[Federal Register Volume 80, Number 12 (Tuesday, January 20, 2015)]
[Proposed Rules]
[Pages 2614-2624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00676]


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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. 80, No. 12 / Tuesday, January 20, 2015 / 
Proposed Rules

[[Page 2614]]



FARM CREDIT ADMINISTRATION

12 CFR Part 611

RIN 3052-AC72


Organization; Mergers, Consolidations, and Charter Amendments of 
Banks or Associations

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

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SUMMARY: The Farm Credit Administration (FCA, Agency, we, or our) 
proposes to amend existing regulations related to mergers and 
consolidations of Farm Credit System (System) banks and associations to 
clarify the merger review and approval process and incorporate existing 
practices in the regulations. The proposed rule would identify when the 
statutory 60-day review period begins, require that only independent 
tabulators be authorized to validate ballots and tabulate stockholder 
votes on mergers or consolidations, require institutions to hold 
informational meetings on proposed mergers or consolidations if 
circumstances warrant, explain the reconsideration petition process and 
specify the voting record date list to be provided to stockholders who 
wish to file a reconsideration petition. The proposed rule would update 
cross-references in the existing regulations, incorporate cross 
references to stockholder voting rules contained elsewhere in part 611, 
and clarify or update terminology to enhance transparency.

DATES: You may send comments on or before April 20, 2015.

ADDRESSES: We offer a variety of methods for you to submit your 
comments. For accuracy and efficiency reasons, commenters are 
encouraged to submit comments by email or through the FCA's Web site. 
As facsimiles (fax) are difficult for us to process and achieve 
compliance with section 508 of the Rehabilitation Act, we do not accept 
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> Email: Send us an email at <a href="/cdn-cgi/l/email-protection#ff8d9a98d29c909292bf999c9ed1989089"><span class="__cf_email__" data-cfemail="80f2e5e7ade3efededc0e6e3e1aee7eff6">[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: Barry F. Mardock, 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 email addresses to help reduce Internet spam.

FOR FURTHER INFORMATION CONTACT:  Shirley Hixson, Policy Analyst, 
Office of Regulatory Policy, Farm Credit Administration, McLean, VA 
22102-5090, (703) 883-4318, TTY (703) 883-4056, or Laura McFarland, 
Senior Counsel, Office of General Counsel, Farm Credit Administration, 
McLean, VA 22102-5090, (703) 883-4020, TTY (703) 883-4056.

SUPPLEMENTARY INFORMATION: 

I. Objectives

    The objectives of the proposed rule are to:
    <bullet> Enhance the efficiency and effectiveness of the 
reconsideration petition process for the stockholder and provide 
clarity to System banks and associations on how they must provide a 
stockholder list to a stockholder when requested for the purpose of 
filing a petition;
    <bullet> Improve security and confidentiality over the voting 
process on mergers and consolidations through the use of independent 
third-party tabulators;
    <bullet> Clarify the FCA's review and approval process related to 
proposed plans of mergers or consolidation in order to facilitate an 
efficient and timely response; and
    <bullet> Enhance existing regulations by updating terminology and 
making other grammatical changes.

II. Background

    The FCA issued subparts F and G of part 611 to address the 
procedures and stockholder disclosure requirements for Farm Credit 
banks and associations proposed plans of merger or consolidation 
(collectively, merger(s)), and charter amendments.\1\ We propose to 
amend our merger and charter amendment regulations to respond to 
inquiries from System banks, associations, their stockholders, and 
third parties regarding the process for submitting proposed plans of 
merger and proposed charter amendments to the FCA for review and the 
related stockholder reconsideration petition process on a stockholder 
vote in favor of a merger. This proposed rule would enhance existing 
merger provisions and clarify our review process. Also, this proposed 
rule would clarify the various ways stockholders may file a 
reconsideration petition with the FCA, explaining who they would 
address the petition to and when we would consider the petition to be 
filed with the FCA.
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    \1\ See 53 FR 50381 (Dec. 15, 1988).
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III. Section-by-Section Analysis

A. Terminology and Other Grammatical Changes [Existing Subparts F and 
G]

    The FCA is committed to using plain language in its rulemaking to 
facilitate understanding and compliance with requirements that we 
administer or enforce. Therefore, we propose updating certain 
terminology and making grammatical changes in subparts F and G to make 
our regulations more clear, concise, and well organized.
1. Terminology Updates [Existing Subparts F and G]
    To be consistent and avoid confusion in how we use certain terms in 
our regulations, we propose replacing the varied references to 
``funding bank'', ``supervisory bank'', and ``district bank'' with 
``funding bank'' where used in subparts F and G. Existing regulations 
in these subparts currently use the terms

[[Page 2615]]

interchangeably. All three terms refer to the same relationship between 
Farm Credit banks and their affiliated associations. As such, there is 
no distinguishable purpose for using one term over the other so we 
believe using a single term will facilitate clear and concise 
regulations.
    We propose adding ``agricultural credit associations'' to the list 
of institutions subject to the merger provisions in existing Sec.  
611.1120(c). This change would update our rules to recognize that 
System associations may be organized and chartered as agricultural 
credit associations and operate as cooperatives within the System. 
Similarly, we propose identifying service corporations in existing 
Sec. Sec.  611.1000(c) and 611.1120(c) to recognize their potential 
existence in merging associations and banks. Also, we propose replacing 
the term ``bank'' in subparts F and G with ``Farm Credit bank'' to 
reconcile the term's usage with the definition in Sec.  619.9140.\2\ We 
further propose updating Sec.  611.1010(d) to incorporate the part 611 
term ``stockholder-association.'' Using this term should help in making 
the appropriate distinctions among those stockholders voting on bank 
charter amendments.
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    \2\ Farm Credit bank as defined in Sec.  619.9140 means Farm 
Credit Banks, agricultural credit banks, and banks for cooperatives.
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    We also propose updating Sec.  611.1010(d) on Farm Credit bank 
charter amendment votes to recognize different voting structures among 
Farm Credit banks. The proposal is to add language to the existing rule 
on bank charter amendments to recognize that agricultural credit banks 
have different voting procedures from Farm Credit banks.
2. Grammatical Changes [Existing Subparts F and G]
    We propose adding the term ``association'' to the section headings 
for Sec. Sec.  611.1121, 611.1122, and 611.1123 for clarity. We also 
propose substituting the phrase ``Farm Credit institution'' for ``bank 
or association'' when discussing prohibited conduct in Sec.  611.1122, 
to cover all chartered institutions, as well as implement the 
terminology used in Sec.  619.9146.
    We propose general language changes to subparts F and G to enhance 
readability. The proposed language changes include:
    <bullet> Replacing the word ``shall'' throughout subparts F and G 
with ``must'', ``will'', ``does'', ``may'', or ``is'', as appropriate 
and consistent with the manner in which ``shall'' is currently used. 
The word ``shall'' would remain in Sec. Sec.  611.1122(c)(1) and 
611.1124(f)(1).
    <bullet> Removing the introductory language of existing Sec. Sec.  
611.1121 and 611.1122 due to redundancy and the definitions for 
``consolidation'' and ``merger'' in Sec.  611.1122, which are already 
addressed in existing Sec. Sec.  619.9110 and 619.9210.
    <bullet> Revising Sec.  611.1121(d) to combine the existing two 
sentences into one cohesive sentence explaining that charter amendment 
approvals will include the amended charter.
    <bullet> Bifurcating the two provisions in existing Sec.  
611.1122(a)(7) into two distinct paragraphs (a)(7) and (8). The 
proposed rule would amend Sec.  611.1122(a)(7) to include the existing 
provision that the requesting associations may include any additional 
information or documents that they wish to submit in support of their 
request to merge. New Sec.  611.1122(a)(8) would include the other 
existing provision that the funding bank or the FCA may request 
additional information.
    <bullet> Adding the word ``granted'' in the last sentence of new 
Sec.  611.1122(c)(2) to clarify that merger approvals are granted 
according to our rules.
    <bullet> Adding the word ``stockholder'' in revised Sec.  
611.1122(d) and (e) to clarify that the meetings discussed in these 
paragraphs are stockholder meetings.
    <bullet> Adding the phrase ``in person'' to Sec.  611.1122(d) to 
clarify and ensure that stockholder voting on a proposed plan of merger 
is permitted only by voting in person or by proxy. We propose the 
change in response to inquiries we received on whether or not mail 
balloting was permitted under existing regulations. The Farm Credit Act 
of 1971, as amended, (Act) limits stockholder voting methods on 
proposed plans of mergers to in-person voting and voting by proxy 
ballots.\3\ Voting by mail ballots on mergers is not permitted.
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    \3\ Sections 7.0(3), 7.8(a)(3), 7.12(a)(3), 7.13(a)(3) of the 
Act.
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    <bullet> Adding the reference of ``constituent associations'' to 
existing Sec.  611.1123(b) to clarify that all associations subject to 
the proposed plan of merger are required to discuss the proposed 
changes to their respective bylaws that will result from the proposed 
merger.
    As with the other grammatical changes, we intend no change in the 
meaning of the affected regulatory provisions.

