[Federal Register Volume 74, Number 72 (Thursday, April 16, 2009)]
[Proposed Rules]
[Pages 17612-17624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-8750]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 74, No. 72 / Thursday, April 16, 2009 / 
Proposed Rules

[[Page 17612]]



FARM CREDIT ADMINISTRATION

12 CFR Parts 611, 613, 615, 619, and 620

RIN 3052-AC43


Organization; Eligibility and Scope of Financing; Funding and 
Fiscal Affairs, Loan Policies and Operations, and Funding Operations; 
Definitions; and Disclosure to Shareholders; Director Elections

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

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SUMMARY: The Farm Credit Administration (FCA, we, or our) is proposing 
to amend its rules on Farm Credit System (System) bank and association 
director elections and other voting procedures to clarify director 
election processes and update its rules to incorporate interpretations 
made through several recent bookletters to System institutions. We 
propose consolidating general election procedures, clarifying the role 
of nominating committees, enhancing eligibility and disclosure 
requirements for director-candidates, and improving annual meeting 
information statement instructions. We also propose new regulations on 
floor nominations and meetings of stockholders. We expect this proposed 
rule will increase stockholder participation in the director election 
process and enhance impartiality and disclosure in director elections.

DATES: You may send comments on or before June 15, 2009.

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 e-mail 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 comment multiple times via different methods. 
You may submit comments by any of the following methods:
    <bullet> E-mail: Send us an e-mail at <a href="/cdn-cgi/l/email-protection#0e7c6b69236d6163634e686d6f20696178"><span class="__cf_email__" data-cfemail="f7859290da94989a9ab7919496d9909881">[email protected]</span></a>.
    <bullet> FCA Web site: http://www.fca.gov. Select ``Public 
Commenters,'' then ``Public Comments,'' and follow the directions for 
``Submitting a Comment.''
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Mail: Gary K. Van Meter, Deputy Director, Office of 
Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, 
McLean, VA 22102-5090.

You may review copies of all comments we receive at our office in 
McLean, Virginia, or from 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, but for technical 
reasons we may omit items such as logos and special characters. 
Identifying information you provide, such as phone numbers and 
addresses, will be publicly available. However, we will attempt to 
remove e-mail addresses to help reduce Internet spam.

FOR FURTHER INFORMATION CONTACT: 

Elna Luopa, Senior Corporate Analyst, Office of Regulatory Policy, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4498, TTY (703) 
883-4434; or
Laura D. McFarland, Senior Counsel, Office of General Counsel, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TTY (703) 
883-4020.

SUPPLEMENTARY INFORMATION: 

I. Objectives

    The objectives of this proposed rule are to:
    <bullet> Strengthen the independence of nominating committees;
    <bullet> Encourage greater stockholder participation in the 
director election process;
    <bullet> Ensure procedures on nominations from the floor are 
equitable and known to stockholders;
    <bullet> Clarify director election procedures;
    <bullet> Enhance impartiality and disclosure in the election of 
directors; and
    <bullet> Incorporate FCA interpretations and responses to questions 
raised by System institutions and FCA examiners in our rules.

II. Background

    The Farm Credit Act of 1971, as amended (Act),\1\ establishes the 
System as a farmer-owned cooperative system that provides credit to 
farmers, ranchers, producers or harvesters of aquatic products, and 
rural home owners. The cooperative structure of the System relies on 
the owner control and participation of its stockholders and is 
supported by the accurate and timely information provided by the 
directors of System institutions. The majority of all Farm Credit bank 
and association directors are elected by voting stockholders.\2\
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    \1\ Public Law 92-181, 85 Stat. 583.
    \2\ See sections 1.4, 2.1, 2.11, 3.2, 3.21, 7.1, 7.12 of the 
Act.
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    One of the main objectives of cooperatives today, as in the past, 
is to promote the participation of members in the management, 
ownership, and control of the cooperative, which includes electing 
directors to represent the interests and concerns of all the 
institution's owner-borrowers. Boards of directors in a cooperative 
system have the responsibility of encouraging stockholder participation 
in the management and control of the cooperative. The capacity of the 
board of directors to view borrowers as owners as well as customers is 
key to a successful cooperative enterprise. Respecting borrowers as 
owners is indispensable to creating stockholder interest and activity 
in the institution's existence as a cooperative. Providing stockholders 
the opportunity to give voice to their concerns through various forums, 
such as an annual stockholders' meeting, gives the board of directors 
the feedback they need to measure how well they are serving all their 
stockholders' interests. It is from this pool of interested, active, 
and informed stockholders that the cooperative draws its next 
generation of directors.
    For these reasons, we are strengthening certain provisions on 
election of directors and adding other provisions to ensure that 
stockholders' voices continue to resound in the boardroom through their 
elected representatives. We are further proposing to consolidate our 
general director election rules, currently located throughout our 
rules, into subpart C of part 611, ``Election of Directors and Other 
Voting Procedures.'' Our rules at

[[Page 17613]]

part 611 were intended to address election procedures, and we believe 
consolidating our election rules into this section is appropriate. We 
believe the proposed reorganization will add clarity to our rules by 
keeping subject matters together, thereby facilitating System 
compliance. In the proposed process of consolidating provisions, some 
regulatory language is proposed to be changed to remove redundancy and 
enhance clarity.

III. Comments Received

    We received two comments on our existing election regulations prior 
to developing these proposed rules. The comments were in response to a 
June 23, 2008, regulatory burden solicitation (73 FR 35361). We 
evaluated the comments in recognition of existing law and policy 
considerations and the cooperative nature of the System.
    One commenter asked us to consider overall revisions to our 
election rules, but made no suggestions on what changes should be made. 
The second commenter requested we modify our rules at Sec.  611.325 and 
Sec.  615.5230 to allow stockholders to nominate and elect directors in 
any manner they consider appropriate, as long as the process is fair 
and equitable. Our existing rules do not prevent voting stockholders 
from using various means to nominate directors as long as the right to 
make floor nominations and use a nominating committee remains 
available. The Act, at section 4.15, requires associations to use 
nominating committees and permit floor nominations in director 
elections. Institutions wishing to use additional methods, such as 
nominations by petition, may do so. Further, our rules do not prevent 
stockholders from using multiple methods, such as mail ballots and 
regional elections, in electing directors. We propose expanding the 
options in this proposed rule by introducing online meetings. Our 
rules, however, provide protections for the cooperative structure of 
the System by limiting each association stockholder to one vote and 
providing weighted voting for Farm Credit Banks. This proposed rule 
carries forward that concept in our impartiality in elections rules at 
Sec.  611.310, while also increasing the flexibility of institutions by 
proposing to treat the associations who are stockholders in a Farm 
Credit bank in the same manner that a stockholder is treated at the 
association level when campaigning for director-candidates. We believe 
we have balanced the rights of stockholders with legitimate safety and 
soundness concerns in our regulations and continue that balance in this 
proposed rule.

IV. Section-by-Section Analysis

A. Meetings of Stockholders [New Sec. Sec.  611.100, 611.110, and 
611.120]

    We propose adding a new subpart A to part 611 that would address 
meetings of stockholders and consist of three sections. The three 
sections we are proposing are Sec.  611.100 for definitions, Sec.  
611.110 to address the basic aspects of meetings of stockholders, and 
Sec.  611.120 on establishing a quorum for stockholders' meetings.
1. Stockholders' Meetings [New Sec.  611.110]
    The proposed Sec.  611.110 would capture the existing practices of 
System institutions in holding annual director elections. It would also 
incorporate and cross-reference the notice of meeting requirements 
currently found in Sec.  620.21 and allow for the use of online 
meetings as part of the annual meeting process. In today's rapidly 
changing environment, System institutions are able to employ new 
technologies to support online meetings conducted over the Internet, 
creating more opportunities for facilitating member attendance and 
involvement. These opportunities help mitigate attendance issues 
arising from larger territories and the costs and inconveniences 
associated with traveling long distances. In proposed Sec.  611.110, 
System institutions would be permitted to use online meetings to 
augment their traditional annual meeting held in a physical location 
within the institution's territory. Each bank and association using an 
online meeting space would need to develop policies and procedures that 
would provide stockholders with the information needed to access the 
online meeting and register their attendance. Because not all 
stockholders may have the means to use online technology, online 
meetings would not substitute for an actual physical meeting location 
for the annual meeting, but would be in addition to it.
2. Stockholder Attendance [New Sec.  611.110(d)]
    We are proposing a requirement that Farm Credit banks and 
associations actively encourage stockholder attendance at the annual 
meeting. We encourage institutions to consider using the Annual Meeting 
Information Statement (AMIS) or other shareholder communications to 
describe the various opportunities for shareholders' participation in 
the ownership, control, and management of their institutions. For 
instance, opportunities may include shareholder appreciation meetings, 
financial results conference calls, sponsorship of conferences, 
educational and other agricultural credit-related events, participation 
in advisory committees, and the opportunity to serve on the 
institution's board of directors or nominating committee. FCA believes 
strongly that the Act places significant expectations on System 
institutions to foster and facilitate shareholder involvement and 
knowledge of the cooperative nature of the System. As a result, FCA 
encourages System institutions to be creative in finding ways to reach 
out to member-shareholders beyond the lending relationship, providing 
for related services, or simply distributing copies of required 
disclosures.
3. Quorums [New Sec.  611.120]
    The proposed Sec.  611.120 would clarify requirements for Farm 
Credit institutions' determining if a quorum at a stockholders' meeting 
was achieved and require institutions to identify quorum requirements 
in their bylaws. A quorum is the minimum number of voting stockholders 
necessary to conduct business, including holding a vote. As such, we 
propose that a quorum count may not include mail ballots. General 
corporate law principles define a quorum as ``the number of persons who 
must be present before any business can be transacted at a meeting.\3\ 
'' Since mail balloting occurs after a meeting is convened and is an 
actual component of the business of a meeting, mail ballots cannot be 
used to establish that there were a sufficient number of voting 
stockholders present at the start of the meeting. Because our proposed 
rule in Sec.  611.110 would permit Farm Credit institutions to hold 
online annual meetings, at which voting stockholders can register their 
attendance electronically, we believe versatility and sufficient 
flexibility exist to enable the institution to meet its quorum 
requirement without the necessity of including mail ballots for that 
purpose. We are proposing a delayed date for the prohibition on using 
mail ballots to establish a quorum because we are aware that some Farm 
Credit institutions may currently allow the counting of mail ballots to 
determine whether a quorum has been met and will have to amend their 
procedures accordingly.
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    \3\ See Fletcher's Cyclopedia of Corporations section 2013 
(emphasis added).
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    The proposed rule would not affect counting proxy ballots towards 
the quorum requirement because proxies

