discussed code of 

conduct at new § 651.21. We next 

propose removing existing § 651.4(a)(2) 

and (b), which requires directors, 

officers, employees, and agents to 

comply with the Corporation’s conflictof-interest policy and provide the 

Corporation with any information the 

Corporation deems necessary or face 

penalties. We propose removing these 

provisions as they are unnecessary in 

light of other proposed changes 

contained in this rulemaking. For 

example, we have already proposed 

addressing our enforcement authorities 

in new § 650.3 and conflicts-of-interest 

in new § 651.22. 

Instead, we propose this section 

address the actions of directors, officers, 

employees, and agents in regards to the 

Corporation, its property, and its 

reputation. We propose under new 

§ 651.24 listing prohibitions on the 

conduct of directors, officers, 

employees, and agents. The proposed 

prohibitions are on making misleading 

or untrue statements of material facts 

regarding Farmer Mac, improper use of 

the official property and information of 

Farmer Mac, and disclosing confidential 

information related to Farmer Mac when 

not in the performance of official duties. 

We believe these prohibitions are 

necessary because, as a GSE and a 

publicly traded corporation, 

misinformation deliberately provided to 

outside parties could have a materially 

adverse impact on the safety and 

soundness of the Corporation. 

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17Under this corporate practice, Farmer Mac uses 

its Governance Committee as its nominating 

committee, which identifies candidates for elected 

director positions. This six member committee is 

composed of two Class A elected directors, two 

Class B elected directors, and two appointed 

directors. 

18The Dodd-Frank Act, at § 971 of subtitle G, 

amended the Securities and Exchange Act of 1934 

to allow shareholders of publicly traded companies 

to submit director-nominees for election to 

corporate boards. The provision was viewed as a 

step in strengthening corporate governance by 

providing an alternative to shareholder proxy fights 

while also avoiding director entrenchment through 

self-nomination. 

19Farmer Mac is not required by law or existing 

regulation to have a nominating committee nor is 

it required to allow floor nominations. 

3. Board Governance [New Subpart C] 

a. Director Elections [New § 651.30] 

It is common corporate practice to use 

a board committee, often the corporate 

governance committee, to name 

director-nominees and Farmer Mac 

follows this practice.17 In consideration 

of this, we are proposing regulations to 

ensure the director election process at 

Farmer Mac complies with the 

provisions of the Act and Congressional 

intent. In new § 651.30, we propose a 

requirement that Farmer Mac have 

election policies and procedures in 

place and that Farmer Mac implement 

those policies and procedures in a fair 

and impartial manner. New § 651.30 

would set forth the minimum 

requirements for the director election 

policies and procedures, including 

allowing all equity holders to submit 

director-candidates for nomination 

consideration. The proposed provision 

would facilitate the establishment of 

nomination procedures that provide 

reasonable assurance of an inclusive 

and fair process as potential directors 

are considered for nomination. The 

provision should not be read as 

requiring the nomination of every 

candidate submitted by an equity 

holder.18 Any such candidate would go 

through the Corporation’s nomination 

process the same as all other directorcandidates. For example, if a directorcandidate submitted by an equity holder 

is not eligible for election as a director 

of the Corporation, there would be no 

requirement for Farmer Mac to include 

the candidate as a nominee. 

New § 651.30 would also allow the 

board committee responsible for 

nominations to engage the services of 

third parties to evaluate the professional 

qualifications of candidates prior to 

nomination. We believe allowing the 

board committee used for nominations 

to engage third parties to vet candidates 

can aid in achieving timely and 

objective evaluation of directorcandidates. 

Next, new § 651.30(b)(3) would 

require the nomination of a directorcandidate to include affirmative votes 

for nomination from a majority of those 

involved in the Corporation’s 

nomination process who also represent 

the same class of stockholders as the 

candidate. Since the voting stockholders 

are only presented with one directorcandidate per board vacancy—and 

Farmer Mac no longer allows floor 

nominations 19—the nomination of 

director-candidates takes on higher 

importance, particularly given the 

statutory requirement that 10 of the 15 

members of the Farmer Mac Board be 

elected by Class A and B stockholders. 

We are not proposing to require the 

use of nominating committees or floor 

nominations in this rulemaking. 

However, we believe requiring directorcandidates to have majority support 

from those involved in the nomination 

process who share the candidate’s 

affiliation with either Class A or Class 

B stockholders facilitates fulfillment of 

the statutory provision that both Class A 

and Class B stockholders determine who 

will represent them on the Corporation’s 

Board. In situations where a ‘‘majority’’ 

would mathematically result in a 

fraction, we would expect the next 

whole number to be used (e.g., three 

representatives would mean a majority 

of two, four representatives would mean 

a majority of three). If there are only two 

representatives from a Class involved in 

the nomination process, then we would 

consider a majority to be one person. 

The proposed rule at new § 651.30(c) 

would require Farmer Mac to document 

the representational affiliation of all 

elected directors at the time of 

nomination and election to the board 

and maintain this documentation until 

3 years after the director’s service on the 

board ends. Such recordkeeping would 

help ensure only those eligible to serve 

as directors representing Class A or 

Class B are nominated. We also believe 

a 3-year record of director affiliations 

could be of assistance when reviewing 

director-candidates up for re-election. 

We believe the statutory term 

‘‘representative’’ means that elected 

directors must have an official 

affiliation with a Class A or Class B 

entity at the time of nomination and 

election in order to serve as director. We 

view this affiliation as one that is a 

substantial and visible connection to the 

class of stockholders. 

b. Director Removal [New § 651.35] 

The proposed new § 651.35 would 

require Farmer Mac to identify its 

director removal procedures in the 

Corporation’s bylaws, which are 

available to shareholders. We believe 

shareholders are entitled to know how 

Farmer Mac determines when to require 

a director to resign (director removal) 

and how that removal action is 

achieved. It is important that 

shareholders understand Farmer Mac’s 

actions in this area since nothing in the 

proposed provision would affect the 

ability of voting shareholders to exercise 

their rights in the election and 

governance of Farmer Mac’s Board of 

Directors. To further emphasize this, the 

rule would prohibit Farmer Mac from 

initiating a director’s removal in a 

manner that would adversely affect the 

rights of voting shareholders. The rule 

would also recognize that appointed 

directors serve at the pleasure of the 

President of the United States. 

We are also proposing language to 

explain what is considered a ‘‘director 

removal’’ action initiated by the 

Corporation. Publicly traded companies 

use contractual agreements with their 

directors to ensure certain behavior 

(e.g., confidentiality of company data, 

standards of conduct). Often, these 

contracts include a provision requiring 

a director to ‘‘voluntarily’’ resign if the 

company determines (and a court later 

affirms) that the director failed to act in 

accordance with the agreement. 

Corporate directors are required to sign 

these agreements in order to take office 

and objecting to the ‘‘voluntarily’’ 

resignation provision(s) may result in 

being denied a seat on the board. These 

types of contractual provisions are 

commonly referred to as mandatory 

resignations and are intended to avoid 

the cost and time required to pursue a 

forced removal action. 

We propose that all director 

resignations required or otherwise 

initiated by Farmer Mac be called 

‘‘director removals.’’ We believe when a 

director must resign (or is deemed to 

have resigned) in response to a Farmer 

Mac bylaw, policy, or other governing 

document, that the resignation was 

initiated by the Corporation since 

Farmer Mac drafted the document at 

issue. Further, we believe that when 

Farmer Mac requires directors, directornominees, and/or director-candidates to 

accede to a resignation provision in 

order to serve on the board of directors 

that, even if characterized as 

‘‘voluntary,’’ it is more appropriately 

called a removal provision. 

The proposed rule would further 

require Farmer Mac to notify OSMO at 

least 14 days before seeking the removal 

of one of its directors. This advance 

notice is considered necessary to protect 

the safety and soundness of Farmer 

Mac. We view this level of advance 

reporting to be appropriate given the 

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potential for sudden changes in the 

board’s membership to result in 

instability within the management and 

oversight of the Corporation or to raise 

concerns about the Corporation in the 

capital markets, or both. 

c. Director Fiduciary Duties and 

Independence [New § 651.40] 

We are proposing a new § 651.40 that 

requires Farmer Mac to have policies in 

place to provide reasonable assurance 

that its Board of directors maintains 

responsibility for and provides 

appropriate oversight of the risk 

management activities of Farmer Mac, 

the reports and disclosures issued by 

Farmer Mac, and shareholder 

communications. Also, new § 651.40 

would clarify the duty of directors to 

conduct the business of the Corporation 

in a manner that promotes the best 

interest of the Corporation and furthers 

its statutory mission. As a GSE, Farmer 

Mac should strive to ensure that its 

Board activities fulfill its public 

missions. Unlike corporations 

incorporated under State statutes of 

incorporation, statutorily chartered 

GSEs are not free to alter their purposes 

or powers, even when such alteration 

may be in the best interest of the 

investing stockholders. For GSEs, such 

changes can only be made by law. Thus, 

it is the responsibility of Farmer Mac 

directors to lead the Corporation in the 

manner that best effectuates the public 

policy it was designed to serve. 