B. Definitions [Existing Sec.  611.100]

    We propose adding three new definitions to Sec.  611.100 that would 
apply to all of part 611, unless otherwise stated in the regulations. 
First, we propose adding as new paragraph (b) the term ``FCA'' in order 
to allow for the use of the ``FCA'' acronym throughout part 611 instead 
of the full agency name. We then propose the conforming change of 
replacing ``Farm Credit Administration'' with ``FCA'' in subparts F and 
G where used. The use of the acronym would enhance readability of the 
regulation.
    Next, we propose adding as new paragraph (i) a definition of 
``voting record date'' or ``record date.'' Several regulatory 
provisions in part 611 reference a voting record date but do not define 
the term. We propose defining ``voting record date'' as the date set by 
each institution before a voting event on which a stockholder must own 
voting stock in order to vote at the event. We recognize there is a 
practical need for System institutions to identify eligible voting 
stockholders as of the voting record date set for each stockholder 
voting event and believe the term must be used consistently throughout 
the System. We would expect System institutions set a voting record 
date that is not too far removed from the voting event. Due to changes 
in the make-up of the stockholder base that may occur between the 
voting record date and the date the vote is held, the stockholders 
permitted to vote on the event may not fully reflect the stockholders 
that will be affected by the long-term results of the voting action if 
the voting record date is too far removed from the voting event.
    Lastly, we propose adding as new Sec.  611.100(j) the term ``voting 
record date list'' or ``record date list.'' The proposed rule would 
define a ``voting record date list'' as a list of the names and 
addresses of borrowers holding voting stock as of the voting record 
date and who are eligible to cast a vote for a particular event (e.g., 
a proposed plan of merger or director elections). As proposed, the list 
would be different from the stockholder list requirements in Sec.  
618.8310. The list in new Sec.  611.100(j) would only include voting 
stockholders, not all stockholders as provided for in Sec.  618.8310, 
and would identify the person designated to cast the vote. In 
situations where the voting stock is owned by more than one person or 
owned by an entity, the list would name the individual designated to 
cast the vote. Each institution would be expected to update its voting 
record date list of stockholders, including the names of individuals 
designated to vote on behalf of multiple obligors or for a

[[Page 2616]]

legal entity that is a voting stockholder, each time a voting record 
date is set. We believe defining this list will facilitate the orderly 
and accurate distribution of ballots and help ensure proper validation 
of ballots and tabulation of votes for each voting event.

C. Mergers and Consolidations [Subparts F and G]

1. Prohibited Activities [Existing Sec. Sec.  611.1020(c) and 
611.1122(f) and (h); New Sec.  611.1122(i)]
    We propose relocating in new Sec.  611.1122(i) the existing 
provisions on prohibited acts in connection with a merger or 
consolidation, currently located in existing Sec. Sec.  611.1020(c) and 
611.1122(f) and (h). This is intended to improve the readability of our 
rule and ensure institutions are fully aware of the requirement that 
stockholders be provided with information that is complete, accurate 
and not misleading. Also, the differences in the existing provisions 
would be reconciled. Additionally, we propose adding ``agents'' and 
other parties participating in the affairs of the institution to the 
existing list of those covered by the prohibitions. Adding these 
persons is intended to provide consistency with similar prohibitions 
elsewhere in our rules and reduce the potential for using third-parties 
agents to circumvent the prohibitions. We also propose the conforming 
change of adding ``agents'' and other parties participating in the 
affairs of the institution to the list of those covered by prohibited 
conduct under our regulations on territorial adjustments at existing 
Sec.  611.1124(g) and (i).
    The proposed rule would also clarify the FCA's existing authority 
to require that Farm Credit banks and associations issue a corrected 
stockholder disclosure document to replace the document originally 
issued in connection with a stockholder vote on a proposed merger. The 
proposed clarification would add language to existing Sec. Sec.  
611.1020(c) and 611.1122(h) explaining our authority to require 
reissuance of the document if we determine that the stockholder 
disclosure document is inaccurate, incomplete, or misleading. Complete 
and accurate information is necessary to stockholders' understanding of 
the action on which they will vote and is critical to their making an 
informed decision. We also propose a conforming change to our 
regulations on territorial adjustments to add a new Sec.  611.1124(j) 
containing the same language.
2. Farm Credit Bank Mergers and Consolidations [Existing Sec.  
611.1020]
    We propose updating Sec.  611.1020 to clarify that proposed bank 
mergers are generally subject to the same merger requirements as 
associations. Existing Sec.  611.1020(b) references certain association 
merger provisions related to document submission that Farm Credit banks 
must follow. We propose updating Sec.  611.1020(b) to clarify that Farm 
Credit banks seeking to merge must follow requirements for association 
mergers, including the FCA review process, stockholder voting, and 
reconsideration petition requirements. However, given that bank mergers 
may result in processing considerations that differ from associations, 
we also propose adding an exemption to Sec.  611.1020(b) that would 
relieve banks from complying with association merger provisions, if 
determined appropriate by the FCA.
    As a conforming change, we propose removing Sec.  611.1020(d). The 
provisions in this paragraph are contained in the association merger 
rules at Sec.  611.1122 and would be incorporated by reference under 
the above proposed change to Sec.  611.1020(b).
3. Association Mergers [Existing Sec.  611.1122]
a. Reorganization
    We propose rearranging existing provisions within Sec.  611.1122 to 
consolidate like provisions and to improve transparency of 
requirements. The organizational changes we propose are:
    <bullet> Incorporating paragraph (i) on the timing of the notice 
and accompanying information of stockholder meetings into paragraph 
(e), which addresses the content of notices. We also propose a 
conforming change to paragraph (i) by removing the reference to 
paragraph (e).
    <bullet> Moving and redesignating paragraph (j) on the mergers of 
more than two institutions as new paragraph (f). The proposed change 
would place the exemptions to the requirements of paragraph (e) 
immediately after paragraph (e).
    <bullet> Bifurcating paragraph (g) into two paragraphs--one 
addressing effective dates and the other addressing notice of 
stockholder votes on a proposed merger. Specifically, we propose 
keeping those parts of paragraph (g) that address effective dates as 
part of new paragraph (g) and moving the provision in paragraph (g) 
requiring notice of the stockholder vote into new paragraph (h).
    <bullet> Moving and redesignating paragraph (k) on the effective 
date of mergers to new paragraphs (g)(1) and (2). As proposed, the new 
paragraph (g)(1) would contain the existing provisions on effective 
dates when reconsideration petitions are filed and the new paragraph 
(g)(2) would contain the existing provision on effective dates when no 
reconsideration petition is filed.
b. FCA Review [Existing Sec.  611.1122(c) and (g); New Sec.  
611.1122(c) and (h)]
    The proposed rule would clarify the FCA review process. We believe 
the proposed changes will aid institutions in managing expectations, 
setting merger effective dates, and scheduling the stockholder vote on 
a merger proposal. As proposed, new Sec.  611.1122(c) and (h) would:
    <bullet> Break existing Sec.  611.1122(c) into paragraphs for ease 
of use;
    <bullet> Specify the need for a complete application before the 
commencement of the statutory 60-day review period; \4\
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    \4\ See 12 U.S.C. 2279e(a)(2).
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    <bullet> Require the FCA to notify the requesting associations when 
the statutory 60-day review period begins;
    <bullet> Restate the existing authority of FCA to require 
additional information to supplement an application; and
    <bullet> Reiterate the existing authority under sections 5.17(a) 
and 5.25(a) of the Act regarding the FCA's authority to impose in 
writing and enforce conditions of approval.
    The statutory review process performed by the FCA is a serious 
undertaking during which we seek to determine the potential impact of 
the merger on the safety and soundness of the constituent institutions 
and their stockholders, as well as the System as a whole. In order to 
conduct a thoughtful and comprehensive review, it is imperative that we 
be provided all the necessary documentation and information to begin 
our review. The FCA evaluates the initial merger submissions to 
determine if they are complete, recognizing that each proposed merger 
may have unique facts and circumstances. Under this practice, if 
additional information is required, we would explain to the 
associations that until the information is received, the statutory 60-
day review period will not begin. This is to ensure our review gives 
full consideration of the relevant and unique facts and circumstances 
applicable to each proposed merger, such as size, complexity, 
geographic territory, and other relevant factors necessary to 
considering whether or not to approve or deny the request to merge. The 
proposed rule would incorporate this practice into our regulations to 
enhance the understanding of the FCA's