[[Page 17614]]

are treated as ``present'' and voting members.\4\ In order to execute a 
proxy, the person designated as the proxy holder must be in attendance 
at the stockholders' meeting. Our proposed rule would also continue to 
allow those Farm Credit institutions holding annual meetings of 
stockholders, or any special meeting of stockholders, in consecutive 
sectional sessions to count the attendance of voting stockholders at 
all sessions for quorum purposes, provided no voting stockholder is 
counted more than once. Further, if a quorum is present when a meeting 
is first convened, the meeting may be recessed to a later time and, 
when reconvened, be held as a legal meeting even if a quorum is no 
longer present.
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    \4\ A proxy is an authorization to act for a voting stockholder 
and requires the stockholder issuing the proxy to name a director or 
another voting stockholder of his or her choosing to cast that 
stockholder's vote.
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    We encourage institution boards to renew their efforts to meet 
their existing quorum requirements as a result of this proposed change. 
The board of directors of the cooperative has an important role to play 
in maintaining open and direct communications with the cooperative's 
owners. An annual meeting of stockholders provides a unique opportunity 
for the cooperative's members and their majority-elected directors to 
reflect on the accomplishments and challenges of the past year and 
discuss their goals for the future. The annual meeting is also a forum 
for member-owners to meet with their directors and other members to 
discuss member concerns and member satisfaction. Taking actions that 
result in a well-attended stockholders' meeting reflects the board's 
collective commitment in meeting the needs of its members. 
Consequently, institutions should consider ways for encouraging 
stockholder-owner involvement and attendance at annual meetings, even 
though mail ballots may not be used for quorum purposes. The 
opportunity to hold annual meetings online and include, in the quorum 
count, the voting stockholders attending the online meeting is likely 
to satisfy an institution's existing quorum requirement.

B. Eligibility for Membership on Board of Directors [Sec.  611.310]

    We propose modifying the language of existing Sec.  611.310(b)--
regarding director eligibility when there is a case of incompetence or 
criminal conviction--to mirror the statutory language at section 
5.65(d) of the Act. Our existing regulatory language identifies felony 
convictions, but the Act makes no distinction between misdemeanor and 
felony convictions. Our proposed change would bring the regulatory text 
into compliance with the Act.
    We propose adding new paragraph (e) addressing director eligibility 
when a person has run for membership on a nominating committee. Our 
existing rule at Sec.  611.325 already prohibits this dual role, but we 
believe further clarity is required. We propose clarifying that a 
person is not eligible to be a director if that person is elected to 
serve on the institution's nominating committee and attends a meeting 
of the nominating committee. Attending a meeting of the nominating 
committee could give a committee member the ability to access 
information that would allow that person to judge the likelihood of a 
successful run for the board, thus creating a potential conflict of 
interest that the rules in Sec.  611.310 seek to avoid. For this 
reason, we propose including the existing Sec.  611.325 prohibition in 
Sec.  611.310 after making clarifying changes to Sec.  611.325 to allow 
a nominating committee member to step down and run as a director-
candidate in an election as long as the member has not attended a 
nominating committee meeting.
    We are also proposing to add a new paragraph (f) in Sec.  611.310 
that would allow out-of-territory borrowers to serve as association 
directors. Many out-of-territory borrowers, who are eligible borrowers 
under Sec.  613.3000, are voting stockholders in their institutions 
and, as such, are potentially eligible to run for election to the 
institution's board of directors. We propose giving the institution the 
discretion to limit out-of-territory borrowers' opportunity to run for 
the board if made a part of the institution's bylaws. Associations 
would also be required to inform, in writing, an out-of-territory 
borrower at the time the loan is made as to the borrower's eligibility 
to serve as a director.

C. Impartiality in the Election of Directors [Sec.  611.320]

1. Institution Resources [Sec.  611.320(c)]
    Our existing rule at Sec.  611.320(c) on impartiality in elections 
states that no resources of an institution may be used by a candidate 
for nomination or election unless the same resources are simultaneously 
made available, and made known, to all declared candidates. We propose 
clarifying this provision to explain that facilities and resources 
include an institution's information technology resources and financial 
resources. For example, an institution may use its financial resources 
to provide reasonable reimbursement of travel expenses of director-
candidates to attend annual meetings (including sectional sessions) if 
all candidates are offered the same reimbursement. We propose this 
clarification to ensure that institutions that have paid the travel 
expenses of incumbent directors running for re-election do not deny 
other candidates reimbursement for similar travel expenses. We also 
propose clarifying that when resources are made available to all 
candidates, the institution must also make the resources available to 
floor nominees. To ensure that all candidates, including any floor 
nominees, are aware of an institution's policy that permits candidate 
reimbursement, we would expect the institution to include stockholder 
notice, in the AMIS or elsewhere, that candidates will be provided the 
opportunity to receive reasonable travel reimbursement. The advance 
notice to voting stockholders would help ensure fairness and equal 
access to the reimbursement opportunity. In no instance may an 
institution provide its financial resources in a manner that results in 
personal financial gain for the candidate(s). Use of an institution's 
financial resources must be reasonable, prudent, and consistent with 
supporting an election that is fair and unbiased.
    We further propose amending paragraph (c) to recognize associations 
as stockholders in their funding banks. We propose treating 
associations as stockholders and not as ``institutions'' to allow 
stockholder-associations to use their property, facilities, and 
resources in support of a candidate to the bank board. As part of this 
proposal, stockholder-associations would be able to exercise their 
rights as stockholders in supporting a bank director-candidate--if 
authorized by the affiliated Farm Credit bank's impartiality in 
director elections' policies and procedures. Our rule would require the 
bank's policy and procedures to set reasonable standards for 
stockholder-associations' use of their property, facilities and 
resources for this purpose. For example, we would expect the bank to 
establish a reasonable amount that stockholder-associations could 
expend in supporting a bank director-candidate. In establishing the 
reasonable amount, the bank would need to take into consideration the 
various sizes of the associations in its district before establishing 
the maximum amount that could be expended by a stockholder-association. 
The bank's policy and procedures must be fair and equitable and be 
clear that the amount expended by a stockholder-association is not for 
the personal use of

[[Page 17615]]

any bank director-candidate. The bank's policy could also identify that 
using photocopying facilities, mailing materials, and the like are 
acceptable uses of the stockholder-association's resources, but cash 
outlays are not an acceptable use. Likewise, banks may want to permit 
stockholder-associations to host moderate social gatherings or 
reimburse travel expenses in order to introduce candidate(s) to the 
bank's other voting stockholders.
    We believe requiring the bank to authorize the use of association 
property, facilities, and resources is appropriate because it is the 
bank's director election process and the bank should have the authority 
to determine the allowable activities of its stockholders in this 
process, subject to our regulations. In the event a bank does not 
choose to allow its stockholder-associations to use property, 
facilities, and resources in support of bank director-candidates, no 
stockholder-association in that district would be authorized to provide 
campaign support to any bank director-candidate in any manner.
    We caution System institutions that stockholder-associations may 
not write checks to any bank director-candidate to support his or her 
campaign. It is critical that any support provided by a stockholder-
association to a bank director-candidate not result in enriching the 
candidate or providing the candidate with personal financial gain. 
Should the candidate win election to the board, we believe that such 
actions may create a conflict of interest in the director's execution 
of his or her fiduciary duties on behalf of all stockholders.
    As a technical change, we propose replacing the phrase ``System 
institution'' with ``Farm Credit'' everywhere it appears in Sec.  
611.320.
2. Involvement of Directors in Board Elections [New Sec.  611.320(f)]
    We propose adding a new paragraph (f) to address the involvement of 
directors in board elections. While our existing rule at Sec.  
611.320(b) prohibits, in part, employees and agents from making 
statements intended to influence votes in elections and nominations, we 
propose adding a prohibition for directors of Farm Credit institutions 
from actively supporting a candidate for nomination or election to that 
institution's board of directors. We believe a director's active 
support of a candidate creates a potential for conflicts of interest 
should that director-candidate be elected to the board. An example of 
prohibited conduct would include a sitting director of an institution 
distributing or mailing a letter to the voting stockholders endorsing a 
particular candidate for director (other than him or herself). We are 
proposing to limit this restriction to activities made on another's 
behalf. Therefore, the proposed rule would allow any director to freely 
engage in campaign activities for his or her own election to the board.