Paragraphs (b) and (c) of the proposed 

provision would set forth key duties of 

the Farmer Mac Board, among which are 

the duty to act in good faith and for the 

best interest of Farmer Mac, as well as 

acting fairly and impartially without 

discriminating in favor of or against any 

investor, stockholder, or group of 

stockholders. The proposed provisions 

are intended to ensure that all directors, 

regardless of how they acquired their 

seats on the board of directors, 

understand that they are bound by their 

fiduciary duty to Farmer Mac and, as a 

result, act for the betterment of Farmer 

Mac overall and not any particular 

group of shareholders or investors. We 

believe these provisions are necessary to 

clarify that the required elected director 

affiliations should not be interpreted to 

mean an elected director serves solely to 

further the viewpoints of the electing 

class without regard to the impact on 

Farmer Mac and all its shareholders. 

Such an interpretation would be 

inconsistent with the established 

corporate common law principles of a 

director’s fiduciary duties, as well as 

with Congressional intent. The fiduciary 

duties of directors are essential to good 

governance and necessary to the safe 

and sound operation of the Corporation. 

Thus, directors failing to fulfill this 

fiduciary duty could have a negative 

impact on the safety and soundness of 

Farmer Mac. 

The proposed provisions are another 

step in ensuring directors maintain their 

duty of loyalty to the Corporation, 

notwithstanding any required affiliation 

with a group of stockholders. However, 

they are not to be read as requiring 

elected directors to disregard the 

perspectives of those electing them to 

office. Instead, we believe elected 

directors should share these 

perspectives with the entire Board so 

that every director is informed of 

stockholder concerns and views, thus 

facilitating Board decisions and 

ensuring those decisions are being made 

in the best interests of the Corporation 

and all of its shareholders. 

In balance with the other 

requirements of new § 651.40, and to 

help ensure the rule is not misapplied, 

proposed paragraph (d) would protect 

the ability of directors to be accountable 

to the shareholders that elected them. 

We recognize that fiduciary duties to 

shareholders must be understood in the 

context of the duty of the elected 

directors to possess a representational 

relationship with certain groups of 

shareholders. As such, the provision, as 

proposed, would specifically allow 

directors to comment on non-private 

and non-privileged corporate business, 

provided doing so will not violate any 

laws or regulations, particularly 

securities laws. The intent is to allow 

directors to converse with stockholders 

as a means of gathering information, 

gaining insights into stockholder 

wishes, and demonstrating 

accountability. The provision clarifies 

that this authority does not prevent 

Farmer Mac from protecting proprietary 

information. It is an established 

corporate governance principle that 

once elected to the board a director 

owes his or her fiduciary duties, 

including a duty of confidentiality, to 

the company and shareholders as a 

whole. As such, the proposed rule 

would clarify that Farmer Mac may take 

measures to ensure each director abides 

by policies defining and specifying the 

treatment of the Corporation’s 

confidential information, including 

restricting directors from disclosing the 

Corporation’s confidential information 

to the shareholders electing them to 

serve on the Corporation’s board. We 

believe the proposed § 651.40 strikes the 

appropriate balance between a director’s 

representational duties required by the 

Act and his or her corporate fiduciary 

duties. 

d. Committees of the Board [New 

§ 651.50] 

We propose a new § 651.50 on board 

committees in subpart C. The new 

§ 651.50 would address the relationship 

between the entire board and its 

committees, require certain committees, 

place membership requirements on the 

committees, and establish minimum 

operational requirements for board 

committees (e.g., charters, meeting 

minutes). The proposed committees 

would resemble those currently 

maintained by Farmer Mac, but with the 

key differences in committee 

composition. 

In paragraph (a) of new § 651.50, we 

propose limiting the authority of the 

board to delegate its collective authority 

to develop and amend Farmer Mac 

bylaws to a committee of the board. This 

provision would not prevent board 

committees from making 

recommendations on the bylaws to the 

entire board. We also propose regulatory 

language holding the entire board 

accountable for committee actions. In 

directing the Corporation, the board of 

directors may rely on reports from board 

committees, but doing so does not 

relieve the board of final responsibility. 

In paragraph (b) of new § 651.50, we 

propose that Farmer Mac have, at the 

minimum, committees to address risk 

management, audit, compensation, and 

corporate governance matters. We 

propose that there be separate 

committees dedicated to audit and risk 

management and that these committees 

not be tasked with other matters. Our 

reasoning in support of this proposal is 

that the oversight responsibilities of 

each of these two committees represent 

an aggregation of a very broad array of 

issues and detailed operational policies 

and procedures that cover essentially 

the entire breadth of the Corporation’s 

operations—in addition to the 

associated ongoing monitoring of all of 

these. We believe a portfolio of 

responsibility any larger for either 

committee would be excessive and risk 

a severe dilution in a committee’s 

effectiveness. 

In paragraph (c) of new § 651.50, we 

propose that each board committee be 

established through a written charter. 

We further propose that committee 

charters specify the powers, 

responsibilities, and structure of each 

committee. We further propose that 

each committee have both elected and 

appointed directors and that among the 

elected directors there be ones with 

affiliations to both Class A and Class B 

stockholders. Similarly, we propose that 

no director may serve as a committee 

chair of more than one committee. Our 

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intent is to ensure that the Farmer Mac 

Board reasonably distributes 

responsibilities among individual 

members of the board. We believe that 

too great a concentration of 

responsibilities would detract from the 

board’s overall effectiveness. 

In paragraph (d) of new § 651.50, we 

propose requiring each board committee 

to have meeting minutes and to keep the 

minutes for 3 years. We propose that the 

minutes include the agenda for the 

meeting, attendance, a summary of 

pertinent discussions held during the 

meeting, and any resulting committee 

recommendations. In proposing this 

requirement, we are not seeking 

transcripts of meetings, but a record of 

matters addressed by the committee and 

who participated in the meeting in 

sufficient detail to allow the reader a 

reasonable understanding of the 

substance of the discussion. We propose 

no set meeting schedule for committees, 

but do propose a requirement that each 

committee meet with sufficient 

frequency to fulfill its duties. We 

believe these provisions would facilitate 

both the historical context of policies 

and procedures for future management 

teams and directors as well as facilitate 

the regulatory oversight of board 

activity. 

In proposing new § 651.50, we intend 

no conflict with SEC regulations on the 

structure of board committees and 

welcome comments identifying any 

potential conflict that might exist 

between the proposed provision and 

SEC requirements. Where our proposal 

contains provisions on board 

committees that would be requirements, 

but which are optional under existing 

SEC rules, it was intentional as we 

believe the requirements facilitate the 

safe and sound operations of Farmer 

Mac. 

C. Risk Management [Part 653, No 

Subparts] 

We propose opening existing reserved 

part 653 to add risk management 

provisions for Farmer Mac, renaming 

the part, ‘‘Federal Agricultural Mortgage 

Corporation Risk Management.’’ We 

propose no subparts to part 653, but 

propose adding the following 

provisions: 

• A new § 653.1 to contain the 

definitions of certain terms used in part 

653; 

• A new § 653.2 to address general 

board-level risk management matters; 

• A new § 653.3 to contain required 

risk management programs and 

activities; and 

• A new § 653.4 to contain 

requirements for internal controls. 

We discuss the proposed §§ 653.1 

through 653.4 below. 

1. Definitions [New § 653.1] 

We propose as new § 653.1 definitions 

for the terms ‘‘Corporation’’, ‘‘FCA’’, 

and ‘‘OSMO.’’ We are proposing the 

same meaning as are proposed 

elsewhere in this rulemaking. We 

propose these definitions to ensure a 

common understanding of the terms as 

used in part 653. 

2. General [New § 653.2] 

We propose in new § 653.2 to require 

the Farmer Mac Board approve the 

overall risk-appetite and tolerance of the 

Corporation. We believe that while 

management may design and implement 

the Corporation’s internal controls, the 

Board remains ultimately responsible 

for how those controls affect the risk 

management of the Corporation. The 

Board’s oversight of internal controls is 

a critical component of its responsibility 

for monitoring corporate activities and 

providing reasonable assurance that the 

controls will prevent excessive risktaking or unsafe and unsound activities. 

3. Risk Management [New § 653.3] 

A comprehensive and integrated risk 

management program significantly 

enhances the coordination of risk 

decision-making as well as capital 

allocation among individual business 

units and allows the units to act within 

the context of the broader risk-taking 

activities and risk tolerance limits of the 

Corporation. Although the Corporation 

has recently expanded its risk 

management program to include a risk 

committee, we propose in new 

§ 653.3(a) to require Farmer Mac to have 

a risk management program addressing 

the Corporation’s exposure to credit, 

market, liquidity, operations, and 

reputation risks. As proposed, the rule 

would require the risk management 

program to include: 

• Periodic assessments of the 

Corporation’s risk profile, with related 

adjustments to the Corporation’s 

operations; 

• Coordination with board-approved 

risk tolerance levels; 

• Delineation of management’s 

authority and independence in 

implementing the program; and 

• Integration with Corporation goals, 

business objectives, and compensation. 