[[Page 2617]]

review and approval process related to proposed plans of merger.
    We propose conforming changes to our regulations on territorial 
adjustments in Sec.  611.1124(d) to add language on supplemental 
information and conditions of approval.
c. Stockholder Meetings and Votes [Existing Sec.  611.1122(d)]
    We propose changes to the requirements regarding stockholder votes 
on proposed plans of merger. The proposed rule would separate the 
existing provisions of Sec.  611.1122(d) into paragraphs (d)(1) through 
(d)(3) for ease of use and clarity. As proposed, new paragraph (d)(1) 
would contain the existing requirement that the constituent 
associations to a proposed plan of merger call a meeting on written 
notice to each of its voting stockholders entitled to vote on the 
proposed plan of merger. New paragraph (d)(3) would contain the 
existing requirement that the voting be in person or by proxy.
    Proposed new paragraph (d)(2) would clarify that merger voting 
procedures must follow the existing confidentiality and security in 
voting procedures contained in Sec.  611.340. This change is made to 
clearly state that the confidentiality and security in voting 
requirements of Sec.  611.340 are applicable to stockholder votes on 
proposed mergers. Based on the inquiries we received from System banks 
and associations, we consider it appropriate to clarify in Sec.  
611.1122(d) that an institution's policies and procedures for a 
stockholder vote on a proposed merger must comply with existing 
confidentiality and security in voting rules at Sec.  611.340.
    We propose that only an independent third party be authorized to 
validate ballots and tabulate stockholder votes on a merger or 
consolidation. Existing regulations at Sec.  611.340 provide that 
System banks and associations may use either an independent third party 
or a tellers committee (which consists of voting stockholders) to 
validate ballots and tabulate voting results. The use of an independent 
third party for mergers would provide added security and 
confidentiality over the voting process on an issue that is not 
routinely presented to stockholders for a vote and that may have long-
lasting effects on stockholders. Also, we believe that due to the time 
constraints imposed on certain phases of the merger process, using an 
independent third party to validate ballots and tabulate votes will 
facilitate the process and allow voting stockholders to focus solely on 
the merger vote itself. We propose a conforming change in new Sec.  
611.1122(h) to recognize the proposed rule limiting the responsibility 
for validating ballots and proxies and tabulating voting results on 
proposed mergers to only independent third parties.
    We also propose adding language to Sec.  611.1122(d) to clarify 
that FCA may require that the constituent banks or associations hold 
informational meetings with their respective stockholders prior to 
putting the proposed plan of merger to a vote. Depending on the 
complexity, geography, specific facts and circumstances, or stockholder 
inquiry relevant to a proposed plan of merger, we believe there may be 
instances where a question and answer forum would benefit stockholder 
understanding of the transaction and its consequences to them, and 
contribute to a more informed stockholder decision. In those instances, 
we believe stockholders would benefit from an open discussion with the 
board of directors and management of the constituent institutions where 
all views may be expressed and heard by all interested parties. We 
believe holding informational meetings with stockholders prior to the 
meeting held for the merger vote would enhance communication and 
stockholder understanding of an action that will have long-term effects 
for the stockholders.
4. Stockholder Reconsiderations [Existing Sec.  611.1123(c); New Sec.  
611.1126]
    Bank and association voting stockholders have the right to 
reconsider the approval of a merger by filing a reconsideration 
petition with the FCA, provided that certain provisions of our 
regulations are met. In order to make it easier to review those 
provisions, we propose moving them from Sec.  611.1123(c), which sets 
forth our requirements on merger agreements, to new Sec.  611.1126. 
Also, we propose clarifying that only voting stockholders have the 
right to file a reconsideration petition.
    We also propose the following changes to the reconsideration 
petition regulations:
a. List of Stockholders [New Sec.  611.1126(b)]
    We propose adding a new provision to address the process by which 
stockholders wishing to file a petition obtain a list of stockholders 
from their bank or association. Stockholders have a statutory right to 
obtain a list of stockholders in their institution.\5\ Existing Sec.  
618.8310 addresses the process by which stockholders may request a list 
of stockholders' names, addresses, and classes of stock held by the 
stockholder, and the prohibitions on the use of the list. We propose 
language in new Sec.  611.1126(b) to clarify that the process set forth 
in Sec.  618.8310, with one change, applies to requests for a list of 
stockholders when the purpose is to seek signatures on a petition for 
reconsideration of a merger. The proposed difference from the Sec.  
618.8310 provisions is that the stockholder list provided to a 
stockholder wishing to file a reconsideration petition be the voting 
record date list developed for the stockholder vote on the proposed 
plan of merger. This change enables the stockholder filing the petition 
to have the names of only those stockholders who would be eligible to 
sign the reconsideration petition. The list provided to the stockholder 
under Sec.  618.8310 includes all stockholders of the bank or 
association, both voting and nonvoting. Absent the proposed provision, 
any stockholder wishing to file a reconsideration petition would have 
the added step of culling the ineligible stockholders from the list 
before proceeding with any further actions to timely filing the 
petition. The Act provides a very limited amount of time for filing a 
reconsideration petition and we believe giving stockholders a list of 
nonvoting, as well as voting, stockholders would be an unnecessary 
burden and one unintended by Congress. Also, we believe using the 
merger voting record date list will ease the burden on the bank or 
association, since the list will already exist and be up-to-date. As 
the reconsideration petition process has a very short timeframe, we 
believe these changes will aid all parties in coordinating their 
efforts and help ensure timely access to the appropriate and relevant 
stockholder lists.
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    \5\ See 12 U.S.C. 2184.
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b. Filing of Petition With the FCA [New Sec.  611.1126(c)]
    We have received requests for clarification from both System 
institutions and their stockholders regarding the date that the FCA 
considers a reconsideration petition to be filed with the Agency and 
how the petition may be filed. We propose adding new Sec.  611.1126(c) 
to explain that there are various means of filing a reconsideration 
petition (e.g., the U.S. Postal Service, hand delivery, electronic 
mail), and all are acceptable to the FCA. We propose allowing petitions 
to be filed in electronic form in recognition of advances in 
communication technology. We also propose that reconsideration 
petitions must be addressed to the