D. Nominating Committees [Existing Sec.  611.325]

    We are proposing that each institution establish and maintain 
policies and procedures on the formation, operation and duties of its 
nominating committee, consistent with current laws and regulations. 
While the nominating committee is a committee of voting stockholders 
and not a committee of the board, the institution's use of policies and 
procedures will help meet its obligation to ensure the independence and 
integrity of the nominating committee process in the election of 
directors for each and every election cycle. To that end, policies and 
procedures for the institution's nominating committee would help ensure 
that nominating committee members are fully informed of their rights 
and obligations as they perform this important service to their 
cooperative.
    We further propose clarifying that each institution may have only 
one nominating committee in any one election cycle, consistent with 
informal guidance we have provided in our brochure on nominating 
committees, our March 8, 2007 bookletter, ``Guidance on Farm Credit 
Bank and Association Nominating Committees'' (BL-043 Revised), and 
Frequently Asked Questions (FAQ) on our Web site.
1. Nominating Committee Composition [Existing Sec.  611.325(a)]
    We are proposing to add a requirement to paragraph (a) that would 
permit out-of-territory borrowers, who are voting stockholders, to 
serve on an institution's nominating committee. The proposed rule would 
recognize that an institution may prohibit eligibility for such 
activities by out-of-territory borrowers in its bylaws. Associations 
would also be required to inform, in writing, the out-of-territory 
borrower, at the time the loan is made, whether the borrower is 
eligible to serve on the nominating committee. We also propose moving 
the existing Sec.  611.325(a) prohibitions on membership to the 
nominating committee to proposed new paragraph (c), which is discussed 
further below.
2. Nominating Committee Election [New Sec.  611.325(b) and Existing 
Sec.  620.21]
    We propose amending our existing rule at Sec.  611.325 by adding a 
new paragraph (b) on nominating committee elections. We propose 
clarifying that an institution may use ballots that would allow 
stockholders to vote for nominating committee members as a slate, as 
long as stockholders also retain the ability and right to elect members 
individually. We have encountered questions on whether institutions may 
present voting stockholders with a list of candidates, identifying only 
one name for each vacant committee position, and then requiring 
stockholders to vote either for or against the entire list. Allowing 
institutions to determine the entire composition of the committee in 
this manner does not give voting stockholders an ability to choose the 
individual members of the nominating committee. The proposed rule would 
not prevent an institution from offering its voting stockholders the 
option of voting on the list of candidates as an alternative to voting 
on each individual candidate running for the nominating committee, but 
the institution would not be allowed to require voting stockholders to 
vote only for or against the list of nominating committee candidates. 
We believe that the institution is responsible for developing an open 
and impartial process for soliciting candidates for nominating 
committee membership. The process must ensure that the institution, its 
directors and management, and the existing nominating committee are not 
naming successors for, or appointing members to, the nominating 
committee. In our BL-043 Revised, we suggest ways in which potential 
nominating committee candidates can be identified.
    We also propose clarifying in Sec.  611.325(b) that association 
nominating committee members may only be elected to serve a 1-year 
term. Section 4.15 of the Act requires each association to elect a 
nominating committee at the annual meeting to serve for the following 
year. Individual members of an association nominating committee may be 
elected to sequential 1-year terms, however. We are not proposing term 
limits for bank nominating committee members because we recognize that 
some banks do not conduct their director elections at annual meetings, 
and there is no statutory provision limiting the terms of bank 
nominating committees. We further propose clarifying that each Farm 
Credit Bank, but not agricultural credit banks or banks for 
cooperatives,

[[Page 17616]]

must use weighted voting procedures when electing members to their 
nominating committees. We propose this change to conform the nominating 
committee election procedure to our existing rules on Farm Credit 
Banks' director elections. These proposed changes are consistent with 
informal guidance we have provided in our brochure on nominating 
committees, BL-043 Revised, and Frequently Asked Questions (FAQ) on our 
Web site.
2. Nominating Committee Conflicts of Interest [New Sec.  611.325(c)]
    We are proposing regulatory language on conflicts of interest for 
nominating committees in a new paragraph (c) to Sec.  611.325. We 
propose moving the existing Sec.  611.325(a) prohibitions on membership 
to the nominating committee to this new paragraph and adding proposed 
language clarifying that once elected to a nominating committee, a 
member may not resign from the committee to be considered as a 
candidate for a director position if the member has attended a meeting 
of the nominating committee. We previously explained this limitation in 
the preamble to the original rulemaking for Sec.  611.325.\5\ This 
clarification is important because we have received numerous questions 
regarding whether nominating committee members may resign from the 
committee or recuse themselves from committee deliberations in order to 
be a director-candidate. Our existing rule at Sec.  611.325(a) 
prohibits an individual from running for election to the board of 
directors if that same individual already successfully ran for election 
to the nominating committee that is identifying director-candidates in 
that election cycle. We believe that to preserve impartiality, 
committee members must be free from any interest in a directorship 
during service on the nominating committee. We continue to believe that 
an open and fair nominating process must be free of potential conflicts 
that could result if a nominating committee member, once elected, 
attends a meeting of the nominating committee and is allowed to recuse 
himself or herself from committee discussions or resign from the 
committee in order to run for director in that same election cycle. 
While we believe that a stockholder has adequate time to decide whether 
a directorship or nominating committee membership would allow him or 
her to best serve the cooperative for that election year cycle, we 
understand that situations may arise that beg reconsideration of the 
stockholder's original decision. In such situations, we are proposing 
that a person elected to the nominating committee, but who did not 
attend any meeting of the nominating committee, may resign his or her 
position. We are also proposing that nominating committees keep minutes 
of their meetings, which would reflect attendance. We further encourage 
institutions to elect alternate members to the nominating committee so 
the committee can function without interruption if a member decides to 
resign his or her position on the nominating committee. For example, if 
nominating committee members are elected by nomination region and the 
person resigning is the only representative from a region, the 
institution would have to hold elections to replace the member who 
resigned if no alternate had been elected to take his or her place.
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    \5\ See 71 FR 5740, 5753 (February 2, 2006).
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3. Nominating Committee Duties [Redesignated Sec.  611.325(d)]
    We propose redesignating paragraph (b) on nominating committee 
responsibilities as paragraph (d), clarifying that nominating 
committees may not be used for other institution business and adding a 
requirement that nominating committees keep records of their meetings. 
We believe having other duties diverts the nominating committee from 
its very significant role in the director election process, and 
therefore we propose limiting its duties to those described in proposed 
Sec.  611.325(d). For example, some institutions are giving the 
nominating committee the task of identifying candidates for election to 
the nominating committee for the following year. While the institution 
may invite the nominating committee to suggest names of individuals who 
may have an interest in succeeding them on the committee, it goes 
beyond the nominating committee's role to determine the candidates who 
will stand for election to the next nominating committee. In other 
occurrences, the nominating committee has been tasked with verifying 
the eligibility or credentials of a floor nominee. The institution, not 
the nominating committee, is responsible for ensuring that the floor 
nominee is eligible. In addition, the nominating committee has 
completed its tasks for that election cycle before floor nominations 
are made or accepted.
    We are not proposing to prohibit institutions from forming other 
stockholder committees for various purposes where some or all of the 
nominating committee members may serve on those committees. We are 
proposing to clarify that the nominating committee itself may not be 
used for functions other than those required by section 4.15 of the 
Act.
4. Nominating Committee Resources [Redesignated Sec.  611.325(e)]
    We propose redesignating paragraph (c) on nominating committee 
resources as paragraph (e) and adding a provision that institutions 
provide their nominating committees with FCA rules and other FCA-issued 
guidance on the operation of nominating committees. We believe this 
requirement is necessary to ensure that the nominating committee is 
aware of FCA's rules and guidance regarding the nominating committee's 
role in representing the institution's stockholders in the director 
elections process and understands how it must operate in accordance 
with those rules.

E. Floor Nominations [New Sec.  611.326]

    We propose moving eligibility and procedural requirements for floor 
nominations from existing Sec.  620.21(d) to new Sec.  611.326. We also 
propose incorporating previous guidance provided to System institutions 
in our February 14, 2008 bookletter, ``Floor Nomination Procedures for 
System Associations and Banks'' (BL-055), and addressing floor 
nomination procedural requirements for various balloting methods.
    Making nominations from the floor is an express right of each 
association's voting stockholder that may not be unduly restricted in a 
way that effectively weakens it.\6\ As explained in BL-055, the 
procedures for nominations from the floor may not be unduly burdensome 
nor have the effect of denying voting stockholders the right to name 
candidates through floor nominations. We propose requiring System 
associations, and those Farm Credit banks that allow floor nominations, 
to have policies and procedures for accepting nominations from the 
floor. The proposed rule would set minimum procedural limits for the 
level of voting stockholder support that may be required by the 
institution before accepting a floor nomination. The proposed limit is 
no more than a second to a nomination. The proposed rule would also 
require that a floor nominee accept the nomination prior to placing the 
nominee on the ballot and clarify that floor nominations may be called 
for only after the nominating committee has

[[Page 17617]]

identified its slate of director candidates.
---------------------------------------------------------------------------

    \6\ Section 4.15 of the Act requires System associations to 
accept floor nominations, but does not have a similar requirement 
for Farm Credit banks.
---------------------------------------------------------------------------