As referenced in the discussion of 

proposed § 651.50 (preamble section 

III.C.3.d.), we are proposing in new 

§ 653.3(b) to require Farmer Mac to have 

a risk management committee. As 

proposed, the membership of the risk 

committee would include a risk 

management expert. Also, we are 

proposing that the risk committee be 

responsible for reviewing the design of 

the risk management program and 

receiving management reports on risk 

management issues, as well as 

monitoring the Corporation’s risk 

management policies and procedures. 

We believe it is essential that the tone 

of Corporation’s risk culture and its 

procedures for risk decision-making be 

set by the Board even when they are 

based on management’s 

recommendations. Further, the Board 

plays a critical role in the ongoing 

oversight of, and cohesive 

implementation of, operational 

strategies and plans that conform to its 

established risk appetite and tolerance. 

We also propose in new § 653.3(c) to 

require Farmer Mac to have a ‘‘Risk 

Officer’’ to implement the risk 

management program. We are proposing 

that the risk officer report directly to the 

chief executive officer and risk 

committee. We also propose that the 

risk officer be separated from other 

management functions to ensure s/he 

devotes full attention to Farmer Mac’s 

risk management activities. Under new 

§ 653.3(c), the risk officer would have to 

have experience in risk management 

commensurate with Farmer Mac’s 

operations. The risk officer also would 

be responsible for monitoring 

compliance with risk management 

policies; developing systems to identify 

and report risks; and making 

recommendations to adjust risk 

management behaviors. We believe a 

staff position that serves as coordinator 

of the consistent and collaborative 

implementation of corporate risk 

policies and objectives across business 

units is necessary. A risk officer could 

help coordinate, organize, prioritize and 

monitor risks on behalf of the CEO and 

Board risk committee. 

As financial institutions become 

larger and more complex, which Farmer 

Mac has since it was chartered by 

Congress in 1987, the need arises for a 

continuous, coordinated, and 

comprehensive oversight of the broad 

spectrum of current and prospective 

risks the entity faces. A key role of a risk 

officer is to prevent the emergence of 

isolated risk ‘‘silos’’ among the entity’s 

business units and ensure a consistent 

and integrated monitoring of key 

sources of risks, such as strategic risks 

(including reputation and political risk), 

compliance risks, and reporting risks. 

We believe requiring a risk officer 

position at Farmer Mac plays a key role 

in ensuring that the Board and CEO are 

adequately informed regarding the 

Corporation’s aggregate risk position— 

thus providing reasonable assurance of 

the achievement of corporate and 

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20Section 8.12 of the Act (12 U.S.C. 2279aa–12). 

mission objectives. In addition, having a 

risk officer position is considered a best 

practice for financial institutions over 

$10 billion and is consistent with 

Basel’s Pillar 2 on Risk Management and 

Risk Supervision. 

4. Internal Controls [New § 653.4] 

A sound system of comprehensive 

and integrated internal controls is vital 

to the operations of any organization 

and especially those whose business is 

taking financial risk. In the 26 years 

since Farmer Mac was chartered, 

business and operational environments 

have become significantly more 

complex and technology-driven. 

Systems of internal controls should 

dynamically respond to such changes in 

complexity—not just in business unit 

operations but also in compliance with 

increasingly complex laws, regulations, 

and industry standards. Thus, while 

FCA regulations on various aspects of 

Farmer Mac’s operations (e.g., 

investments, liquidity, capital planning) 

include specific minimum control 

requirements related to those 

operations, we believe a Corporationwide integrated system of internal 

controls is also appropriate. 

Accordingly, we propose in new § 653.4 

to require Farmer Mac to adopt internal 

controls for the proper treatment of and 

accountability for the programs, 

operations, and resources of Farmer 

Mac. 

The proposed provision would 

require an internal controls system that 

addresses: The effectiveness of 

corporate activities; security of 

corporate assets; accuracy and 

completeness of financial reports; 

separation of duties to avoid conflicts in 

responsibilities; transparent reports to 

the Farmer Mac board; and compliance 

with applicable laws, regulations, and 

corporate policies. The new § 653.4 

would also require Farmer Mac to have 

a system to correct weaknesses 

identified by the internal controls 

program. Finally, we are proposing an 

annual reporting requirement, where 

Farmer Mac would report to OSMO on 

the effectiveness of the internal controls 

program. 

D. Disclosure and Reporting [Part 655] 

Existing part 655 contains financial 

disclosure and reporting provisions for 

Farmer Mac in two subparts: Subpart A 

on annual reports and subpart B on 

securities reports. We propose 

organizational changes to this part as 

follows: 

• Adding a new subpart A, entitled 

‘‘General’’ to address the matters 

common to disclosures and reports; 

• Renaming and redesignating the 

existing subpart A as new subpart B, to 

be called ‘‘Reports of Condition of the 

Federal Agricultural Mortgage 

Corporation;’’ 

• Redesignating existing subpart B as 

new subpart C; 

• Adding a new § 655.1 to identify 

the definitions of certain terms used in 

part 655; 

• Adding a new § 655.2 to prohibit 

misleading, inaccurate, or incomplete 

disclosures; 

• Moving existing § 655.1 on annual 

reports, currently under existing subpart 

A, to new subpart B and redesignating 

it as § 655.10; 

• Adding a new § 655.15 on the 

distribution of interim notices and 

proxies to new subpart B; 

• Moving, renaming, and 

redesignating existing § 655.50 on 

securities not registered under the 

Securities Act, currently under existing 

subpart B, as new § 655.20 in new 

subpart C; and 

• Adding a new § 655.21 on 

communications with the U.S. Treasury, 

SEC, and NYSE. 

We also propose enhancements to 

existing disclosure and reporting 

requirements of part 655 to remove 

repetitious reporting and incorporate 

technology by allowing for electronic 

filing of reports with OSMO. These 

proposed enhancements are designed to 

reduce Farmer Mac’s reporting 

responsibilities, while also improving 

the quality and timeliness of 

information provided to FCA. We are 

also proposing changes to remove 

repetitious disclosure and reporting 

requirements resulting from the dual 

reporting responsibilities of Farmer Mac 

to the FCA and the SEC. 

1. Definitions [New Subpart A: New 

§ 655.1] 

We propose adding a new § 655.1 for 

definitions of certain terms used in part 

655. We are proposing the same 

definitions to this part as are proposed 

for part 650 (listed in section III.A. of 

this preamble). We are also proposing to 

add the same definition for ‘‘person’’ as 

is proposed for part 651. In addition, we 

propose definitions for the term 

‘‘material’’ and ‘‘report.’’ While there is 

a definition for ‘‘material’’ in part 651, 

the one proposed for this part is 

different in that it focuses on the 

meaning of the term when considering 

financial reports, not conflicts-ofinterest. We propose these definitions to 

ensure a common understanding of the 

terms as used in part 655. In addition, 

we propose changes to the existing 

provisions of part 655 to incorporate the 

proposed new terms. 

2. Prohibitions [New Subpart A: New 

§ 655.2] 

We propose adding a new § 655.2 to 

prohibit misleading, inaccurate, or 

incomplete disclosures. This 

prohibition is substantially similar to 

the one that currently exists in our 

regulations for the reports of System 

banks and associations. The provision 

would establish that no director, officer, 

employee or agent of Farmer Mac may 

mislead the FCA, Farmer Mac 

stockholders, or the general public by 

making misleading, inaccurate, or 

incomplete disclosures within the 

reports required under part 655. The 

provision would also clarify the 

authority of FCA to require a corrected 

report if we determine it contained any 

misleading, inaccurate, or incomplete 

disclosures. 

3. Reports of Condition [New Subpart B: 

Existing § 655.1; New §§ 655.10 and 

655.15] 

The Act requires Farmer Mac to 

register its equities with the SEC and be 

subject to SEC disclosure regulations 

issued under section 14 of the Securities 

and Exchange Act of 1934.20 Also, 

Farmer Mac’s Class A and Class C stocks 

are publicly traded on the NYSE. Thus, 

Farmer Mac must comply with both 

FCA and SEC disclosure and reporting 

requirements. We are proposing changes 

to our reporting requirements for Farmer 

Mac to enable the reports filed by 

Farmer Mac with the SEC to also satisfy 

our requirements in that area, absent 

instructions from us to the contrary. We 

believe the proposed changes will 

facilitate the coordination of Farmer 

Mac’s financial reporting 

responsibilities to both OSMO and the 

SEC as well as reduce or eliminate 

repetitious reporting. 