[[Page 2618]]

Secretary to the FCA Board. We propose that reconsideration petitions 
may be filed at:
    <bullet> The FCA headquarters office in McLean, Virginia;
    <bullet> Any FCA office, including the most local FCA office; or
    <bullet> Delivered in-person during normal business hours to any 
FCA employee who is in official duty status at the time.
    We would expect that if a reconsideration petition is filed by in-
person delivery to an FCA employee, then the delivery should be 
followed up with notice of the delivery to the Secretary to the FCA 
Board. We believe that proposing various means for a stockholder to 
file a petition with the FCA will aid the stockholder in working within 
the 35-day time constraint for filing a petition, and will make the 
petition process less burdensome on the stockholder. Also, we propose 
clarifying that the date of postmark, ship date, or the timestamp 
reflected in the metadata of electronic transmissions will be used to 
determine the date the petition is considered filed with the FCA.
    The Act requires reconsideration petitions to be ``presented'' to 
FCA within 30 days after the date that stockholders receive 
notification of the final results of the stockholder vote on the 
proposed plan of merger.\6\ However, existing Sec.  611.1123(c) 
provides that petitions must be filed with the FCA within 35 days \7\ 
after notification of the voting results is mailed to stockholders. The 
additional 5 days for filing a petition as provided in the regulation 
allows time for the stockholder to receive the notification and ensures 
that stockholders have the full statutory 30 days to file a 
reconsideration petition. We believe a similar concession is necessary 
to determine when reconsideration petitions are filed with the FCA. For 
example, a petition would be considered timely filed with the FCA if it 
was mailed via the U.S. Postal Service and the postmark date was the 
35th day of the regulatory reconsideration period. This concession 
would give stockholders the added benefit of having the full statutory 
30 days to acquire needed signatures and file the petition with the FCA 
without concern for delivery delays.
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    \6\ Section 7.9(b)(3) of the Act (12 U.S.C. 2279c-2).
    \7\ Unless our rules specify ``business days'', any use of the 
term ``days'' means calendar days.
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    We also propose that petitions contain contact information on the 
stockholder filing the petition. Having contact information on the 
stockholder filing the petition would enable the FCA to readily contact 
that individual, if necessary.
c. FCA Review of Petitions [Existing Sec.  611.1123(c); New Sec.  
611.1126(d)]
    We propose to clarify and enhance the existing rule on the notice 
process used by the FCA when a reconsideration petition is filed. In 
new Sec.  611.1126(d), we propose that if a petition is received in a 
timely manner, notice that a reconsideration petition has been filed be 
sent to the relevant institutions. We believe all parties should be 
notified that a reconsideration petition was timely and appropriately 
filed with the FCA since institution action on a petition will be 
required.
    We further propose to clarify in new Sec.  611.1126(d) that 
institutions have no expectation of receiving a copy of the petition. 
We believe the rule should be clear regarding access to the names on 
the petition. By necessity, one or more stockholder will identify 
themselves to the institution in order to obtain the list of 
stockholders. However, there is no legitimate business purpose for the 
institutions to have the names of stockholders signing the petition. We 
do not believe Congress intended the institutions to have this 
information, or they would not have required that the petition be filed 
with the FCA, rather than the institution. Also, providing the names of 
stockholders signing a petition to their respective institutions may 
allow the institution to infer how that stockholder voted on the 
proposed plan of merger and impact the statutory right to confidential 
voting.\8\
---------------------------------------------------------------------------

    \8\ See 12 U.S.C. 2208.
---------------------------------------------------------------------------

d. Reconsideration Votes [Existing Sec.  611.1123(c); New Sec.  
611.1126(e)]
    We propose to clarify in new Sec.  611.1126(e) the existing rule on 
the voting process after a reconsideration petition is filed. We 
propose clarifying that reconsideration votes are only cast in person 
or by proxy, similar to merger votes, and, just as merger votes, must 
follow the voting and confidentiality provisions of existing Sec.  
611.340, but without use of a tellers committee. This is to ensure the 
reconsideration voting process is the same as that used for the 
original merger vote.

VI. 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 would 
not have a significant economic impact on a substantial number of small 
entities. Each of the banks in the Farm Credit System, considered 
together with its affiliated associations, has assets and annual income 
in excess of the amounts that would qualify them as small entities. 
Therefore, Farm Credit System institutions are not ``small entities'' 
as defined in the Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 611

    Agriculture, Banks, banking, Rural areas.

    For the reasons stated in the preamble, part 611 of chapter VI, 
title 12 of the Code of Federal Regulations is proposed to be amended 
as follows:

PART 611--ORGANIZATION

0
1. The authority citation for part 611 continues to read as follows:

    Authority: Secs. 1.2, 1.3, 1.4, 1.5, 1.12, 1.13, 2.0, 2.1, 2.2, 
2.10, 2.11, 2.12, 3.0, 3.1, 3.2, 3.3, 3.7, 3.8, 3.9, 3.21, 4.3A, 
4.12, 4.12A, 4.15, 4.20, 4.21, 4.25, 4.26, 4.27, 4.28A, 5.9, 5.17, 
5.25, 7.0-7.13, 8.5(e) of the Farm Credit Act (12 U.S.C. 2002, 2011, 
2012, 2013, 2020, 2021, 2071, 2072, 2073, 2091, 2092, 2093, 2121, 
2122, 2123, 2124, 2128, 2129, 2130, 2142, 2154a, 2183, 2184, 2203, 
2208, 2209, 2211, 2212, 2213, 2214, 2243, 2252, 2261, 2279a-2279f-1, 
2279aa-5(e)); secs. 411 and 412 of Pub. L. 100-233, 101 Stat. 1568, 
1638; sec. 414 of Pub. L. 100-399, 102 Stat. 989, 1004.

0
2. Section 611.100 is amended by:
0
a. Redesignating existing paragraphs (b) through (g) as paragraphs (c) 
through (h); and
0
b. Adding new paragraphs (b), (i) and (j) to read as follows:


Sec.  611.100  Definitions.

* * * * *
    (b) FCA means the Farm Credit Administration.
* * * * *
    (i) Voting record date or record date means the official date set 
by a Farm Credit institution whereby a stockholder must own voting 
stock in that institution in order to cast a vote.
    (j) Voting record date list or record date list means the list of 
names, addresses, and classes of stock held by stockholders in the Farm 
Credit institution who are eligible to vote as of a specific voting 
record date.
0
3. Section 611.1000 is revised to read as follows:


Sec.  611.1000  General authority.

    (a) An amendment to a Farm Credit bank charter may relate to any 
provision that is properly the subject of a charter, including, but not 
limited to, the name of the bank, the location of its offices, or the 
territory served.
    (b) The FCA may make changes in the charter of a Farm Credit bank 
as may be requested by that bank and approved by the FCA pursuant to 
Sec.  611.1010.
    (c) The FCA may, in accordance with the provisions of the Act, make 
changes

[[Page 2619]]

in the charter of a Farm Credit bank, and any chartered service 
corporation thereof, as may be necessary or expedient to implement the 
provisions of the Act.
0
4. Section 611.1010 is revised to read as follows:


Sec.  611.1010  Farm Credit bank charter amendment procedures.