    We are also proposing to address a concern that allowing 
nominations from the floor only at the physical locations of the annual 
meeting may create delays and meeting inefficiencies because the 
institution first has to verify that the nominee is eligible for the 
position for which he or she has been nominated before the meeting can 
continue. Our proposed rule in Sec.  611.110(c) would permit online 
annual meetings. Once the chairperson of the online annual meeting 
declares the meeting open, a ``virtual floor'' would allow a voting 
stockholder to make a ``virtual floor nomination'' through the 
interactive online meeting space. Virtual floor nominations would 
require using an ``instant access'' method such as ``instant 
messaging'' or a telephone call to the institution, both of which are 
unedited as in a physical meeting. An acceptable ``instant access'' 
method would be one that enables voting stockholders to second the 
floor nomination immediately and for the nominee to accept the 
nomination. For example, instant messaging to an online meeting space 
or a comment board would be considered sufficiently ``instant,'' as 
well as being public to all voting stockholders. An e-mail or voice 
mail system would not be considered instant, as the institution staff 
would have to transfer the information to the virtual floor. This 
virtual floor could remain open for several hours or be recessed and 
reopened for several days at set times, enabling the institution to 
obtain floor nominee eligibility information before voting begins. We 
believe this process addresses the concerns for time to verify 
eligibility of candidates and the integrity of the floor nomination 
process. Floor nominations are public nominations of candidates that 
are not previously vetted by any person or committee. Ensuring the 
``public'' nature and instant responses by stockholders to a floor 
nomination are essential. Because of the various forms of, and rapid 
changes in, technology, as well as recognizing the diversity of 
operations within the System, we are not proposing specific rules on 
how this innovative online meeting process occurs. We would expect Farm 
Credit institutions to develop procedures that address the core 
elements contained in this proposed rule.
    If an institution uses a virtual floor in connection with an online 
meeting, this would not replace the floor at the physical location of 
the annual meeting. The institution must allow voting stockholders to 
nominate from the floor at any physical location of the annual meeting 
if voting stockholders will vote on director-candidates by paper or 
electronic mail ballot after all sessions of the annual meeting are 
concluded. Or, if the institution permits stockholders to vote in 
person at the meeting, then a voting stockholder must be allowed to 
nominate from the floor at the initial physical location of the annual 
meeting. It is for these reasons we also propose requiring banks and 
associations to inform stockholders in the AMIS of the procedures for 
making floor nominations.

F. Director-Nominee Disclosures [New Sec.  611.330 and Existing Sec.  
620.21]

    We propose moving the existing requirements on director-nominee 
disclosures from Sec.  620.21(d) to a new Sec.  611.330 called 
``Disclosures of Farm Credit bank and association director-nominees.'' 
We believe that these requirements are process-related, describing 
steps that are taken in conducting director elections, and do not 
belong in part 620, which covers reporting requirements. We propose an 
additional provision in new paragraph (a) of Sec.  611.330, which would 
require that each institution adopt policies and procedures addressing 
the acquisition of director-nominee disclosure statements to ensure 
that all director-nominees are fairly treated in the election and 
voting processes. We previously provided guidance on this matter in our 
September 11, 2008 bookletter, ``Distribution of Director Candidate 
Information'' (BL-056).
    As a conforming technical change, we propose changing the reference 
in Sec.  611.320(e) from Sec.  620.21(d) to Sec.  611.330.

G. Regional Voting in Director Elections [New Sec.  611.335 and 
Existing Sec. Sec.  615.5230(a) and 620.21(d)]

    We propose moving the existing requirements on regional director 
elections to a new Sec.  611.335 called ``Regional voting in director 
elections'' to enhance the clarity and organization of our rules. We 
propose moving the regional voting procedures contained in existing 
Sec.  615.5230(a)(3) and Sec.  620.21(d)(4)(ii) to a new Sec.  611.335 
because existing Sec.  620.21 is an interim report to stockholders 
(AMIS) and Sec.  615.5230 addresses equity issuances in cooperative 
principles. As a conforming technical change, we propose deleting the 
paragraphs addressing regional elections contained in Sec.  
620.21(d)(4) and Sec.  615.5230(a)(3).

H. Confidentiality and Security in Voting [Sec. Sec.  611.330 and 
611.340]

    We propose consolidating into Sec.  611.340 the ``security in 
voting'' rules and the ``confidentiality in voting'' rules currently 
located in existing Sec. Sec.  611.330 and 611.340. We believe the 
consolidation will eliminate redundancy and make the rule easier to 
read. As part of the consolidation, we propose clarifying that only an 
independent third party or a tellers committee may validate and 
tabulate votes. The proposed clarification would remove a provision 
that allows another designated group of persons to perform these tasks. 
We do not believe an institution needs to designate any other group of 
individuals to validate and tabulate ballots when it can use a tellers 
committee or an independent third party for this purpose. We also 
propose new language on the membership of a tellers committee in 
paragraph (a)(4). We propose that only voting stockholders who do not 
have a conflict of interest may serve on the tellers committee. That 
is, only those voting stockholders who are not directors, director-
candidates, or serving on the current election-year nominating 
committee may be members of the tellers committee. Institution 
employees who hold voting stock in the institution remain eligible to 
serve on a tellers committee. This limitation ensures that only those 
voting stockholders who have had no direct involvement in the 
nomination or election process are tabulating and counting ballots.
    We further recognize the practical need for institutions to 
identify eligible voting stockholders as of the record date set for 
each stockholder voting action in paragraph (a)(2). The list of 
stockholders indicates the names of those stockholders holding voting 
stock as of the record date and thus the stockholder's eligibility to 
cast a ballot. Each institution is expected to update its list of 
stockholders, including individuals designated to vote for a legal 
entity that is a voting stockholder, each time the record date is set 
for director and nominating committee elections or any other matter 
requiring a stockholder vote. An updated list is also essential to 
determine if a floor nominee for a director position or membership on 
the nominating committee is a voting stockholder.
    As a clarifying change, we propose adding language to paragraph (d) 
to explain that only proxy ballots may be accepted before stockholder 
meetings are convened for election or other voting purposes. Accepting 
mail ballots before an annual meeting results in those

[[Page 17618]]

stockholders being unable to consider any candidate nominated from the 
floor because mail ballots cannot be revoked once received by the 
institution. Proxy ballots must be returned to the institution by the 
date of the stockholders' meeting and before balloting begins. The 
stockholder voting by proxy may withdraw the proxy authorization and 
vote in person at the meeting. Thus, a nominee from the floor could 
conceivably uphold a viable candidacy with sufficient stockholder 
support from those voting at the meeting as well as those that decide 
to revoke their proxy ballots and vote in person at the meeting.
    As a conforming technical change, we propose changing the reference 
in Sec.  611.1240(e) from Sec. Sec.  611.330 and 611.340 to Sec.  
611.340.

I. Cooperative Principles in Elections [Sec. Sec.  611.350 and 
615.5230(a)]

    We propose moving the contents of existing Sec.  615.5230(a)(1) and 
(a)(2), addressing voting rights of stockholders in Farm Credit bank 
and association director elections, to existing Sec.  611.350 on 
cooperative principles in director elections. We propose no changes to 
the Sec.  615.5230 provisions on how many votes a stockholder may cast, 
but propose minor rewording of the language for clarity and to 
recognize the proposed new location of these provisions.
    We also propose adding a new provision to Sec.  611.350 to clarify 
that out-of-territory borrowers holding voting stock must be assigned 
to a specific geographic region for voting purposes if the association 
apportions its territory into regions for voting purposes. Section 4.15 
of the Act requires the nominating committee of each association to 
review a list of farmers from the association's territory and seek to 
nominate director-candidates representing all sections of the 
territory. Also, sections 2.1 and 2.11 require that elected directors 
come from the voting members (voting stockholders) of the association. 
We believe that these provisions, when read together, allow all voting 
members of an association, including out-of-territory borrowers, to 
have equal standing in the association in terms of voting stock. As 
discussed earlier in section IV.B. of this preamble (see discussion on 
Sec.  611.310(f)), each institution must determine whether out-of-
territory borrowers may serve the institution in other ways, such as on 
the board of directors or the nominating committee.
    We also propose moving the provision requiring the disclosure of 
the types of agriculture in which directors of an institution engage 
from the existing provision at Sec.  615.5230(b)(5) to Sec.  620.21. We 
further propose, as a technical change, removing the remaining portions 
of Sec.  615.5230(b)(5) regarding the nomination of at least two 
candidates for each director position as it is redundant of Sec.  
611.325.