We propose revising existing § 655.1 

(proposed to be redesignated as 

§ 655.10) to cover all reports of 

conditions, not just annual reports. We 

are also proposing to require reports be 

signed and certified. The proposed 

certification components would be 

attesting that the signatory reviewed the 

report, the report was prepared in 

accordance with applicable laws and 

regulations, and the reported 

information is true, accurate, and 

complete to the best of the signatory’s 

knowledge. Further, we are proposing 

that quarterly and annual reports be 

filed by Farmer Mac with OSMO and 

that those reports either be equivalent to 

those required by the SEC or according 

to our instructions. We are proposing 

the provision that reports be filed 

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Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Proposed Rules 15941 

according to our instructions to address 

the contingency of the SEC changing its 

reporting requirements in such a 

manner as to reduce the usefulness of 

the reports in safety and soundness 

matters. 

For the reasons already discussed, we 

are proposing changes to the existing 

report distribution requirements to 

reduce timeframes, require Web site 

posting of reports, and ensure reports 

distributed to shareholders and 

investors are the same as those filed 

with both the FCA and SEC. We are 

proposing to reduce the existing 120- 

day timeframe to distribute reports to a 

90-day timeframe for distribution of 

reports to shareholder and a 5-day filing 

timeframe with OSMO. We believe the 

reduced timeframes are more reasonable 

given available technology and other 

advances in reporting systems. We 

further propose that if the report is the 

same as that filed with the SEC, it be 

filed with OSMO simultaneous with the 

SEC filing. We next propose changing 

the existing requirement to send us 

three paper copies of each report by 

reducing it to only one paper copy. We 

also propose allowing the use of 

electronic filing of reports with OSMO. 

We propose requiring Farmer Mac to 

post reports on its Web site within 3 

business days of filing the report with 

OSMO. We propose that a report remain 

available on the Web site until the next 

report is posted. We further propose that 

if the report is the same as that filed 

with the SEC, an electronic link to the 

SEC reports database (EDGAR) would 

satisfy our regulatory requirement in 

this area. In making this proposal, we 

relied on technological advances, the 

existing availability of the information, 

and Farmer Mac’s existing practice of 

posting reports on its Web site. 

Further, we are proposing a new 

§ 655.15 to require that Farmer Mac 

send OSMO one paper and one 

electronic copy of every notice, interim 

report, and proxy statement it files with 

the SEC. We believe it is essential that 

communications between Farmer Mac 

and OSMO, its primary regulator, 

include the communications Farmer 

Mac has with the SEC. The proposed 

provision would require Farmer Mac to 

make these disclosures within 1 

business day of filing the notice, interim 

report, or proxy statement with the SEC. 

We believe this requirement is 

necessary to ensure we have timely 

notice of events outside our scheduled 

examination of these documents. 

Similar to the proposal to post reports 

on its Web site, we are proposing in 

§ 655.15(b) that Farmer Mac post on its 

Web site notices, interim reports, and 

proxy statements within 5 business days 

of filing them with the SEC. As 

proposed, this requirement could be 

satisfied with a link to EDGAR. We also 

propose that these documents remain on 

the Web site for 6 months, or until the 

next annual report, whichever is later. 

4. Reports Related to Securities 

Activities [New Subpart C: Existing 

§ 655.50; New §§ 655.20 and 655.21] 

We propose revising existing § 655.50 

by first breaking it into two sections: 

§ 655.20 on unregistered securities 

(currently § 655.50(a)) and § 655.21 on 

all other filings and communications 

with the U.S. Treasury, SEC, and NYSE 

(currently § 655.50(b) and (c)). In new 

§ 655.20, we propose changing the 

manner of making special filings with 

OSMO by replacing the existing 

requirement to send us three paper 

copies to require one paper and one 

electronic copy. In new § 655.21, we 

propose expanding the existing 

requirement to send us copies of 

‘‘substantive’’ correspondence between 

Farmer Mac and the SEC or U.S. 

Treasury to include the NYSE. The 

proposal would also remove the 

limitation on the type of 

communication. Currently, the 

requirement covers correspondence 

relating to securities activities or 

regulatory compliance. We believe the 

Corporation should provide us all 

substantive communications it has with 

the U.S. Treasury, the SEC, and the 

NYSE as that communication may have 

a bearing on the safety and soundness 

of Farmer Mac. We also propose setting 

a 3-day timeframe for providing the 

information to us. Finally, new 

§ 655.21(c) would require Farmer Mac to 

notify us of exemptions from SEC filing 

requirements within 1 business day. 

The current rule requires this 

information to be sent to us ‘‘promptly.’’ 

In light of the proposed changes to 

reporting requirements, we believe it is 

necessary to have definitive and fast 

notice of any changes Farmer Mac seeks 

in SEC filing requirements. 

IV. Regulatory Flexibility Act 

Pursuant to section 605(b) of the 

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

et seq.), FCA hereby certifies the 

proposed rule will not have a significant 

economic impact on a substantial 

number of small entities. Farmer Mac 

has assets and annual income over the 

amounts that would qualify it as a small 

entity. Therefore, Farmer Mac is not 

considered a ‘‘small entity’’ as defined 

in the Regulatory Flexibility Act. 

List of Subjects 

12 CFR Part 650 

Agriculture, Banks, banking, Credit, 

Reporting and recordkeeping 

requirements, Rural areas. 

12 CFR Part 651 

Agriculture, Banks, banking, Conduct 

standards, Conflict of interests, 

Elections, Ethical conduct, Rural areas. 

12 CFR Part 653 

Agriculture, Banks, banking, Capital, 

Conduct standards, Credit, Finance, 

Rural areas. 

12 CFR Part 655 

Accounting, Agriculture, Banks, 

banking, Accounting and reporting 

requirements, Disclosure and reporting 

requirements, Financial disclosure, 

Rural areas. 

For the reasons stated in the 

preamble, parts 650, 651, 653, and 655 

of chapter VI, title 12 of the Code of 

Federal Regulations are proposed to be 

amended as follows: 

PART 650—FEDERAL AGRICULTURAL 

MORTGAGE CORPORATION 

GENERAL PROVISIONS 

■ 1. The authority citation for part 650 

is revised to read as follows: 

Authority: Secs. 4.12, 5.9, 5.17, 5.25, 8.11, 

8.12, 8.31, 8.32, 8.33, 8.34, 8.35, 8.36, 8.37, 

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

2243, 2252, 2261, 2279aa–11, 2279aa–12, 

2279bb, 2279bb–1, 2279bb–2, 2279bb–3, 

2279bb–4, 2279bb–5, 2279bb–6, 2279cc); sec. 

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

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

■ 2. Add subpart B, under the heading 

‘‘Conservators, Receivers, and 

Liquidations’’ consisting of existing 

§§ 650.1 through 650.80 as redesignated 

in the following table: 

Old section New section 

650.1, no subpart ...... 650.13, subpart B. 

650.5, no subpart ...... 650.14, subpart B. 

650.10, no subpart .... 650.10, subpart B. 

650.15, no subpart .... 650.15, subpart B. 

650.20, no subpart .... 650.20, subpart B. 

650.25, no subpart .... 650.25, subpart B. 

650.30, no subpart .... 650.30, subpart B. 

650.35, no subpart .... 650.35, subpart B. 

650.40, no subpart .... 650.40, subpart B. 

650.45, no subpart .... 650.45, subpart B. 

650.50, no subpart .... 650.50, subpart B. 

650.55, no subpart .... 650.55, subpart B. 

650.60, no subpart .... 650.60, subpart B. 

650.65, no subpart .... 650.65, subpart B. 

650.70, no subpart .... 650.70, subpart B. 

650.75, no subpart .... 650.75, subpart B. 

650.80, no subpart .... 650.80, subpart B. 

■ 3. Add subpart A to read as follows: 

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15942 Federal Register / Vol. 80, No. 58 / Thursday, March 26, 2015 / Proposed Rules 

Subpart A—Regulation, Examination and 

Enforcement 

Sec. 

650.1 Definitions. 

650.2 Regulatory authority. 

650.3 Supervision and enforcement. 

650.4 Access to Corporation records and 

personnel. 

650.5 Reports of examination. 

650.6 Criminal referrals. 

Subpart A—Regulation, Examination 

and Enforcement 

§ 650.1 Definitions. 

The following definitions apply for 

the purpose of this part: 

Act or Authorizing statute means the 

Farm Credit Act of 1971, as amended. 

Business day means a day the 

Corporation is open for business, 

excluding the legal public holidays 

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

Corporation or Farmer Mac means the 

Federal Agricultural Mortgage 

Corporation and its affiliates. 

FCA means the Farm Credit 

Administration, an independent federal 

agency of the executive branch. 

NYSE means the New York Stock 

Exchange, a listing exchange. 

OSMO means the FCA Office of 

Secondary Market Oversight, which is 

responsible for the general supervision 

of the safe and sound exercise of the 

Corporation’s powers, functions, and 

duties and compliance with laws and 

regulations. 