    (a) A Farm Credit bank may recommend a charter amendment to 
accomplish any of the following actions--
    (1) A merger or consolidation with any other Farm Credit bank or 
banks operating under title I or III of the Act.
    (2) A transfer of territory with any other Farm Credit bank 
operating under the same title of the Act.
    (3) A change to its name or location.
    (4) Any other change that is properly the subject of a Farm Credit 
bank charter.
    (b) Upon approval of an appropriate resolution by the Farm Credit 
bank board, the certified resolution, together with supporting 
documentation, must be submitted to the FCA for preliminary or final 
approval, as the case may be.
    (c) The FCA will review the material submitted and either approve 
or disapprove the request. The FCA may require submission of any 
supplemental information and analysis it deems appropriate. If the 
request is for merger, consolidation, or transfer of territory, the 
approval of the FCA will be preliminary only, with final approval 
subject to a vote of the Farm Credit bank's stockholders.
    (d) Following receipt of the FCA's written preliminary approval, 
the proposal must be submitted for approval to the voting stockholders 
of the Farm Credit bank. A proposal will be considered approved if 
agreed to by a majority of the voting stockholders of each Farm Credit 
bank voting, in person or by proxy, at a duly authorized stockholder 
meeting with each stockholder-association entitled to cast a number of 
votes equal to the number of the association's voting shareholders, 
unless another voting scheme has been approved by the FCA.
    (e) Upon approval by the stockholders of the Farm Credit bank, the 
request for final approval and issuance of the appropriate charter or 
amendments to charter for the Farm Credit banks involved must be 
submitted to the FCA.
0
5. Section 611.1020 is revised to read as follows:


Sec.  611.1020  Requirements for mergers or consolidations of Farm 
Credit banks.

    (a) As authorized under sections 7.0 and 7.12 of the Act, a Farm 
Credit bank may merge or consolidate with one or more Farm Credit banks 
operating under the same or different titles of the Act.
    (b) The plan to merge or consolidate two or more Farm Credit banks 
is subject to the requirements of Sec. Sec.  611.1122, 611.1123, and 
611.1126 of this part, unless otherwise instructed by the FCA. In 
interpreting those sections, the phrase ``Farm Credit bank(s)'' will be 
read for the word ``association(s)'' and references to ``funding bank'' 
are to be ignored.


Sec.  611.1040  [Amended]

0
6. Section 611.1040 is amended by removing the word ``shall'' and 
adding in its place the word ``must'' each place it appears.
0
7. Section 611.1120 is amended by:
0
a. Removing the words ``Farm Credit Administration'' and adding in 
their place, the acronym ``FCA'' each place they appear in paragraph 
(b); and
0
b. Revising paragraph (c).
    The revision reads as follows:


Sec.  611.1120  General authority.

* * * * *
    (c) The FCA may, on its own initiative, make changes in the charter 
of an agricultural credit association, Federal land bank association, 
or a production credit association, and any chartered service 
corporation thereof, where the FCA determines that the change is 
necessary to accomplish the purposes of the Act.
0
8. Section 611.1121 is revised to read as follows:


Sec.  611.1121  Association charter amendment procedures.

    (a) An association which proposes to amend its charter must submit 
a request to its funding bank containing the following information:
    (1) A statement of the provision(s) of the charter that the 
association proposes to amend and the proposed amendment(s);
    (2) A statement of the reasons for the proposed amendment(s), the 
impact of the amendment(s) on the association and its stockholders, and 
the requested effective date of the amendment(s);
    (3) A certified copy of the resolution of the board of directors of 
the association approving the amendment(s); and
    (4) Any additional information or documents that the association 
wishes to submit in support of the request or that may be requested by 
the funding bank.
    (b) Upon receipt of a proposed amendment from an association, the 
funding bank must review the materials submitted and provide the 
association with its analysis of the proposal within a reasonable 
period of time. Concurrently, the funding bank must communicate its 
recommendation on the proposal to the FCA, including the reasons for 
the recommendation, and any analysis the bank believes appropriate. 
Following review by the bank, the association must transmit the 
proposed amendment with attachments to the FCA.
    (c) Upon receipt of an association's request for a charter 
amendment, the FCA will review the materials submitted and either 
approve or disapprove the request. The FCA may require submission of 
any supplemental information and analysis it deems appropriate.
    (d) The FCA will notify the association of its approval or 
disapproval of the amendment request, including a copy of the amended 
charter with the approval notification, and provide a copy of such 
communication to the funding bank.
0
9. Section 611.1122 is revised to read as follows:


Sec.  611.1122  Requirements for association mergers or consolidations.

    (a) Where two or more associations plan to merge or consolidate, or 
where the funding bank board has adopted a reorganization plan for the 
associations in the district, the associations involved must jointly 
submit a request to the funding bank containing the following:
    (1) In the case of a merger, a copy of the charter of the 
continuing association reflecting any proposed amendments. In the case 
of consolidation, a copy of the proposed charter of the new 
association;
    (2) A statement of the reasons for the proposed merger or 
consolidation, the impact of the proposed transaction on the 
associations and their stockholders, and the planned effective date of 
the merger or consolidation;
    (3)(i) A certified copy of the resolution of the board of directors 
of each association recommending approval of the merger or 
consolidation; or
    (ii) In the case of a district reorganization plan, a certified 
copy of the resolution of the board of directors of each association 
recommending either approval or disapproval of the proposal;
    (4) A copy of the agreement of merger or consolidation;
    (5) Two signed copies of the continuing or proposed Articles of 
Association;
    (6) All of the information specified in paragraph (e) of this 
section;
    (7) Any additional information or documents each association wishes 
to submit in support of the request; and

[[Page 2620]]