J. Annual Meeting Information Statement (AMIS)

    We propose renaming subpart E to clarify that an AMIS is used for 
more than an annual meeting. We also propose dividing the existing 
Sec.  620.21 into two sections, one to address preparation and 
distribution of an AMIS and the other to address the contents of an 
AMIS. We propose this change to conform the AMIS to our other reporting 
sections.
1. Preparing and Distributing the AMIS [new Sec.  620.20]
    We propose moving that portion of the existing introductory 
language of Sec.  620.21, discussing distribution of the AMIS to 
shareholders, to new Sec.  620.20 and adding a requirement that the 
AMIS be dated. We believe that without a date of preparation, the value 
of the information in the AMIS is difficult to determine. We also 
propose an outside timeframe of 30 business days for distributing the 
AMIS to shareholders. The existing rule requires an AMIS be provided to 
shareholders at least 10 days before a meeting or election to ensure 
the shareholders' receipt before the meeting. We believe an outside 
timeframe is needed to ensure that the information in the AMIS is 
reasonably current at the time the shareholders' meeting or director 
elections take place. We also propose clarifying that the existing 
requirement to provide the AMIS no later than 10 days before a meeting 
means business days. We further propose referencing in paragraph (b) of 
new Sec.  620.20 the existing signature and filing requirements of 
Sec. Sec.  620.2 and 620.3 for all reports, specifically that the AMIS 
be provided to the Farm Credit Administration and that every AMIS be 
signed and dated. Institutions are required in Sec.  620.3(b) to sign 
all reports, including the AMIS, and we are proposing to reference this 
requirement in Sec.  620.20 to facilitate compliance with our rules. We 
are also proposing to include a requirement that the AMIS be 
electronically filed with the FCA at the time it is issued. On December 
4, 2007, the FCA issued a final rule (72 FR 68060) amending the 
disclosure and reporting regulations for System institutions. As part 
of this rulemaking, Sec.  620.4 now requires that each System 
institution prepare and send to FCA an electronic copy of its annual 
report. This amendment did not address filing requirements for the 
AMIS. We propose including this provision for the AMIS in new Sec.  
620.20 so that the filing requirements are consistent between the 
annual report and the AMIS.
    We further propose adding language to paragraph (a)(3) of new Sec.  
620.20 explaining that an AMIS may be posted on an institution's Web 
site after the AMIS is mailed to shareholders. We propose requiring 
these postings be maintained on the institution's Web site for a 
reasonable amount of time, but at least 30 calendar days, to provide 
shareholders some certainty of time to view the posting. For example, 
if a posted AMIS addresses an upcoming director election, we would 
consider a reasonable amount of time to be the duration of the election 
cycle.
2. Contents of the AMIS [Existing Sec.  620.21]
    We propose reorganizing existing Sec.  620.21 to clarify the 
minimum information that must be included in an AMIS and the additional 
information that must be included in any AMIS issued in connection with 
elections.
a. Minimum Requirements for Each AMIS [Sec.  620.21(a)]
    We propose keeping existing requirements that each AMIS include the 
date, time, and place of the meeting; the number of voting shareholders 
currently in the institution; updates to previously issued financial 
reports; changes or disagreements with external auditors; and the 
current composition and attendance history of the board of directors. 
While we make no changes to the substance of these existing 
requirements, we do propose some clarifications and additional 
requirements.
    We propose incorporating notice of any online meeting space that 
might be used into the date, time, and place of meeting section of the 
AMIS. As explained earlier in the Sec.  620.20 discussion, we propose 
requiring that the AMIS be issued no earlier than 30 business days in 
advance of a meeting or election, but no later than 10 business days in 
advance of the meeting.
    We make no changes to how the AMIS identifies the number of voting 
shareholders, but propose moving the existing language in Sec.  
620.21(d)(3), addressing the number of shareholders voting by region, 
to this paragraph. We propose moving the requirement that each AMIS 
update financial information and report disagreements or changes in 
accountants to new paragraph (a)(3). We

[[Page 17619]]

propose clarifying that the annual report being updated by the AMIS is 
the last annual report of record. This would clarify which annual 
report to reference when an institution holds an annual meeting before 
mailing the current year's annual report to shareholders.
    We propose moving the requirement that institutions record the 
types of agriculture each incumbent director is engaged in from 
existing Sec.  615.5230(b)(5) to paragraph (a)(4) of this section. We 
make the proposed change as part of our effort to consolidate our 
regulations and enhance clarity by keeping subject matters together.
    We are not changing the existing requirement that director 
attendance be reported in the AMIS. However, we offer clarification of 
existing Sec.  620.21(c)(2) on whether an institution is to disclose 
only the number of missed board meetings or the number of missed 
committee meetings in the director meeting attendance disclosure. The 
intention of the rule is to disclose any reduced attendance at meetings 
of official board business and thus the requirement to disclose missed 
meetings covers both board meetings and committee meetings. In 
providing this clarification, we propose no change to the current rule.
b. Additional Information for Elections [New Sec.  620.21(b)]
i. Director-Nominees [New Sec.  620.21(b)(1) and (b)(3)]
    We propose moving to paragraph (b)(1) the existing Sec.  
620.21(d)(2) language on the efforts of the nominating committee to 
find two nominees for each vacant position. We then propose amending 
the provision to require that the names of the director-candidates 
nominated by the nominating committee be listed. This language captures 
the provision of existing Sec.  620.21(d)(1) which, when moved to 
proposed Sec.  611.330, loses the link to the nominating committee.
    We propose moving to paragraph (b)(2) existing language requiring 
an AMIS to include director-nominee disclosures. We propose conforming 
changes to reference proposed Sec.  611.330. As discussed earlier, the 
proposed creation of a new Sec.  611.330, addressing the contents of 
director-nominee disclosures, involves moving those provisions from 
this section. The proposed creation of a separate director-nominee 
disclosure section does not remove the requirement of including those 
disclosures (or a restatement of them) in an election AMIS.
    In another matter, we are aware that some institutions indicate on 
their ballots the director-candidates who are incumbent directors. 
While we are not proposing to amend the AMIS candidate disclosure 
requirement, we urge institutions to observe the principles of fairness 
and equal treatment of all director-candidates in providing disclosure 
information as stated in BL-056. We believe it is not necessary to 
indicate incumbency status on the ballots because all candidates 
provide disclosure statements with r[eacute]sum[eacute]-type 
information and the incumbent's disclosure is likely to indicate past 
service on the institution board.
ii. Floor Nominations [New Sec.  620.21(b)(3)]
    We propose moving, but not changing, the existing requirement that 
institutions state whether floor nominations will be accepted. We are 
proposing that System institutions explain the procedures for making 
floor nominations. As discussed in section IV.E. of this preamble, 
institutions need to explain how voting shareholders can make floor 
nominations to ensure that the process works efficiently and 
effectively.
c. Nominating Committees [New Sec.  620.21(c)]
    We propose adding a requirement in paragraph (c) that the election 
procedures for nominating committee candidates be included in the AMIS 
when nominating committees will be elected in connection with director 
elections. As in the election of directors, the election of members to 
the nominating committee is subject to each stockholder's right to a 
secret ballot under section 4.20 of the Act. We believe each 
institution must inform its voting shareholders of the procedures for 
voting on candidates for the nominating committee and must do so in a 
manner that protects each shareholder's right to a secret ballot.

K. Other Miscellaneous Changes

1. Similar Entity Participation Lending Limit Voting [Sec.  613.3300]
    We propose clarifying Sec.  613.3300(c)(1)(i)(B) to explain that 
the stockholder vote for participation lending limits is based on the 
majority of voting stockholders voting. The existing language does not 
specify how a majority vote is tabulated.
2. Equityholder Voting on Preferred Stock [Sec.  615.5230(b)]
    We propose clarifying Sec.  615.5230(b)(1) to explain that the 
equityholder vote on issuing preferred stock requires the approval of 
the majority of the shares voting of each class of equities adversely 
affected by the preference, voting as a class. The existing language 
does not specify that the majority is of the shares actually voted.
3. Definitions [Existing Sec.  620.1(p) and New Sec.  619.9320]
    We propose moving the definition of ``shareholder'' from part 620 
to our general definition section at part 619. We also propose 
clarifying that the terms ``shareholder'' and ``stockholder'' have the 
same meaning for purposes of our rules. These two terms are currently 
used interchangeably in our rules as well as in the Act.

V. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act (5 
U.S.C. 601 et seq.), FCA hereby certifies that the proposed rule will 
not have a significant economic impact on a substantial number of small 
entities. Each of the banks in the Farm Credit System, considered 
together with its affiliated associations, has assets and annual income 
in excess of the amounts that would qualify them as small entities. 
Therefore, Farm Credit System institutions are not ``small entities'' 
as defined in the Regulatory Flexibility Act.

List of Subjects

12 CFR Part 611

    Agriculture, Banks, banking, Rural areas.

12 CFR Part 613

    Agriculture, Banks, banking, Credit, Rural areas.

12 CFR Part 615

    Accounting, Agriculture, Banks, banking, Government securities, 
Investments, Rural areas.

12 CFR Part 619

    Agriculture, Banks, banking, Rural areas.

12 CFR Part 620

    Accounting, Agriculture, Banks, banking, Reporting and 
recordkeeping requirements, Rural areas.

    For the reasons stated in the preamble, parts 611, 613, 615, 619, 
and 620 of chapter VI, title 12 of the Code of Federal Regulations are 
proposed to be amended as follows:

PART 611--ORGANIZATION

    1. The authority citation for part 611 continues to read as 
follows:


[[Page 17620]]


    Authority: Secs. 1.3, 1.4, 1.13, 2.0, 2.1, 2.10, 2.11, 3.0, 3.2, 
3.21, 4.12, 4.12A, 4.15, 4.20, 4.21, 5.9, 5.10, 5.17, 6.9, 6.26, 
7.0-7.13, 8.5(e) of the Farm Credit Act (12 U.S.C. 2011, 2012, 2021, 
2071, 2072, 2091, 2092, 2121, 2123, 2142, 2183, 2184, 2203, 2208, 
2209, 2243, 2244, 2252, 2278a-9, 2278b-6, 2279a-2279f-1, 2279aa-
5(e)); secs. 411 and 412 of Pub. L. 100-233, 101 Stat. 1568, 1638; 
secs. 409 and 414 of Pub. L. 100-399, 102 Stat. 989, 1003, and 1004.

    2. Add a new subpart A, consisting of Sec. Sec.  611.100 through 
611.120, to read as follows:

Subpart A--General
Sec.
611.100 Definitions.
611.110 Meetings of stockholders.
611.120 Quorums.

Subpart A--General


Sec.  611.100  Definitions.