Our or we means the FCA or OSMO, 

as appropriate to the context of the 

provision employing the term. 

SEC means the Securities and 

Exchange Commission. 

Securities Act means the Securities 

Act of 1933 (15 U.S.C. 77a et seq.) or the 

Exchange Act of 1934 (15 U.S.C. 78a et 

seq.), or both, as appropriate to the 

context of the provision employing the 

term. 

Signed, when referring to paper form, 

means a manual signature, and, when 

referring to electronic form, means 

marked in a manner that authenticates 

each signer’s identity. 

§ 650.2 Regulatory authority. 

(a) General. The Corporation is a forprofit Government-sponsored enterprise 

developed to provide a secondary 

market for agricultural and rural utility 

loans with public policy objectives 

included in its statutory charter. The 

Corporation is regulated by the FCA, 

operating through OSMO. The 

Corporation also lists securities on the 

NYSE, making it subject to certain SEC 

listing and disclosure requirements. 

(b) Primary regulator. The FCA, 

operating through OSMO, holds primary 

regulatory, examination, and 

enforcement authority over the 

Corporation. The FCA, operating 

through OSMO, is responsible for the 

general supervision of the safe and 

sound exercise of the Corporation’s 

powers, functions, and duties and 

compliance with laws and regulations. 

(c) Other regulatory authorities. The 

Corporation is required by its 

authorizing statute to comply with 

certain SEC reporting requirements and 

must register offerings of Farmer Mac 

Guaranteed Securities under the 

Securities Act of 1933 and related 

regulations. The Corporation is also 

subject to most of the industry selfregulatory requirements of the NYSE. 

§ 650.3 Supervision and enforcement. 

The Act provides FCA, acting through 

OSMO, with enforcement authority to 

protect the financial safety and 

soundness of the Corporation and to 

ensure that the Corporation’s powers, 

functions, and duties are exercised in a 

safe and sound manner. 

(a) General supervision. When we 

determine the Corporation has violated 

a law, rule, or regulation or is engaging 

in an unsafe or unsound condition or 

practice, we have enforcement authority 

that includes, but is not limited to, the 

following: 

(1) Issue an order to cease and desist; 

(2) Issue a temporary order to cease 

and desist; 

(3) Assess civil monetary penalties 

against the Corporation and its 

directors, officers, employees, and 

agents; and 

(4) Issue an order to suspend, remove, 

or prohibit directors and officers. 

(b) Financial safety and soundness of 

the Corporation. 

When we determine the Corporation 

is taking excessive risks that adversely 

impact capital, we have authority to 

address that risk. This includes, but is 

not limited to, requiring capital 

restoration plans, restricting dividend 

distributions, requiring changes in the 

Corporation’s obligations and assets, 

requiring the acquisition of new capital 

and restricting those Corporation 

activities determined to create excessive 

risk to the Corporation. 

§ 650.4 Access to Corporation records and 

personnel. 

(a) The Corporation must make its 

records available promptly upon request 

by OSMO, at a location and in a form 

and manner acceptable to OSMO. 

(b) The Corporation must make 

directors, officers, employees and agents 

available to OSMO during the course of 

an examination or supervisory action 

when OSMO determines it necessary to 

facilitate an examination or supervisory 

action. 

§ 650.5 Reports of examination. 

The Corporation is subject to the 

provisions in 12 CFR part 602 regarding 

FCA Reports of Examination. 

§ 650.6 Criminal referrals. 

The rules at 12 CFR part 612, subpart 

B, regarding ‘‘Referral of Known or 

Suspected Criminal Violations’’ are 

applicable to the Corporation. 

■ 4. Revise part 651 to read as follows: 

PART 651—FEDERAL AGRICULTURAL 

MORTGAGE CORPORATION 

GOVERNANCE 

Subpart A—General 

Sec. 

651.1 Definitions. 

651.2 Indemnification. 

Subpart B—Standards of Conduct 

651.21 Code of conduct. 

651.22 Conflict-of-interest policy. 

651.23 Conflict-of-interest disclosure and 

reporting. 

651.24 Director, officer, employee, and 

agent responsibilities. 

Subpart C—Board Governance 

651.30 Director elections. 

651.35 Director removal. 

651.40 Director fiduciary duties and 

independence. 

651.50 Committees of the Corporation’s 

board of directors. 

Authority: Secs. 4.12, 5.9, 5.17, 8.3, 8.11, 

8.14, 8.31, 8.32, 8.33, 8.34, 8.35, 8.36, 8.37, 

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

2243, 2252, 2279aa–3, 2279aa–11, 2279aa– 

14, 2279bb, 2279bb–1, 2279bb–2, 2279bb–3, 

2279bb–4, 2279bb–5, 2279bb–6, 2279cc); sec. 

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

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

Subpart A—General 

§ 651.1 Definitions. 

The following definitions apply to 

this part: 

Act or Authorizing statute means the 

Farm Credit Act of 1971, as amended. 

Agent means any person (other than a 

director, officer, or employee of the 

Corporation) who represents the 

Corporation in contacts with third 

parties or who provides professional 

services such as legal, accounting, or 

appraisal services to the Corporation. 

Affiliate means any entity established 

under authority granted to the 

Corporation under section 8.3(c)(14) of 

the Act. 

Appointed director means a member 

of the Corporation board of directors 

who was appointed to the Corporation 

board by the President of the United 

States of America. 

Business day means a day the 

Corporation is open for business, 

excluding the legal public holidays 

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

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Class A stockholders means holders of 

common stock in the Corporation that 

are insurance companies, banks, or 

other financial institutions or entities. 

Class B stockholders means holders of 

common stock in the Corporation that 

are Farm Credit System institutions. 

Corporation means the Federal 

Agricultural Mortgage Corporation and 

its affiliates. 

Director elections mean the process of 

searching for director candidates, 

conducting director nominations, and 

voting for directors. 

Elected director means a member of 

the Corporation board of directors who 

was elected by either Class A or Class 

B stockholders. 

Employee means any salaried 

individual working part-time, full-time, 

or temporarily for the Corporation. 

Entity means a corporation, company, 

association, firm, joint venture, 

partnership (general or limited), society, 

joint stock company, trust (business or 

otherwise), fund, or other organization 

or institution. 

FCA means the Farm Credit 

Administration, an independent federal 

agency of the executive branch. 

Material means conflicting interests of 

sufficient magnitude or significance that 

a reasonable person with knowledge of 

the relevant facts would question the 

ability of the person having such 

interest to discharge official duties in an 

objective and impartial manner in 

furtherance of the interests and statutory 

purposes of the Corporation. 

Officer means the salaried president, 

vice presidents, secretary, treasurer, and 

general counsel, or other person, 

however designated, who holds a 

position of similar authority in the 

Corporation. 

OSMO means the FCA Office of 

Secondary Market Oversight, which is 

responsible for the general supervision 

of the safe and sound exercise of the 

Corporation’s powers, functions, and 

duties and compliance with laws and 

regulations. 

Our or we means the FCA or OSMO, 

as appropriate to the context of the 

provision employing the term. 

Person means individual or entity. 

Potential conflict-of-interest means a 

director, officer, or employee of the 

Corporation has an interest in a 

transaction, relationship, or activity that 

might adversely affect, or appear to 

adversely affect, the ability of the person 

having such interest to perform his or 

her official duties on behalf of the 

Corporation in an objective and 

impartial manner in furtherance of the 

interest of the Corporation and its 

statutory purposes. 

Reasonable person means a person 

under similar circumstances exercising 

the average level of care, skill, and 

judgment in his or her conduct based on 

societal requirements for the protection 

of the general interest. 

Resolved means an actual or potential 

material conflict-of-interest that has 

been altered so that a reasonable person 

with knowledge of the relevant facts 

would conclude that the conflicting 

interest would not adversely affect the 

person’s performance of official duties 

in an objective and impartial manner 

and in furtherance of the interests and 

statutory purposes of the Corporation. 

Signed, when referring to paper form, 

means a manual signature, and, when 

referring to electronic form, means 

marked in a manner that authenticates 

each signer’s identity. 

§ 651.2 Indemnification. 

(a) General. The Corporation is not 

required to offer indemnification 

insurance. The Corporation must have 

policies and procedures in place before 

it may offer indemnification insurance 

to its directors, officers, or employees. 

(1) Indemnification policies and 

procedures must address how the board 

of directors approves or denies requests 

for indemnification from current and 

former directors, officers, and 

employees. The policies and procedures 

must include standards relating to 

indemnification, investigations by the 

board of directors, and reviews by 

independent counsel. 

(2) Indemnification policies and 

procedures must consider all sources of 

potential indemnification to protect the 

Corporation against overindemnification of an individual 

director or officer. 

(b) Oversight. The Corporation must 

notify OSMO 10 business days before 

issuing any indemnification payment. 