    (8) All additional information and documentation that the funding 
bank or the FCA requests.
    (b) Upon receipt of a request for approval of an association merger 
or consolidation, the funding bank must review the materials submitted 
to determine whether they comply with the requirements of these 
regulations and must communicate with the associations concerning any 
deficiency. When the bank approves the request to merge or consolidate 
it must notify the associations. The bank must also notify the FCA of 
its approval together with the reasons for its approval and any 
supporting analysis. The associations must jointly submit the proposal 
together with required documentation to the FCA for preliminary 
approval.
    (c) Upon receipt of a complete association merger or consolidation 
request, the FCA will review the request and either deny or give its 
written preliminary approval to the request within 60 days. The FCA 
will notify the requesting associations when the 60-day preliminary 
approval review period begins. The FCA may require submission of any 
supplemental information and analysis it deems appropriate for its 
consideration of the merger or consolidation request.
    (1) When a request is denied, written notice stating the reasons 
for the denial will be transmitted to the associations and a copy 
provided to the funding bank(s).
    (2) When a request is preliminarily approved, written notice of the 
preliminary approval will be given to the associations and a copy 
provided to the funding bank(s). Preliminary approval by the FCA does 
not constitute approval of the merger or consolidation. Approval of a 
merger or consolidation is only issued pursuant to this subpart. In 
connection with granting preliminary approval, the FCA may impose 
conditions in writing.
    (d) Upon receipt of preliminary approval by the FCA of a merger or 
consolidation request, each constituent association must call a meeting 
of its voting stockholders. The FCA may also require the associations 
to hold informational meetings before a stockholder vote. The 
stockholder meeting to vote on a merger or consolidation must:
    (1) Be called on written notice to each stockholder entitled to 
vote on the transaction as of the record date and be held in accordance 
with the terms of each association's bylaws.
    (2) Follow the voting procedures of Sec.  611.340, except 
associations may not use tellers committees to validate ballots and 
tabulate votes on the merger or consolidation.
    (3) Require the affirmative vote of a majority of the voting 
stockholders of each association present and voting, either in person 
or by written proxy, at a meeting at which a quorum is present to 
constitute stockholder approval of a merger or consolidation proposal.
    (e) Notice of the stockholder meeting to consider and act upon a 
proposed merger or consolidation must be accompanied by the information 
required under this paragraph. The notice and accompanying information 
must not be sent to stockholders until preliminary approval of the 
merger or consolidation has been given by the FCA.
    (1) A statement either on the first page of the materials or on the 
notice of the stockholders' meeting, in capital letters and bold face 
type, that:
    THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON 
THE ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF 
MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE 
CONTRARY SHALL BE MADE OR RELIED UPON.
    (2) A description of the material provisions of the agreement of 
merger or consolidation and the effect of the proposed merger or 
consolidation on the associations, their stockholders, the new or 
continuing board of directors, and the territory to be served. In 
addition, a copy of the agreement must be furnished with the notice to 
stockholders.
    (3) A summary of the provisions of the charter and bylaws of the 
continuing or new association that differ materially from the existing 
charter or bylaw provisions of the constituent associations.
    (4) A brief statement by the boards of directors of the constituent 
associations setting forth the basis for the boards' recommendation on 
the merger or consolidation.
    (5) A description of any agreement or arrangement between a 
constituent association and any of its officers relating to employment 
or termination of employment and arising from the merger or 
consolidation.
    (6) A presentation of the following financial data:
    (i) A balance sheet and income statement for each constituent 
association for each of the 2 preceding fiscal years.
    (ii) A balance sheet for each constituent association as of a date 
within 90 days of the date the request for preliminary approval is 
forwarded to the FCA presented on a comparative basis with the 
corresponding period of the prior fiscal year.
    (iii) An income statement for the interim period between the end of 
the last fiscal year and the date of the required balance sheet 
presented on a comparative basis with the corresponding period of the 
preceding fiscal year. The balance sheet and income statement format 
must be that contained in the association's annual report to 
stockholders; must contain any significant changes in accounting 
policies that differ from those in the latest association annual report 
to stockholders; and must contain appropriate footnote disclosures, 
including data relating to high-risk assets and other property owned, 
and allowance for loan losses, including net chargeoffs as required in 
paragraph (e)(10) of this section.
    (7) The financial statements (balance sheet and income statement) 
must be in sufficient detail to show separately all significant 
categories of interest-earning assets and interest-bearing liabilities 
and the income or expense accrued thereon.
    (8) Attached to the financial statements for each constituent 
association, either:
    (i) A statement signed by the chief executive officer and each 
member of the board of directors of the association that the various 
financial statements are unaudited, but have been prepared in all 
material respects in accordance with generally accepted accounting 
principles (except as otherwise disclosed therein) and are, to the best 
of the knowledge of the board, a fair and accurate presentation of the 
financial condition of the association; or
    (ii) A signed opinion by an independent certified public accountant 
that the various financial statements have been examined in accordance 
with generally accepted auditing standards and, accordingly, included 
such tests of the accounting records and such other auditing procedures 
as were considered necessary in the circumstances, and, as of the date 
of the statements, present fairly the financial position of the 
association in conformity with generally accepted accounting principles 
applied on a consistent basis, except as otherwise noted thereon.
    (9) A presentation for each constituent association regarding its 
policy on accounting for loan performance, together with the number and 
dollar amount of loans in all performance categories, including those 
categorized as high-risk assets.

[[Page 2621]]

    (10) Information of each constituent association concerning the 
amount of loans charged off in each of the 2 fiscal years preceding the 
date of the balance sheet, the current year-to-date net chargeoff 
amount, and the balance in the allowance for loan losses account and a 
statement regarding whether, in the opinion of management, the 
allowance for loan losses is adequate to absorb the risk currently 
existing in the loan portfolio. This information may be appropriately 
included in the footnotes to the financial statements.
    (11) A management discussion and analysis of the financial 
condition and results of operation for the past 2 fiscal years for each 
constituent institution. This requirement can be satisfied by including 
the materials contained in the management discussion and analysis of 
each institution's most recent annual report.
    (12) A discussion of any material changes in financial condition of 
each constituent institution from the end of the last fiscal year to 
the date of the interim balance sheet provided.
    (13) A discussion of any material changes in the results of 
operations of each constituent institution with respect to the most 
recent fiscal-year-to-date period for which an income statement is 
provided.
    (14) A discussion of any change in the tax status of the new 
institution from those of the constituent institutions as a result of 
merger or consolidation. A statement on any adverse tax consequences to 
the stockholders of the institution as a result of the change in tax 
status.
    (15) A statement on the proposed institution's relationship with an 
independent public accountant, including any change that may occur as a 
result of the merger or consolidation.
    (16) A pro forma balance sheet of the continuing or consolidated 
association presented as if the merger or consolidation had occurred as 
of the date on the balance sheets required in paragraph (e)(6) of this 
section, as recommended to the stockholders. A pro forma summary of 
earnings for the continuing or consolidated association presented as if 
the merger or consolidation had been effective at the beginning of the 
interim period between the end of the last fiscal year and the date of 
the balance sheets.
    (17) A description of the type and dollar amount of any financial 
assistance that has been provided during the past year or will be 
provided by the funding bank or other party to assist the constituent 
or the continuing or new association(s), the conditions on which 
financial assistance has been or will be extended, the terms of 
repayment or retirement, if any, and the impact of the assistance on 
the subject association(s) or the stockholders.
    (18) A presentation for each constituent association of interest 
rate comparisons for the last 2 fiscal years preceding the date of the 
balance sheet, together with a statement of the continuing or new 
association's proposed interest rate and fee programs, interest 
collection policies, capitalization rates, dividends or patronage 
refunds, and other factors that would affect a borrower's cost of doing 
business with the continuing or new association. Where agreement has 
not been reached on such matters, current related information must be 
presented for each constituent association.
    (19) A description for each constituent association of any event 
subsequent to the date of the financial statements, but prior to the 
merger or consolidation vote, that would have a material impact on the 
financial condition of the constituent or continuing or new 
association(s).
    (20) A statement of any other material fact or circumstance that a 
stockholder would need in order to make an informed decision on the 
merger or consolidation proposal, or that is necessary to make the 
required disclosures not misleading.
    (21) Where proxies are to be solicited, a form of written proxy, 
together with instructions on the purpose and authority for its use, 
and the proper method for signature by the stockholder.
    (f) Where a proposed merger or consolidation will involve more than 
three associations, the FCA may require the supplementation, or allow 
the condensation or omission of any information required under 
paragraph (e) of this section in furtherance of meaningful disclosure 
to stockholders. Any waiver sought under this paragraph must be 
obtained before preparation of the financial statements and 
accompanying schedules required under paragraph (e) of this section.
    (g) The effective date of a merger or consolidation may not be less 
than 35 days after the date of mailing of the notification to 
stockholders of the results of the stockholder vote, or 15 days after 
the date of submission to the FCA of all required documents for the 
FCA's consideration of final approval, whichever occurs later.
    (1) The constituent institutions must agree on a second effective 
date to be used in the event the merger or consolidation is approved on 
reconsideration. The second effective date may not be less than 60 days 
after stockholder notification of the results of the first vote, or 15 
days after the date of the reconsideration vote, whichever occurs 
later.
    (2) If no reconsideration petition is filed with the FCA, upon 
final approval by the FCA, the merger or consolidation will be 
effective on the date specified in the merger agreement or at such 
later date as may be required by the FCA.
    (h) Each constituent association must notify its stockholders not 
later than 30 days after the stockholder vote of the final results of 
the vote. Upon approval of a proposed merger or consolidation by the 
stockholders of the constituent associations, each association must 
submit to the FCA a certified copy of the stockholders' resolution on 
which the stockholders cast their votes and a certification of the 
stockholder vote from the independent third party(s) used to tally the 
vote. After the time for submitting reconsideration petitions has 
expired, and if no petition is filed, the FCA will make a final 
approval decision on the merger or consolidation, imposing conditions 
as appropriate. The FCA will send written notice of the final FCA 
approval decision to the associations and provide a copy to the 
affiliated funding bank(s).
    (i) No Farm Credit institution, or any director, officer, employee, 
agent, or other person participating in the conduct of the affairs 
thereof, may make any untrue or misleading statement of a material 
fact, or fail to disclose any material fact necessary under the 
circumstances to make statements made not misleading, to a stockholder 
of any association in connection with an association merger or 
consolidation.
    (1) No Farm Credit institution or any director, officer, employee, 
agent, or other person participating in the conduct of the affairs of a 
Farm Credit institution may make an oral or written representation to 
any person that a preliminary or final approval by the FCA of a merger 
or consolidation constitutes, directly or indirectly, either a 
recommendation on the merits of the transaction or an assurance 
concerning the adequacy or accuracy of any information provided to any 
association's stockholders in connection therewith.
    (2) When a Farm Credit institution, or any of its employees, 
officers, directors, agents, or other person participating in the 
conduct of the affairs thereof, make disclosures or representations in 
connection with an association merger or consolidation that, in the 
judgment of the FCA, are incomplete, inaccurate, or misleading, whether 
or not such disclosure or representation is made in disclosure 
statements required by this subpart, such institution must make