    The following definitions apply for the purpose of this part:
    (a) Mail ballot means a ballot cast by mail or by electronic means 
after the conclusion of a stockholders' meeting.
    (b) Online meeting means a meeting that is conducted over the 
Internet through the use of mediating technologies, such as online 
services, computer hardware and software, etc., where technology is 
used to generate objects and environments that are presented to users 
through a number of senses (e.g., vision and hearing). The mediating 
technologies allow remote people or objects to appear locally present 
or at least allow them to be treated that way during the course of the 
meeting.
    (c) Online meeting space means an online environment where Farm 
Credit institutions can hold stockholder meetings that allow 
stockholders to communicate, collaborate, and share information. Any 
stockholder with the necessary technology requirements and access 
(e.g., password-protected meetings) must be allowed to connect to his 
or her institution's online meeting space.
    (d) Quorum means the minimum number of voting stockholders of a 
Farm Credit institution that must be present, either in person 
(including through an online medium) or by proxy, at an annual meeting 
or other meeting of stockholders in order for the institution to 
conduct business.
    (e) Regional election means the apportionment of a Farm Credit 
institution's territory into regions in which a director or directors 
from a region are elected only by those voting stockholders who reside 
or conduct agricultural or aquatic operations in that same region.
    (f) Stockholder-association means an association within a Farm 
Credit bank district holding voting stock in that bank.
    (g) Stockholder-elected director means a director who is elected by 
the majority vote of the voting stockholders voting to serve as a 
member of a Farm Credit institution's board of directors.


Sec.  611.110  Meetings of stockholders.

    (a) Requirement. Associations must annually have a meeting of 
stockholders for the purpose of conducting annual director elections. 
Associations must elect at least one director at each annual meeting, 
but the vote on the election of a director or directors may occur in 
the period following an annual meeting if voting is solely by mail 
ballots. Farm Credit banks are encouraged to hold annual or periodic 
meetings of stockholders. Farm Credit banks and associations may use an 
online meeting space in addition to a physical meeting space to conduct 
a stockholders' meeting or director elections. A physical meeting space 
must always exist for meetings involving director elections.
    (b) Notice. Each Farm Credit bank and association must issue an 
Annual Meeting Information Statement in accordance with the 
requirements of Sec. Sec.  620.20 and 620.21 of this chapter to notify 
stockholders of the date, time, and place of annual meetings or 
director elections. If a Farm Credit bank or association uses an online 
meeting space to conduct part of its meeting, the notice must specify 
the date, time, and location of the online meeting as well. The notice 
must be provided at least 10 business days, but no more than 30 
business days, before the meeting.
    (c) Online meeting. Each Farm Credit bank and association using an 
online meeting space as part of a meeting or election must have 
policies and procedures in place addressing how the online meeting 
space will be accessed and used by participants. The policies and 
procedures must specifically identify any technological adaptations 
necessary to address the confidentiality and security in voting 
requirements of Sec.  611.340.
    (d) Attendance. Each institution must encourage stockholder 
attendance at the annual meeting, whether in person or through online 
meeting attendance.


Sec.  611.120  Quorums.

    (a) The bylaws of each Farm Credit bank and association must 
specify the quorum requirements for stockholder meetings.
    (b) After January 1, 2011, mail ballots may not be used to 
establish a quorum. Proxy ballots and attendance at annual meetings or 
sectional sessions thereof, including such meetings held online, may be 
used to establish a quorum.

Subpart C--Election of Directors and Other Voting Procedures

    3. Amend Sec.  611.310 by revising paragraph (b) and adding new 
paragraphs (e) and (f) to read as follows:


Sec.  611.310  Eligibility for membership on bank and association 
boards and subsequent employment.

* * * * *
    (b) No bank or association director shall be eligible to continue 
to serve in that capacity and his or her office shall become vacant if 
after election as a member of the board, he or she becomes legally 
incompetent or is convicted of any criminal offense involving 
dishonesty or breach of trust or held liable in damages for fraud.
* * * * *
    (e) No person shall be eligible for membership on a Farm Credit 
bank or association board of directors in the same election cycle for 
which the Farm Credit institution's nominating committee is identifying 
candidates if that person was elected to serve on that institution's 
nominating committee and attended any meetings called by the nominating 
committee.
    (f) Out-of-territory borrowers who hold voting stock in the 
association may serve as association directors unless prohibited by the 
association's bylaws. Associations must inform, in writing, each out-
of-territory borrower of his or her eligibility status for directorship 
at the time the loan is made.
    4. Amend Sec.  611.320 by:
    a. Removing the word ``System'' and adding the words ``Farm 
Credit'' each place it appears in paragraphs (a) and (d);
    b. Revising paragraphs (c) and (e); and
    c. Adding a new paragraph (f) to read as follows:


Sec.  611.320  Impartiality in the election of directors.

* * * * *
    (c) No property, facilities, or resources, including information 
technology and human or financial resources, of any Farm Credit 
institution shall be used by any candidate for nomination or election 
or by any other person for the benefit of any candidate for nomination 
or election, unless the same property, facilities, or resources are 
simultaneously available and made known to be available for use by all 
declared candidates, including floor nominees. For the limited purpose 
of Farm Credit bank board elections, each stockholder-association of a 
Farm Credit

[[Page 17621]]

bank may, to the extent permitted by the affiliated Farm Credit bank's 
policies and procedures, use its property, facilities, or resources in 
support of bank director-candidates. Each Farm Credit bank permitting 
this activity must establish reasonable standards that stockholder-
associations must follow when using property, facilities, and resources 
for the nomination or election of candidates to the bank board. The 
Farm Credit bank's policies and procedures must give appropriate 
consideration to the various sizes of stockholder-associations within a 
bank's district and include a maximum amount that a stockholder-
association may expend in support of a bank director-candidate.
* * * * *
    (e) No Farm Credit institution may in any way distribute or mail, 
whether at the expense of the institution or another, any campaign 
materials for director-candidates. Institutions may request 
biographical information, as well as the disclosure information 
required under Sec.  611.330, from all declared candidates who certify 
that they are eligible, restate such information in a standard format, 
and distribute or mail it with ballots or proxy ballots.
    (f) No director of a Farm Credit institution shall make any 
statement, either orally or in writing, which may be construed as 
intended to influence any vote in that institution's director 
nominations or elections. This paragraph shall not prohibit director-
candidates from engaging in campaign activities on their own behalf.
    5. Revise Sec.  611.325 to read as follows:


Sec.  611.325  Bank and association nominating committees.

    Each Farm Credit bank and association may have only one nominating 
committee in any one election cycle. Each Farm Credit bank and 
association must establish and maintain policies and procedures on its 
nominating committee, describing the formation, composition, operation, 
resources, and duties of the committee, consistent with current laws 
and regulations. Each nominating committee must conduct itself in the 
impartial manner prescribed by the policies and procedures adopted by 
its institution under Sec.  611.320 and this section.
    (a) Composition. The voting stockholders of each bank and 
association must elect a nominating committee of no fewer than three 
members. Unless prohibited by association bylaws, out-of-territory 
borrowers who are voting stockholders may serve as members of an 
association's nominating committee. Each association must inform, in 
writing, an out-of-territory borrower of his or her eligibility to 
serve on the nominating committee at the time the loan is made.
    (b) Election. Farm Credit banks and associations may use in-person 
(including use of an online medium) or mail balloting procedures to 
elect a nominating committee.
    (1) Farm Credit banks and associations must provide voting 
stockholders the opportunity to vote on each nominee for membership on 
the nominating committee. Farm Credit banks and associations may give 
voting stockholders the option to vote on a slate of nominees for the 
nominating committee as long as the right to vote on individual 
nominees remains.
    (2) Association nominating committee members may only be elected to 
a 1-year term. Farm Credit Banks must use weighted voting, with no 
cumulative voting permitted, when electing members to serve on a 
nominating committee.
    (c) Conflicts of interest. No individual may serve on a nominating 
committee who, at the time of election to, or during service on, a 
nominating committee, is an employee, director, or agent of that bank 
or association. A nominating committee member may not be a candidate 
for election to the board in the same election for which the committee 
is identifying nominees. A nominating committee member may resign from 
the committee to run for election to the board only if the individual 
did not attend any nominating committee meeting.
    (d) Responsibilities. It is the responsibility of each nominating 
committee to identify, evaluate, and nominate candidates for 
stockholder election to a Farm Credit bank or association board of 
directors. A nominating committee's responsibilities are limited to the 
following:
    (1) Nominate individuals whom the committee determines meet the 
eligibility requirements to run for open director positions. The 
committee must endeavor to ensure representation from all areas of the 
Farm Credit bank's or association's territory and, as nearly as 
possible, all types of agriculture practiced within the territory.
    (2) Evaluate the qualifications of the director-candidates. The 
evaluation process must consider whether there are any known obstacles 
preventing a candidate from performing the duties of the position.
    (3) Nominate at least two candidates for each director position 
being voted on by stockholders. If two nominees cannot be identified, 
the nominating committee must provide written explanation to the 
existing board of the efforts to locate candidates or the reasons for 
disqualifying any other candidate that resulted in fewer than two 
nominees.
    (4) Maintain records of its meetings, including a record of 
attendance at meetings.
    (e) Resources. Each Farm Credit bank and association must provide 
its nominating committee reasonable access to administrative resources 
in order for the committee to perform its duties. Each Farm Credit bank 
and association must, at a minimum, provide its nominating committee 
with FCA regulations and guidance on nominating committees, a current 
list of stockholders, the most recent bylaws, the current director 
qualifications policy, and a copy of the policies and procedures that 
the bank or the association has adopted pursuant to Sec.  611.320(a) 
ensuring impartial elections. On the request of the nominating 
committee, the institution must also provide a summary of the current 
board self-evaluation. The bank or association may require a pledge of 
confidentiality by committee members prior to releasing evaluation 
documents.
    6. Add a new Sec.  611.326 to subpart C to read as follows:


Sec.  611.326  Floor nominations for open Farm Credit bank and 
association director positions.