Subpart B—Standards of Conduct 

§ 651.21 Code of conduct. 

(a) General. The Corporation must 

develop and administer a written code 

of conduct establishing the ethical 

benchmarks for professional integrity, 

competence, and respect. The code must 

be reasonably designed to assure the 

ability of board members, officers, 

employees, and agents of the 

Corporation to discharge their duties 

and responsibilities, on behalf of the 

Corporation, in an ethical and businesslike manner. The code of conduct must 

be consistent with applicable laws and 

regulations. 

(b) Review. Not less often than once 

every 3 years, the Corporation must 

review the adequacy of its code of 

conduct for consistency with practices 

appropriate to the entity and 

compliance with laws and regulations 

and must make any appropriate 

revisions to such code. 

§ 651.22 Conflict-of-interest policy. 

(a) The Corporation must establish 

and administer a conflict-of-interest 

policy that will provide reasonable 

assurance that the directors, officers, 

employees, and agents of the 

Corporation discharge their official 

responsibilities in an objective, 

impartial, and business-like manner that 

furthers the lawful interests and 

statutory purpose of the Corporation. 

The conflict-of-interest policy must 

acknowledge and respect the 

representational affiliations required by 

the Act for elected directors. 

(b) The conflict-of-interest policy 

must: 

(1) Define the types of transactions, 

relationships, or activities that could 

reasonably be expected to give rise to 

potential conflicts of interest. For the 

purpose of determining whether a 

potential conflict-of-interest exists, the 

following interests shall be imputed to 

a person subject to this regulation as if 

they were that person’s own interests: 

(i) Interests of any individual residing 

in that person’s household; 

(ii) Interests of any individual 

identified as a legal dependent of that 

person; 

(iii) Interests of that person’s general 

partner; 

(iv) Interests of an organization or 

entity that the person serves as officer, 

director, trustee, general partner or 

employee, unless the organization or 

entity is directly connected to the 

representational affiliations required by 

the Act for elected directors; and 

(v) Interests of a person, organization, 

or entity with which that person is 

negotiating for or has an arrangement 

concerning prospective employment. 

(2) Include guidelines for determining 

when a potential conflict is material (as 

that term is defined in this part); 

(3) Contain procedures for resolving 

or disclosing material conflicts of 

interest. 

(4) Address recusal from official 

actions on any matter in which a 

director, officer, employee, or agent is 

prohibited from participating based on a 

conflict-of-interest identified under this 

part; and 

(5) Define documentation and 

reporting requirements, consistent with 

this part, for demonstrating compliance 

with conflict-of-interest decisions. 

(c) The Corporation must notify 

directors, officers, employees, and 

agents of the conflict-of-interest policy 

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and any subsequent changes thereto and 

allow them a reasonable period of time 

to conform to the policy. 

(d) When requested, the Corporation 

must provide to any shareholder, 

investor, or potential investor, with a 

copy of its conflict-of-interest policy. 

The Corporation may charge a nominal 

fee to cover the costs of reproduction 

and handling. 

§ 651.23 Conflict-of-interest disclosure 

and reporting. 

(a) Annually, each director, officer, 

and employee must provide to the 

Corporation a written and signed 

conflict-of-interest report. The report 

must disclose information about 

financial interests, transactions, 

relationships, and activities sufficient 

enough for a reasonable person to make 

a conflict-of-interest determination. 

(1) The annual conflict-of-interest 

report must identify any transaction, 

relationship, or activity that, in the 

director, officer or employee’s opinion, 

creates a real or potential material 

conflict-of-interest or that is: 

(i) Specifically named in the 

Corporation’s policies on conflict-ofinterest; or 

(ii) Addressed in regulation. 

(2) If potential or real conflicts arise 

between annual reporting periods, each 

director, officer, and employee must 

update his or her annual disclosure at 

the time(s) such conflict arises. 

(b) The Corporation must review the 

annual conflict-of-interest reports, and 

any subsequent reports, within 10 

business days of receipt. 

(1) The Corporation must determine 

for each director, officer, and employee 

whether any real or potential material 

conflict-of-interest exists and document 

its findings. 

(2) If a real or potential conflict-ofinterest is identified as material by the 

Corporation, the Corporation must, 

within 3 business days of identification, 

notify the director, officer, or employee 

of the material conflict-of-interest 

determination and must provide the 

director, officer, or employee a 

reasonable opportunity to respond. 

(c) The Corporation must document 

all resolved and unresolved material 

conflicts-of-interest. Until resolved, the 

Corporation must maintain on-going 

documentation that explains how 

unresolved conflicts are being handled. 

(d) The Corporation must disclose any 

unresolved material conflict-of-interest 

involving its directors, officers, and 

employees existing at the time to: 

(1) Shareholders through annual 

reports and proxy statements; 

(2) Investors and potential investors 

through disclosure documents supplied 

to them; and 

(3) The FCA, through procedures 

established by OSMO. 

(e) The Corporation must establish 

and maintain internal controls to ensure 

that conflict-of-interest reports are filed 

and reviewed as required and that 

conflicts are resolved or disclosed in 

accordance with this subpart. 

(f) The Corporation must maintain all 

reports of real or potential material 

conflicts-of-interest, including 

documentation of materiality 

determinations and resolutions, for a 

period of 6 years. 

(g) The Corporation must establish 

procedures for obtaining conflict-ofinterest disclosures from agents of the 

Corporation. These disclosures must 

provide enough information for the 

Corporation to identify if the agent has 

material conflicts-of-interest with the 

Corporation. The procedures on agent 

conflicts-of-interest must satisfy the 

documentation and record retention 

requirements in paragraphs (c) and (f) of 

this section. 

§ 651.24 Director, officer, employee, and 

agent responsibilities. 

(a) No director, officer, employee, or 

agent of the Corporation may make any 

untrue or misleading statement of a 

material fact intended or having the 

effect of reducing public confidence in 

the Corporation. 

(b) No director, officer, employee, or 

agent of the Corporation may make 

improper use of official Corporation 

property or information. Improper use 

includes, but is not limited to, the 

purchase or retirement of any stock in 

advance of the public release of material 

non-public information concerning the 

Corporation. 

(c) Except in the performance of 

official duties, no director of the 

Corporation shall divulge or use any 

fact, information, or document that is 

acquired by virtue of serving on the 

board of the Corporation and not 

generally available to the public. 

Subpart C—Board Governance 

§ 651.30 Director elections. 

(a) The Corporation must have in 

effect at all times director election 

procedures and must administer those 

procedures in a fair and impartial 

manner. 

(b) The director election procedures 

must: 

(1) Provide that any holder of an 

equity interest in the Corporation may 

submit candidates for consideration as 

director-nominees to the Corporation’s 

board of directors. 

(2) Allow the board committee used 

for director nominations to engage the 

services of third parties to evaluate the 

professional qualifications of potential 

nominees. 

(3) Require that during the director 

nomination process, a directorcandidate must receive affirmative votes 

for nomination from a majority of those 

representing the same class of 

stockholders as the candidate. 

(c) The Corporation must ensure 

director elections acknowledge and 

respect the voting rights of Class A and 

Class B stockholders, as well as the 

elected director representational 

affiliations required by the Act. Elected 

director candidates must have a 

recognized affiliation or relationship 

with their respective class of voting 

stockholders at the time of nomination 

and election to the Corporation board of 

directors. The Corporation must 

maintain documentation supporting the 

affiliation or relationship of each elected 

director until 3 years after the director’s 

service on the board ends. 

§ 651.35 Director removal. 

(a) The procedures that the 

Corporation relies upon to initiate 

director removals must be contained in 

the Corporation’s bylaws. Director 

removals initiated by the Corporation 

include, but are not limited to, 

resignations requested by the 

Corporation, mandatory resignations 

based on contractual agreements with 

the Corporation, and resignations 

required in response to predetermined 

events or actions identified in the 

Corporation’s governing documents. 

(b) Director removals initiated by the 

Corporation may not adversely affect the 

rights of voting shareholders. Appointed 

directors may only be removed as 

authorized by the President of the 

United States. 

(c) The Corporation must notify 

OSMO at least 14 days before any 

director removal is initiated by the 

Corporation. 

§ 651.40 Director fiduciary duties and 

independence. 

(a) General. The responsibilities of the 

Corporation’s board of directors include 

having in place adequate policies and 

procedures to assure its oversight of: 

(1) The risk management and 

compensation programs of the 

Corporation, 

(2) The processes for providing 

accurate financial reporting and other 

disclosures, and 

(3) Communications with 

stockholders. 

(b) Responsibility. The board of 

directors of the Corporation is 

responsible for directing the conduct 

and affairs of the Corporation in 

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furtherance of the safe and sound 

operation of the Corporation and in 

compliance with all applicable laws and 

regulations. The board must remain 

reasonably informed of the condition, 

activities, and operations of the 

Corporation in order to fulfill its duties. 