[[Page 2622]]

such additional or corrective disclosure as directed by the FCA and as 
is necessary to provide stockholders and the general public with full 
and fair disclosure.
0
10. Section 611.1123 is amended by:
0
a. Revising the section heading and paragraph (a) introductory text;
0
b. Removing the word ``shall'' and adding in its place, the word 
``must'' in the last sentence of paragraph (a)(3);
0
c. Removing the word ``shall'' and adding in its place, the word 
``may'' in paragraph (a)(4);
0
d. Removing the words ``supervising bank'' and ``Farm Credit 
Administration'' and adding in their place the words ``funding bank'' 
and the acronym ``FCA'', respectively, in paragraph (a)(5);
0
e. Removing the words ``Farm Credit Administration'' and adding in 
their place the acronym ``FCA'' in paragraph (a)(7) introductory text;
0
f. Removing the word ``institution'' and adding in its place the words 
``or consolidated association'' in paragraph (a)(7)(iv);
0
g. Removing the words ``new institution'' and ``shall'' and adding in 
their place the words ``continuing or consolidated association'' and 
``must'', respectively, in paragraph (a)(9);
0
h. Removing the words ``proposed institution'' and adding in its place 
the words ``continuing or consolidated association'' in paragraph 
(a)(10);
0
i. Revising paragraph (b); and
0
j. Removing paragraph (c).
    The revisions read as follows:


Sec.  611.1123  Association merger or consolidation agreements.

    (a) Associations operating under the same title of the Act may 
merge or consolidate voluntarily, but only pursuant to a written 
agreement. The agreement must set forth all of the terms of the 
transaction, including, but not limited to, the following:
* * * * *
    (b) As an attachment to the agreement, the constituent associations 
must set forth those provisions of the charter and bylaws of the 
continuing or consolidated association which differ from the existing 
charter or bylaw provisions of the constituent associations.
0
11. Section 611.1124 is revised to read as follows:


Sec.  611.1124  Territorial adjustments.

    This section applies to any request submitted to the FCA to modify 
association charters for the purpose of transferring territory from one 
association to another.
    (a) Territorial adjustments, except as specified in paragraph (m) 
of this section, require approval of a majority of the voting 
stockholders of each association present and voting or voting by 
written proxy at a duly authorized meeting at which a quorum is 
present.
    (b) When two or more associations agree to transfer territory, each 
association must submit a proposal to the funding bank containing the 
following:
    (1) A statement of the reasons for the proposed transfer and the 
impact the transfer will have on its stockholders and holders of 
participation certificates;
    (2) A certified copy of the resolution of the board of directors of 
each association approving the proposed territory transfer;
    (3) A copy of the agreement to transfer territory that contains the 
following information:
    (i) A description of the territory to be transferred;
    (ii) Transferor association's plan to transfer loans and the types 
of loans to be transferred;
    (iii) Transferor association's plan to retire and transferee 
association's plan to issue equities held by holders of stock, 
participation certificates, and allocated equities, if any, and a 
statement by each association that the book value of its equities is at 
least equal to par;
    (iv) An inventory of the assets to be sold by the transferor 
association and purchased by the transferee association;
    (v) An inventory of the liabilities to be assumed from the 
transferor association by the transferee association;
    (vi) A statement that the holders of stock and participation 
certificates whose loans are subject to transfer have 60 days from the 
effective date of the territory transfer to inform the transferor 
association of their decision to remain with the transferor association 
for normal servicing until the current loan is paid;
    (vii) A statement that the transfer is conditioned upon the 
approval of the stockholders of each constituent association; and
    (viii) The effective date of the proposed territory transfer.
    (4) A copy of the stockholder disclosure statement provided for in 
paragraph (f) of this section; and
    (5) Any additional relevant information or documents that the 
association wishes to submit in support of its request or that may be 
required by the FCA.
    (c) Upon receipt of documents supporting a proposed territory 
transfer, the funding bank must review the materials submitted and 
provide the associations with its analysis of the proposal within a 
reasonable period of time. The funding bank must concurrently advise 
the FCA of its recommendation regarding the proposed territory 
transfer. Following review by the bank, the associations must transmit 
the proposal to the FCA together with all required documents.
    (d) Upon receipt of an association's request to transfer territory, 
the FCA will review the request and either deny or grant preliminary 
approval to the request. The FCA may require submission of any 
supplemental information and analysis it deems appropriate for its 
consideration of the request to transfer territory.
    (1) When a request is denied, written notice stating the reasons 
for the denial will be transmitted to the associations, and a copy 
provided to the funding bank.
    (2) When a request is preliminarily approved, written notice of the 
preliminary approval will be transmitted to the associations, and a 
copy provided to the funding bank. Preliminary approval by the FCA does 
not constitute approval of the territory transfer. Final approval is 
granted only in accordance with paragraph (h) of this section. In 
connection with granting preliminary approval, the FCA may impose 
conditions in writing.
    (e) Upon receipt of preliminary approval by the FCA, each 
constituent association must, by written notice, and in accordance with 
its bylaws, call a meeting of its voting stockholders. The affirmative 
vote of a majority of the voting stockholders of each association 
present and voting or voting by written proxy at a meeting at which a 
quorum is present is required for stockholder approval of a territory 
transfer.
    (f) Notice of the meeting to consider and act upon a proposed 
territory transfer must be accompanied by the following information 
covering each constituent association:
    (1) A statement either on the first page of the materials or on the 
notice of the stockholders' meeting, in capital letters and bold face 
type, that:
    THE FARM CREDIT ADMINISTRATION HAS NEITHER APPROVED NOR PASSED UPON 
THE ACCURACY OR ADEQUACY OF THE INFORMATION ACCOMPANYING THE NOTICE OF 
MEETING OR PRESENTED AT THE MEETING AND NO REPRESENTATION TO THE 
CONTRARY SHALL BE MADE OR RELIED UPON.
    (2) A copy of the Agreement to Transfer Territory and a summary of 
the major provisions of the Agreement;
    (3) The reason the territory transfer is proposed;