    (a) Each floor nominee must be eligible for the director position 
for which the person has been nominated.
    (b) Voting stockholders of associations must be allowed to make 
floor nominations for every open stockholder-elected director position. 
Associations using only mail ballots must allow nominations from the 
floor at every session of an annual meeting. Associations permitting 
stockholders to cast votes during annual meetings may only allow 
nominations from the floor at the first session of the annual meeting. 
Before every director election by a Farm Credit bank, the bank must 
inform voting stockholders whether floor nominations will be accepted.
    (c) Each association must adopt policies and procedures for making 
and accepting floor nominations of candidates to stand for election to 
the association's board of directors. Farm Credit banks allowing 
nominations from the floor must also adopt policies and procedures for 
making and accepting floor nominations. Policies and procedures for 
floor nominations must, at a minimum, provide that:
    (1) Floor nominations may only be made after the nominating 
committee

[[Page 17622]]

has provided its list of director-nominees.
    (2) No more than a second by a voting stockholder to a nomination 
from the floor is required. After receiving a floor nomination, the 
floor nominee must state if he or she accepts the nomination.
    (3) Floor nominees must make the disclosures required by Sec.  
611.330 of this part.
    7. Revise Sec.  611.330 to read as follows:


Sec.  611.330  Disclosures of Farm Credit bank and association 
director-nominees.

    (a) Each Farm Credit bank and association must adopt policies and 
procedures that ensure a disclosure statement is prepared by each 
director-nominee. At a minimum, each disclosure statement for each 
nominee must:
    (1) State the nominee's name, city and state of residence, business 
address if any, age, and business experience during the last 5 years, 
including each nominee's principal occupation and employment during the 
last 5 years.
    (2) List all business interests on whose board of directors the 
nominee serves or is otherwise employed in a position of authority and 
state the principal business in which the business interest is engaged.
    (3) Identify any family relationship of the nominee that would be 
reportable under part 612 of this chapter if elected to the 
institution's board.
    (b)(1) Floor nominees who are not incumbent directors must provide 
to the Farm Credit bank or association the information referred to in 
this section and in Sec.  620.5(j) and (k) of this chapter. The 
information must be provided in either paper or electronic form within 
the time period prescribed by the institution's bylaws or policies and 
procedures. If the institution does not have a prescribed time period, 
each floor nominee must provide this information to the institution 
within 5 business days of the nomination. If stockholders will not vote 
solely by mail ballot upon conclusion of the meeting, each floor 
nominee must provide the information at the first session at which 
voting is held.
    (2) For each nominee who is not an incumbent director or a nominee 
from the floor, the nominee must provide the information referred to in 
this section and in Sec.  620.5(j) and (k) of this chapter.
    (c) Each Farm Credit bank and association must distribute director-
nominee disclosure information to all stockholders eligible to vote in 
the election. Institutions may either restate such information in a 
standard format or provide complete copies of each nominee's disclosure 
statement.
    (1) Disclosure information for each director-nominee must be 
provided as part of the Annual Meeting Information Statement issued for 
director elections.
    (2) Disclosure information for each director-nominee must be 
distributed or mailed with ballots or proxy ballots. Farm Credit banks 
and associations must ensure that the disclosure information on floor 
nominees is provided to voting stockholders by delivering ballots for 
the election of directors in the same format as the comparable 
information contained in the Annual Meeting Information Statement.
    (d) No person may be a nominee for director who does not make the 
disclosures required by this section.
    8. Add a new Sec.  611.335 to subpart C to read as follows:


Sec.  611.335  Regional voting in director elections.

    (a) Authority. The use of regional voting in director elections 
requires a bylaw provision approved by a majority of voting 
stockholders, voting in person or by proxy. The use of regional voting 
in director elections does not prevent any voting stockholder, 
regardless of the region where he or she resides or conducts 
agricultural or aquatic operations, from voting in any stockholder vote 
to remove a director.
    (b) Region size. When using regional voting in director elections, 
there must be an approximately equal number of voting stockholders in 
each of the voting regions. Regions will have an approximately equal 
number of voting stockholders if the number of voting stockholders in 
any one region does not exceed the number of voting stockholders in any 
other region by more than 25 percent. At least once every 3 years, the 
number of voting stockholders in each region must be counted and, if 
the regions do not have an approximately equal number of voting 
stockholders, the regional boundaries must be adjusted to achieve such 
result. If more than one director represents a region, the equitability 
of regions shall be determined by dividing the number of voting 
stockholders in that region by the number of director positions 
representing that region, and the resulting quotient shall be the 
number that is compared to the number of voting stockholders in other 
regions.
    9. Revise Sec. Sec.  611.340 and 611.350 to read as follows:


Sec.  611.340  Confidentiality and security in voting.

    (a) Each Farm Credit bank and association must adopt policies and 
procedures that:
    (1) Ensure the security of all records and materials related to a 
stockholder vote including, but not limited to, ballots, proxy ballots, 
and other related materials.
    (2) Ensure that ballots and proxy ballots are provided only to 
stockholders who are eligible to vote as of the record date set for the 
stockholder vote.
    (3) Ensure that all information and materials regarding how or 
whether an individual stockholder has voted remain confidential, 
including protecting the information from disclosure to the 
institution's directors, stockholders, or employees, or any other 
person except:
    (i) An independent third party tabulating the vote; or
    (ii) The Farm Credit Administration.
    (4) Provide for the establishment of a tellers committee or 
independent third party who will be responsible for validating ballots 
and proxies and tabulating voting results. A tellers committee may only 
consist of voting stockholders who are not directors, director-
nominees, or members of that election cycle's nominating committee.
    (b) No Farm Credit bank or association may use signed ballots in 
stockholder votes. A bank or association may use balloting procedures, 
such as an identity code on the ballot, that can be used to identify 
how or whether an individual stockholder has voted only if the votes 
are tabulated by an independent third party. In weighted voting, the 
votes must be tabulated by an independent third party. An independent 
third party that tabulates the votes must certify in writing that such 
party will not disclose to any person (including the institution, its 
directors, stockholders, or employees) any information about how or 
whether an individual stockholder has voted, except that the 
information must be disclosed to the Farm Credit Administration if 
requested.
    (c) Once a Farm Credit bank or association receives a ballot, the 
vote of that stockholder is final, except that a stockholder may 
withdraw a proxy ballot before balloting begins at a stockholders' 
meeting. A Farm Credit bank or association may give a stockholder 
voting by proxy an opportunity to give voting discretion to the proxy 
of the stockholder's choice, provided that the proxy is also a 
stockholder eligible to vote.
    (d) Ballots and proxy ballots must be safeguarded before the time 
of

[[Page 17623]]

distribution or mailing to voting stockholders and after the time of 
receipt by the bank or association until disposal. When stockholder 
meetings are held for the purpose of conducting elections or other 
votes, only proxy ballots may be accepted prior to any or all sessions 
of the stockholders' meeting. In an election of directors, ballots, 
proxy ballots and election records must be retained at least until the 
end of the term of office of the director. In other stockholder votes, 
ballots, proxy ballots, and records must be retained for at least 3 
years after the vote.
    (e) An institution and its officers, directors, and employees may 
not make any public announcement of the results of a stockholder vote 
before the tellers committee or independent third party has validated 
the results of the vote.


Sec.  611.350  Application of cooperative principles to the election of 
directors.

    In the election of directors, each Farm Credit institution shall 
comply with the following cooperative principles as well as those set 
forth in Sec.  615.5230 of this chapter, unless otherwise required by 
statute or regulation.
    (a) Each voting stockholder of an association or bank for 
cooperatives has only one vote, regardless of the number of shares 
owned or the number of loans outstanding. Each voting stockholder-
association of a Farm Credit Bank has only one vote that is assigned a 
weight proportional to the number of that association's voting 
stockholders. Each voting stockholder of an agricultural credit bank 
has only one vote, unless otherwise approved by the Farm Credit 
Administration.
    (b) Each voting stockholder must be accorded the right to vote in 
the election of each stockholder-elected director, unless regional 
voting in director elections is provided for in the institution's 
bylaws. When electing directors by regions, pursuant to Sec.  611.335, 
each voting stockholder must be accorded the right to vote in the 
election of each stockholder-elected director for their region.
    (c) If the association apportions its territory into geographic 
regions for director nomination or election purposes, out-of-territory 
voting stockholders must be assigned to a geographic region.
    (d) Each voting stockholder of a Farm Credit institution must be 
allowed to cumulate votes and distribute them among the director-
nominees at the stockholder's discretion unless otherwise provided in 
the bylaws or in the case of regional voting in director elections. 
Cumulative voting is not allowed in the regional voting of directors. A 
Farm Credit Bank may eliminate cumulative voting if 75 percent of the 
associations that are voting stockholders of the Farm Credit Bank vote 
in favor of elimination. In a vote to eliminate cumulative voting, each 
association shall be accorded one vote that is not a weighted vote.
    (e) All voting stockholders of a Farm Credit institution have the 
right to vote in any stockholder vote to remove any director.

Subpart P--Termination of System Institution Status

    10. Revise Sec.  611.1240(e) to read as follows:


Sec.  611.1240  Voting record date and stockholder approval.

* * * * *
    (e) Voting procedures. The voting procedures must comply with Sec.  
611.340. You must have an independent third party count the ballots. If 
a voting stockholder notifies you of the stockholder's intent to 
exercise dissenters' rights, the tabulator must be able to verify to 
you that the stockholder voted against the termination. Otherwise, the 
votes of stockholders must remain confidential.
* * * * *

PART 613--ELIGIBILITY AND SCOPE OF FINANCING

    11. The authority citation for part 613 continues to read as 
follows:

    Authority: Secs. 1.5, 1.7, 1.9, 1.10, 1.11, 2.2, 2.4, 2.12, 3.1, 
3.7, 3.8, 3.22, 4.18A, 4.25, 4.26, 4.27, 5.9, 5.17 of the Farm 
Credit Act (12 U.S.C. 2013, 2015, 2017, 2018, 2019, 2073, 2075, 
2093, 2122, 2128, 2129, 2143, 2206a, 2211, 2212, 2213, 2243, 2252).