(c) Duties. Each director of the 

Corporation must: 

(1) Carry out his or her duties as 

director in good faith, in a manner such 

director believes to be in the best 

interests of the Corporation, and with 

such care, including reasonable inquiry, 

as a reasonable person in a similar 

position would use under similar 

circumstances; 

(2) Administer the affairs of the 

Corporation fairly and impartially and 

without discrimination in favor of or 

against any investor, stockholder, or 

class of stockholders; and 

(3) Direct the operations of the 

Corporation in conformity with safety 

and soundness standards and the 

requirements set forth in the authorizing 

statute and in compliance with all 

applicable laws and regulations. 

(d) Independence. No director of the 

Corporation may be prohibited by 

confidentiality agreements or 

Corporation policies and procedures 

from publicly or privately commenting 

orally or in writing on non-private or 

non-privileged corporate business and 

related matters. This provision does not 

exempt directors from relevant laws and 

regulations, including securities laws, 

regarding such statements. This 

provision does not prohibit the 

Corporation from protecting proprietary, 

privileged, and non-public information. 

§ 651.50 Committees of the Corporation’s 

board of directors. 

(a) General. No committee of the 

board of directors may be delegated the 

authority of the board of directors to 

amend Corporation bylaws. No 

committee of the board of directors shall 

relieve the board of directors or any 

board member of a responsibility 

imposed by law or regulation. 

(b) Required committees. The board of 

directors of the Corporation must have 

committees, however styled, that 

address risk management, audit, 

compensation, and corporate 

governance. Neither the risk 

management committee nor the audit 

committee may be combined with any 

other committees. This provision does 

not prevent the board of directors from 

establishing any other committees that it 

deems necessary or useful to carrying 

out its responsibilities. 

(c) Charter. Each committee must 

adopt, and the full board of directors of 

the Corporation must approve, a formal 

written charter that specifies the scope 

of a committee’s powers and 

responsibilities, as well as the 

committee’s structure, processes, and 

membership requirements. 

(1) Each board committee must have 

at least one elected director from each 

class of voting stock and one appointed 

director as members of the committee. 

(2) No director may serve as chairman 

of more than one board committee. 

(d) Frequency of meetings and 

records. Each committee of the board of 

directors must meet with sufficient 

frequency to carry out its obligations 

and duties under applicable laws, 

regulations, and its operating charter. 

Each committee of the board of directors 

must maintain minutes of its meetings. 

The minutes must record attendance, 

the agenda, a summary of the relevant 

discussions held by the committee 

during the meeting, and any resulting 

recommendations to the board. Such 

minutes must be retained for a 

minimum of 3 years and must be 

available to the entire board of directors 

and to OSMO. 

■ 5. Add part 653 to read as follows: 

PART 653—FEDERAL AGRICULTURAL 

MORTGAGE CORPORATION RISK 

MANAGEMENT 

Sec. 

653.1 Definitions. 

653.2 General. 

653.3 Risk management. 

653.4 Internal controls. 

Authority: Secs. 8.3, 8.4, 8.6, 8.8, and 8.10 

of the Farm Credit Act (12 U.S.C. 2279aa–3, 

2279aa–4, 2279aa–6, 2279aa–8, and 2279aa– 

10). 

§ 653.1 Definitions. 

The following definitions apply for 

the purpose of this part: 

Corporation means the Federal 

Agricultural Mortgage Corporation and 

its affiliates. 

FCA means the Farm Credit 

Administration, an independent federal 

agency of the executive branch. 

OSMO means the FCA Office of 

Secondary Market Oversight, which is 

responsible for the general supervision 

of the safe and sound exercise of the 

Corporation’s powers, functions, and 

duties and compliance with law and 

regulations. 

§ 653.2 General. 

The Corporation’s board of directors 

must approve the overall risk-appetite 

and risk tolerance of the Corporation 

and monitor internal controls to ensure 

risk-taking activities are conducted in a 

safe and sound manner. 

§ 653.3 Risk management. 

(a) Risk management program. The 

Corporation’s board of directors must 

have in effect at all times an enterprisewide risk management program that, at 

a minimum, addresses the Corporation’s 

exposure to credit, market, liquidity, 

business and operational risks and 

ensures that the Corporation’s activities 

are exercised in a safe and sound 

manner. The risk management program 

must: 

(1) Periodically assess and document 

the Corporation’s risk profile. 

(2) Align the Corporation’s risk profile 

with the board-approved risk appetite 

and risk tolerance and the Corporation’s 

operational planning strategies and 

objectives. 

(3) Address the Corporation’s 

exposure to credit, market, liquidity, 

business and operational risks. 

(4) Specify management’s authority 

and independence to carry out risk 

management responsibilities. 

(5) Integrate risk management and 

control objectives into management 

goals and compensation structures. 

(6) Comply with all applicable FCA 

regulations and policies. 

(b) Risk committee. The Corporation’s 

board of directors must establish and 

maintain a board-level risk committee 

that is responsible for the oversight of 

the enterprise-wide risk management 

practices of the Corporation. 

(1) The risk committee must have at 

least one member with risk management 

expertise commensurate with the 

Corporation’s capital structure, risk 

profile, complexity, activities, size, and 

other appropriate risk-related factors. 

(2) The responsibilities of the risk 

committee include, but are not limited 

to: 

(i) Overseeing and documenting the 

enterprise-wide risk management 

policies and practices of the 

Corporation; 

(ii) Reviewing and recommending an 

appropriate risk management program 

commensurate with the Corporation’s 

capital structure, risk profile, 

complexity, activities, size, and other 

appropriate risk-related factors; and 

(iii) Receiving and reviewing regular 

reports from the Corporation’s Risk 

Officer. 

(c) Risk officer (RO). The Corporation 

must have a RO to implement and 

maintain the enterprise-wide risk 

management practices of the 

Corporation. The RO must be 

independent from other management 

functions or units and must report 

directly to the chief executive officer 

and the risk committee. The RO must 

have risk management experience 

commensurate with the Corporation’s 

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capital structure, risk profile, 

complexity, activities, and size. The 

responsibilities of the RO include, but 

are not limited to: 

(1) Identifying and monitoring 

compliance with risk limits, exposures, 

and controls; 

(2) Implementing risk management 

policies, procedures, and risk controls; 

(3) Developing appropriate processes 

and systems for identifying and 

reporting risks, including emerging 

risks; 

(4) Reporting risk management issues, 

emerging risks, and compliance 

concerns to the chief executive officer 

and the risk committee; and 

(5) Making recommendations to the 

chief executive officer and board risk 

committee on adjustments to risk 

management policies, procedures, and 

risk controls of the Corporation. 

§ 653.4 Internal controls. 

(a) The Corporation’s board of 

directors must adopt an internal 

controls policy that provides adequate 

directions for, and identifies 

expectations in, establishing effective 

control over, and accountability for, 

operations, programs, and resources to 

ensure that the Corporation’s powers, 

functions, and duties are exercised in a 

safe and sound manner and in 

compliance with all applicable laws and 

regulations. 

(b) The internal control system must 

address: 

(1) The efficiency and effectiveness of 

the Corporation activities; 

(2) Safeguarding the assets of the 

Corporation; 

(3) Evaluating the reliability, 

completeness, and timely reporting of 

financial and management information; 

(4) Compliance with applicable laws, 

regulations, regulatory directives, and 

the policies of the Corporation’s board 

of directors and senior management; 

(5) The appropriate segregation of 

duties among the Corporation personnel 

so that personnel are not assigned 

conflicting responsibilities; and 

(6) The transparency of information 

provided to the Corporation’s board of 

directors. 

(c) The Corporation is responsible for 

establishing and implementing an 

effective system to track internal control 

weaknesses and take action to correct 

detected weaknesses. As part of that 

program, the Corporation must establish 

and maintain a compliance program that 

is reasonably designed to assure that the 

Corporation complies with applicable 

laws, regulations, and internal controls. 

(d) The Corporation must annually 

report to OSMO on the effectiveness of 

the internal control system. 

■ 6. Revise part 655 to read as follows: 

PART 655—FEDERAL AGRICULTURAL 

MORTGAGE CORPORATION 

DISCLOSURE AND REPORTING 

REQUIREMENTS 

Subpart A—General 

Sec. 

655.1 Definitions. 

655.2 Prohibition against misleading, 

inaccurate, and incomplete reports and 

disclosures. 

Subpart B—Report of Condition of the 

Federal Agricultural Mortgage Corporation 

655.10 Reports of condition. 

655.15 Interim reports, notices, and proxy 

statements. 

Subpart C—Reports Relating to Securities 

Activities of the Federal Agricultural 

Mortgage Corporation 

655.20 Securities not registered under the 

Securities Act. 

655.21 Filings and communications with 

U.S. Treasury, the SEC and the NYSE. 

Authority: Secs. 5.9, 8.3, 8.11, and 8.12 of 

the Farm Credit Act (12 U.S.C. 2243, 2279aa– 

3, 2279aa–11, 2279aa–12). 