[[Page 2623]]

    (4) A map of the association's territory as it would look after the 
transfer;
    (5) A summary of the differences, if any, between the transferor 
and transferee associations' interest rates, interest rate policies, 
collection policies, service fees, bylaws, and any other items of 
interest that would impact a borrower's lending relationship with the 
institution;
    (6) A statement that all loans of the transferor association that 
finance operations located in the transferred territory will be 
transferred to the transferee association except as otherwise provided 
for in this section or in accordance with agreements between the 
associations as provided for in Sec.  614.4070;
    (7) Where proxies are to be solicited, a form of written proxy, 
together with instructions on the purpose and authority for its use, 
and the proper method for signature by the stockholders; and
    (8) A statement that the associations' bylaws, financial statements 
for the previous 3 years, and any financial information prepared by the 
associations concerning the proposed transfer of territory are 
available on request to the stockholders of any association involved in 
the transaction.
    (g) No Farm Credit institution, or director, officer, employee, 
agent, or other person participating in the conduct of the affairs 
thereof, may make any untrue or misleading statement of a material 
fact, or fail to disclose any material fact necessary under the 
circumstances to make statements made not misleading, to a stockholder 
of any Farm Credit institution in connection with a territory transfer.
    (h) Upon approval of a proposed territory transfer by the 
stockholders of the constituent associations, a certified copy of the 
stockholders' resolution for each constituent association and one 
executed Agreement to Transfer Territory must be forwarded to the FCA. 
The territory transfer will be effective when thereafter finally 
approved and on the date as specified by the FCA. Notice of final 
approval will be transmitted to the associations and a copy provided to 
the bank.
    (i) No director, officer, employee, agent, or other person 
participating in the conduct of the affairs of a Farm Credit 
institution may make an oral or written representation to any person 
that a preliminary or final approval by the FCA of a territory transfer 
constitutes, directly or indirectly, a recommendation on the merits of 
the transaction or an assurance concerning the adequacy or accuracy of 
any information provided to any association's stockholders in 
connection therewith.
    (j) When a Farm Credit institution, or any of its employees, 
officers, directors, agents, or other persons participating in the 
conduct of the affairs thereof, make disclosures or representations 
that, in the judgment of the FCA, are incomplete, inaccurate, or 
misleading in connection with a territory transfer, whether or not such 
disclosure or representation is made in disclosure statements required 
by this subpart, such institution must make such additional or 
corrective disclosure as directed by the FCA and as is necessary to 
provide stockholders and the general public with full and fair 
disclosure.
    (k) The notice and accompanying information required under 
paragraph (f) of this section may not be sent to stockholders until 
preliminary approval of the territory transfer has been granted by the 
FCA.
    (l) Where a territory transfer is proposed simultaneously with a 
merger or consolidation, both transactions may be voted on by 
stockholders at the same meeting. Only stockholders of a transferee or 
transferor association may vote on a territory transfer.
    (m) Each borrower whose real estate or operations is located in a 
territory that will be transferred must be provided with a written 
Notice of Territory Transfer immediately after the FCA has granted 
final approval of the territory transfer. The Notice must inform the 
borrower of the transfer of the borrower's loan to the transferee 
association and the exchange of related equities for equities of like 
kinds and amounts in the transferee association. If a like kind of 
equity is not available in the transferee association, similar equities 
must be offered that will not adversely affect the interest of the 
owner. The Notice must give the borrower 60 days from the effective 
date of the territory transfer to notify the transferor association in 
writing if the borrower decides to stay with the transferor association 
for normal servicing until the current loan is paid. Any application by 
the borrower for renewal or for additional credit must be made to the 
transferee association, except as otherwise provided for by an 
agreement between associations in accordance with Sec.  614.4070.
    (n) This section does not apply to territory transfers initiated by 
order of the FCA or to territory transfers due to the liquidation of 
the transferor association.
    (o) Where a proposed action involves the transfer of a portion of 
an association's territory to an association operating in a different 
district, such proposal must comply with the provisions of this section 
and section 5.17(a) of the Act.


Sec.  611.1125  [Amended]

0
12. Section 611.1125 is amended by:
0
a. Removing the words ``Farm Credit Administration'' and adding in 
their place the acronym ``FCA'' in paragraph (a);
0
b. Removing the word ``shall'' and adding in its place, the word 
``must'' in paragraph (b) introductory text;
0
c. Removing the words ``district bank'' and adding in their place, the 
word ``funding bank'' in paragraphs (b) introductory text and (b)(1) 
through (4) wherever they appear; and
0
d. Removing the words ``district bank'' and adding in their place, the 
word ``funding bank'' in paragraph (c) wherever they appear.
0
13. Subpart G is amended by adding Sec.  611.1126 to read as follows:


Sec.  611.1126  Reconsiderations of mergers and consolidations.

    (a) Voting stockholders have the right to reconsider their approval 
of a merger or consolidation, provided that a petition is filed with 
the FCA. The petition must be signed by 15 percent of the stockholders 
(who were eligible to vote on the merger or consolidation proposal) of 
one or more of the constituent associations. The reconsideration 
petition must be filed with the FCA within 35 days after the date when 
the association mailed the notification of the final results of the 
stockholder vote pursuant to Sec.  611.1122(h).
    (b) Voting stockholders that intend to file a reconsideration 
petition have a right to obtain from the association of which they are 
a voting stockholder the voting record date list used by that 
association for the merger or consolidation vote. The association must 
provide the voting record date list as soon as possible, but not later 
than 7 days after receipt of the request. The list must be provided 
pursuant to the provisions of Sec.  618.8310(b).
    (c) A reconsideration petition must be addressed to the Secretary 
of the FCA Board and filed with the FCA on or before the deadline 
described in paragraph (a) of this section. Reconsideration petitions 
must identify a contact person and provide contact information for that 
person.
    (1) Filing of a reconsideration petition may only be accomplished 
through in-person delivery during normal business hours to any FCA 
employee in official duty status or by sending the petition by mail, 
facsimile, electronic transmission, carrier delivery, or other similar 
means to an FCA office.

[[Page 2624]]

    (2) The FCA will use the postmark, ship date, electronic stamp, or 
similar evidence as the date of filing the reconsideration petition.
    (d) The FCA will notify the named contact on the reconsideration 
petition whether the petition was filed on time. On the timely receipt 
of a reconsideration petition, the FCA will review the petition to 
determine whether it complies with the requirements of section 7.9 of 
the Act. Following a determination that the petition was timely filed 
and complies with applicable requirements, the FCA will give notice to 
the associations involved in the merger or consolidation for which the 
reconsideration petition was filed. The associations are not entitled 
to either a copy of the petition or the names of the petitioners.
    (e) Following FCA notification that a reconsideration petition has 
been properly filed, a special stockholders meeting must be called by 
the association(s) to reconsider the merger or consolidation vote. The 
reconsideration vote must be conducted according to the merger and 
consolidation voting requirements of Sec.  611.1122(d). If a majority 
of the stockholders voting, in person or by proxy, at a duly authorized 
stockholders' meeting from any one of the constituent associations vote 
against the merger or consolidation under the reconsideration vote, the 
merger or consolidation will not take place. In the event that the 
merger or consolidation is approved on reconsideration, the constituent 
associations must use the second effective date developed under Sec.  
611.1122(g)(1).

    Dated: January 13, 2015.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
[FR Doc. 2015-00676 Filed 1-16-15; 8:45 am]
BILLING CODE 6705-01-P


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