Subpart C--Similar Entity Authority Under Sections 3.1(11)(B) and 
4.18A of the Act


Sec.  613.3300  [Amended]

    12. Amend Sec.  613.3300(c)(1)(i)(B) by removing the words ``if a 
majority of the shareholders'' and adding in their place the words ``if 
a majority of voting stockholders voting''.

PART 615--FUNDING AND FISCAL AFFAIRS, LOAN POLICIES AND OPERATIONS, 
AND FUNDING OPERATIONS

    13. The authority citation for part 615 continues to read as 
follows:

    Authority:  Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 2.2, 2.3, 2.4, 
2.5, 2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 4.3A, 4.9, 4.14B, 4.25, 5.9, 
5.17, 6.20, 6.26, 8.0, 8.3, 8.4, 8.6, 8.7, 8.8, 8.10, 8.12 of the 
Farm Credit Act (12 U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 2074, 
2075, 2076, 2093, 2122, 2128, 2132, 2146, 2154, 2154a, 2160, 2202b, 
2211, 2243, 2252, 2278b, 2278b-6, 2279aa, 2279aa-3, 2279aa-4, 
2279aa-6, 2279aa-7, 2279aa-8, 2279aa-10, 2279aa-12); sec. 301(a) of 
Pub. L. 100-233, 101 Stat. 1568, 1608.

Subpart I--Issuance of Equities

    14. Amend Sec.  615.5230 by revising paragraphs (a) and (b)(1) and 
by removing paragraph (b)(5) to read as follows:


Sec.  615.5230  Implementation of cooperative principles.

    (a) Voting stockholders of Farm Credit banks and associations shall 
be accorded full voting rights in accordance with cooperative 
principles. Except as otherwise required by statute or regulation and 
except as modified by paragraph (b) of this section, the voting rights 
of each voting stockholder are as follows:
    (1) Each voting stockholder of an association or bank for 
cooperatives has only one vote, regardless of the number of shares 
owned or the number of loans outstanding.
    (2) Each voting stockholder-association of a Farm Credit Bank has 
only one vote that is assigned a weight proportional to the number of 
that association's voting stockholders.
    (3) Each voting stockholder of an agricultural credit bank has only 
one vote unless otherwise approved by the Farm Credit Administration.
    (b) * * *
    (1) Each issuance of preferred stock (other than preferred stock 
outstanding on October 5, 1988, and stock into which such outstanding 
stock is converted that has substantially similar preferences) shall be 
approved by a majority of the shares voting of each class of equities 
adversely affected by the preference, voting as a class, whether or not 
such classes are otherwise authorized to vote;
* * * * *

PART 619--DEFINITIONS

    15. The authority citation for part 619 is revised to read as 
follows:

    Authority:  Secs. 1.4, 1.7, 2.1, 2.4, 2.11, 3.2, 3.21, 4.9, 5.9, 
5.17, 5.18, 5.19, 7.0, 7.1, 7.6, 7.8 and 7.12 of the Farm Credit Act 
(12 U.S.C. 2012, 2015, 2072, 2075, 2092, 2123, 2142, 2160, 2243, 
2252, 2253, 2254, 2279a, 2279a-1, 2279b, 2279c-1, 2279f).

    16. Add new Sec.  619.9320 to read as follows:


Sec.  619.9320  Shareholder or stockholder.

    A holder of any equity interest in a Farm Credit institution.

[[Page 17624]]

PART 620--DISCLOSURE TO SHAREHOLDERS

    17. The authority citation for part 620 continues to read as 
follows:

    Authority:  Secs. 4.19, 5.9, 5.17, 5.19, 8.11 of the Farm Credit 
Act (12 U.S.C. 2207, 2243, 2252, 2254, 2279aa-11); sec. 424 of Pub. 
L. 100-233, 101 Stat. 1568, 1656.

Subpart A--General


Sec.  620.1  [Amended]

    18. Amend Sec.  620.1 by removing paragraph (p) and redesignating 
paragraphs (q) and (r) as paragraphs (p) and (q).

Subpart E--Annual Meeting Information Statements and Other 
Information To Be Furnished in Connection With Annual Meetings and 
Director Elections

    19. Revise the heading of subpart E to read as set forth above.
    20. Amend subpart E by adding a new Sec.  620.20 to read as 
follows:


Sec.  620.20  Preparing and distributing the information statement.

    (a)(1) Each Farm Credit bank and association must prepare and 
provide an information statement (``statement'' or ``AMIS'') to its 
shareholders at least 10 business days, but no more than 30 business 
days, before any annual meeting or any director elections.
    (2) Each Farm Credit bank and association must provide to the Farm 
Credit Administration an electronic copy of the AMIS when issued.
    (3) In addition to the mailed AMIS, each Farm Credit bank and 
association may post its AMIS on its Web site. Any AMIS posted on an 
institution's Web site must remain on the Web site for a reasonable 
period of time, but not less than 30 calendar days.
    (b) Every AMIS must be dated and signed in accordance with the 
requirements of Sec.  620.3(b) of this part.
    (c) Every AMIS must be available for public inspection at all 
offices of the issuing institution pursuant to Sec.  620.2(b) of this 
part.
    21. Amend Sec.  620.21 by revising the heading, removing the 
introductory text, and revising paragraphs (a) through (d) to read as 
follows:


Sec.  620.21  Contents of the information statement.

    (a) An AMIS must, at a minimum, address the following items:
    (1) Date, time, and place of the meeting(s). Notice of the date, 
time, and meeting location(s) must be provided at least 10 business 
days, but no more than 30 business days, before the meeting. If the 
Farm Credit bank or association will use an online meeting space as 
part of its meeting, the notice must also specify the date, time, and 
means of accessing the online meeting space.
    (2) Voting shareholders. For each class of stock entitled to vote 
at the meeting, state the number of shareholders entitled to vote and, 
when shareholders are asked to vote on preferred stock, the number of 
shares entitled to vote. State the record date as of which the 
shareholders entitled to vote will be determined and the voting 
requirements for each matter to be voted upon. If directors are 
nominated or elected by region, describe the regions and state the 
number of voting shareholders entitled to vote in each region.
    (3) Financial updates. Each AMIS must reference the most recently 
issued annual report required by subpart B of this part. The AMIS must 
also include such other information considered material and necessary 
to make the required contents of the AMIS, in light of the 
circumstances under which it is made, not misleading.
    (i) If any transactions between the institution and its senior 
officers and directors of the type required to be disclosed in the 
annual report to shareholders under Sec.  620.5(j), or any of the 
events required to be disclosed in the annual report to shareholders 
under Sec.  620.5(k) have occurred since the end of the last fiscal 
year and were not disclosed in the annual report to shareholders, the 
disclosures required by Sec.  620.5(j) and (k) shall be made with 
respect to such transactions or events in the information statement. If 
any material change in the matters disclosed in the annual report to 
shareholders pursuant to Sec.  620.5(j) and (k) has occurred since the 
annual report to shareholders was prepared, disclosure shall be made of 
such change in the information statement.
    (ii) If the Farm Credit institution has had a change or changes in 
accountants since the last annual report to shareholders, or if a 
disagreement with an accountant has occurred, the institution shall 
disclose the information required by Sec.  621.4(c) and (d) of this 
chapter.
    (4) Directors. State the names and ages of persons currently 
serving as directors of the institution, their terms of office, and the 
periods during which such persons have served. Institutions must also 
state the type or types of agriculture or aquaculture engaged in by 
each director. No information need be given with respect to any 
director whose term of office as a director will not continue after the 
meeting to which the statement relates.
    (i) Identify by name any incumbent director who attended fewer than 
75 percent of the board meetings or any meetings of board committees on 
which he or she served during the last fiscal year.
    (ii) If any director resigned or declined to stand for re-election 
since the last annual meeting because of a policy disagreement with the 
board, and if the director has provided a notice requesting disclosure 
of the nature of the disagreement, state the date of the director's 
resignation and summarize the director's description of the 
disagreement. If the institution holds a different view of the 
disagreement, the institution's view may be summarized.
    (b) An AMIS issued for director elections must also include the 
information required by this paragraph.
    (1) Provide the nominating committee's slate of director-nominees. 
If fewer than two director-nominees for each position are named, 
describe the efforts of the nominating committee to locate two willing 
nominees.
    (2) Provide, as part of the AMIS, each director-nominee's 
disclosure information collected under Sec.  611.330 of this chapter. 
Institutions may either restate such information in a standard format 
or provide complete copies of each nominee's disclosure statement.
    (3) State whether nominations will be accepted from the floor and 
explain the procedures for making floor nominations.
    (c) When the nominating committee will be elected during director 
elections, notice to voting shareholders of this event must be included 
in the AMIS. The AMIS must describe the balloting procedures that will 
be used to elect the nominating committee, including whether floor 
nominations for committee members will be permitted. The AMIS must 
state the number of committee positions to be filled and the names of 
the nominees for the committee.
    (d) If shareholders are asked to vote on matters not normally 
required to be submitted to shareholders for approval, the AMIS must 
describe fully the material circumstances surrounding the matter, the 
reason shareholders are asked to vote, and the vote required for 
approval of the proposition. The AMIS must describe any other matter 
that will be discussed at the meeting upon which shareholder vote is 
not required.
* * * * *

    Dated: April 10, 2009.
Roland E. Smith,
Secretary, Farm Credit Administration Board.
[FR Doc. E9-8750 Filed 4-15-09; 8:45 am]
BILLING CODE 6705-01-P


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