Subpart A—General 

§ 655.1 Definitions. 

The following definitions apply for 

the purpose of this part: 

Act or authorizing statute means the 

Farm Credit Act of 1971, as amended. 

Business day means a day the 

Corporation is open for business, 

excluding the legal public holidays 

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

Corporation means the Federal 

Agricultural Mortgage Corporation and 

its affiliates. 

FCA means the Farm Credit 

Administration, an independent federal 

agency of the executive branch. 

Material, when used to qualify a 

requirement to furnish information as to 

any subject, means the information 

required to those matters to which there 

is a substantial likelihood that a 

reasonable person would attach 

importance in making investor 

decisions or determining the financial 

condition of the Corporation. 

NYSE means the New York Stock 

Exchange, a listing exchange. 

OSMO means the FCA Office of 

Secondary Market Oversight, which 

regulates and examines the Federal 

Agricultural Mortgage Corporation for 

safety and soundness and compliance 

with law and regulations. 

Our or us means the FCA or OSMO, 

as appropriate to the context of the 

provision employing the term. 

Person means individual or entity. 

Report refers to the annual report, 

quarterly report, or notices, regardless of 

form, required by this part unless 

otherwise specified. 

SEC means the Securities and 

Exchange Commission. 

Securities Act means the Securities 

Act of 1933 (15 U.S.C. 77a et seq.) or the 

Exchange Act of 1934 (15 U.S.C. 78a et 

seq.), or both, as appropriate to the 

context of the provision employing the 

term. 

Signed, when referring to paper form, 

means a manual signature, and, when 

referring to electronic form, means 

marked in a manner that authenticates 

each signer’s identity. 

§ 655.2 Prohibition against misleading, 

inaccurate, and incomplete reports and 

disclosures. 

The Corporation and any agent, 

employee, officer, or director of the 

Corporation may not make any report or 

disclosure to FCA, stockholders or the 

general public concerning any matter 

required to be disclosed by this part that 

is incomplete, inaccurate, or misleading. 

When any such person makes a report 

or disclosure that, in the judgment of 

FCA, is incomplete, inaccurate, or 

misleading, whether or not such report 

or disclosure is made in reports or 

disclosure statements required by this 

part, the FCA may require the 

Corporation to make such additional or 

corrective disclosure as is necessary to 

provide a full and fair disclosure. 

Subpart B—Reports of Condition of 

the Federal Agricultural Mortgage 

Corporation 

§ 655.10 Reports of condition. 

(a) General. The Corporation must 

prepare and publish quarterly and 

annual reports of its condition, 

including financial statements and 

related schedules, exhibits, and other 

documents that are part of the reports. 

The contents of each quarterly or annual 

report must be either equivalent in 

content to the quarterly and annual 

reports to shareholders required by the 

Securities Act or according to our 

instructions. 

(b) Signatures and certification. Each 

report issued under this part must be 

signed. The Corporation must designate 

the representatives who will sign each 

report. The name and position title of 

each person signing the report must be 

printed beneath his or her signature. 

Those components of the report 

containing financial information must 

be separately certified as financially 

accurate. The entire report must be 

certified by the signatories and the 

certification must, at a minimum, state 

that: 

(1) The signatories have reviewed the 

report, 

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(2) The report has been prepared in 

accordance with all applicable statutory 

or regulatory requirements, and 

(3) The information is true, accurate, 

and complete to the best of signatories’ 

knowledge and belief. 

(c) Distribution. The Corporation must 

distribute the signed report of condition 

to all its shareholders within 90 days of 

its fiscal year-end. The Corporation 

must provide us one paper and one 

electronic copy of every signed report 

within 5 days of signing. If the report is 

the same as that filed with the SEC, the 

Corporation may instead provide the 

signed reports to us only in electronic 

form and simultaneous with filing the 

report with the SEC. 

(1) The Corporation must publish a 

copy of each report of condition on its 

Web site within 3 business days of filing 

the report with us. The report must 

remain on the Web site until the next 

report is posted. When the reports are 

the same as those filed with the SEC, 

electronic links to the SEC filings Web 

site, EDGAR, may be used in satisfaction 

of this requirement. 

(2) Upon receiving a request for an 

annual report of condition from a 

stockholder, investor, or the public, the 

Corporation must promptly provide the 

requester the most recent signed annual 

report issued in compliance with this 

section. 

§ 655.15 Interim reports, notices, and 

proxy statements. 

(a) The Corporation must provide to 

us one paper and one electronic copy of 

every interim report, notice, and proxy 

statement filed with the SEC within 1 

business day of filing the item with the 

SEC, including all papers and 

documents that are a part of the report, 

notice, or statement. 

(b) The Corporation must publish a 

copy of each interim report, notice, and 

proxy statement on its Web site within 

5 business days of filing the 

document(s) with the SEC. The interim 

report, notice, or proxy statement must 

remain on the Web site for 6 months or 

until the next annual report of condition 

is posted, whichever is later. Electronic 

links to the SEC filings Web site, 

EDGAR, may be used in satisfaction of 

this requirement. 

Subpart C—Reports Relating to 

Securities Activities of the Federal 

Agricultural Mortgage Corporation 

§ 655.20 Securities not registered under 

the Securities Act. 

The Corporation must make special 

filings with OSMO for securities either 

issued or guaranteed by the Corporation 

that are not registered under the 

Securities Act. These filings include, 

but are not limited to: 

(a) One paper and one electronic copy 

of any offering circular, private 

placement memorandum, or 

information statement prepared in 

connection with the securities offering 

at or before the time of the securities 

offering. 

(b) For securities backed by qualified 

loans as defined in section 8.0(9)(A) of 

the Act, one paper and one electronic 

copy of the following within 1 business 

day of the finalization of the transaction: 

(1) The private placement memoranda 

for securities sold to investors; and 

(2) The pooling and servicing 

agreement when the security is 

purchased by the Corporation as 

authorized by section 8.6(g) of the Act. 

(c) For securities backed by qualified 

loans as defined in section 8.0(9)(B) of 

the Act, the Corporation must provide 

summary information on such securities 

issued during each calendar quarter in 

the form prescribed by us. Such 

summary information must be provided 

with each report of condition and 

performance filed pursuant to § 621.12, 

and at such other times as OSMO may 

require. 

§ 655.21 Filings and communications with 

the U.S. Treasury, the SEC, and NYSE. 

(a) The Corporation must send us one 

paper and one electronic copy of every 

filing made with U.S. Treasury, the SEC, 

or NYSE, including financial statements 

and related schedules, exhibits, and 

other documents that are a part of the 

filing. Such copies must be filed with us 

no later than 1 business day after any 

U.S. Treasury, SEC, or NYSE filing. If 

the filing is one addressed in subpart B 

of this part, no action under this 

paragraph is required. 

(b) The Corporation must send us, 

within 3 business days and according to 

instructions provided by us, copies of 

all substantive correspondence between 

the Corporation and the U.S. Treasury, 

the SEC, or NYSE. 

(c) The Corporation must notify us 

within 1 business day if it becomes 

exempt or claims exemption from any 

filing requirements of the Securities Act. 

Dated: March 19, 2015. 

Dale L. Aultman, 

Secretary, Farm Credit Administration Board. 

[FR Doc. 2015–06755 Filed 3–25–15; 8:45 am] 

BILLING CODE 6705–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2015–0249; Directorate 

Identifier 2014–NM–174–AD] 

RIN 2120–AA64 

Airworthiness Directives; The Boeing 

Company Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to supersede 

Airworthiness Directive (AD) 2012–18– 

05, which applies to The Boeing 

Company Model DC–9–10, DC–9–20, 

DC–9–30, DC–9–40, and DC–9–50 series 

airplanes; and Model DC–9–81 (MD– 

81), DC–9–82 (MD–82), DC–9–83 (MD– 

83), DC–9–87 (MD–87), MD–88, and 

MD–90–30 airplanes; equipped with a 

center wing fuel tank and Boeing 

original equipment manufacturerinstalled auxiliary fuel tanks. AD 2012– 

18–05 currently requires adding design 

features to detect electrical faults and to 

detect a pump running in an empty fuel 

tank. Since we issued AD 2012–18–05, 

we have determined that it is necessary 

to clarify the actions for airplanes on 

which the auxiliary fuel tanks are 

removed. This proposed AD would 

allow certain actions as optional 

methods of compliance. We are 

proposing this AD to reduce the 

potential of ignition sources inside fuel 

tanks, which, in combination with 

flammable fuel vapors, could result in 

fuel tank explosions and consequent 

loss of the airplane. 

DATES: We must receive comments on 

this proposed AD by May 11, 2015. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, 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: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

For service information identified in 

this proposed AD, contact Boeing 

Commercial Airplanes, Attention: Data 

& Services Management, 3855 

mstockstill on DSK4VPTVN1PROD with PROPOSALS