Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Proposed Rules 26989 

1Public Law 110–289, 122 Stat. 2654. 

2See Division A, titled the ‘‘Federal Housing 

Finance Regulatory Reform Act of 2008,’’ Title I, 

Section 1101 of HERA. 

other regions otherwise eligible at that 

increment level. 

* * * * * 

3. In § 1209.38, paragraphs (l) and (m) 

are redesignated as paragraphs (m) and 

(n) respectively and new paragraph (l) is 

added to read as follows: 

§ 1209.38 Powers. 

* * * * * 

(l) To develop and propose to the 

Secretary programs for good agricultural 

and good handling practices and related 

activities for mushrooms. 

* * * * * 

§ 1209.230 [Removed and Reserved] 

4. Section 1209.230 is removed and 

reserved. 

Dated: June 2, 2009. 

David R. Shipman, 

Acting Administrator. 

[FR Doc. E9–13152 Filed 6–4–09; 8:45 am] 

BILLING CODE 3410–02–P 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1230 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

Office of Federal Housing Enterprise 

Oversight 

12 CFR Part 1770 

RIN 2590–AA12 

Executive Compensation 

AGENCIES: Federal Housing Finance 

Agency; Office of Federal Housing 

Enterprise Oversight. 

ACTION: Notice of proposed rulemaking; 

request for comments. 

SUMMARY: The Federal Housing Finance 

Agency (FHFA) is proposing to issue an 

Executive Compensation regulation. The 

proposed regulation sets forth 

requirements and processes with respect 

to compensation provided to executive 

officers by the Federal National 

Mortgage Association, the Federal Home 

Loan Mortgage Corporation, the Federal 

Home Loan Banks, and the Office of 

Finance, consistent with the safety and 

soundness responsibilities of FHFA 

under the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992, as amended by the Housing and 

Economic Recovery Act of 2008. 

DATES: Comments on the Notice of 

Proposed Rulemaking must be received 

on or before August 4, 2009. For 

additional information, see 

SUPPLEMENTARY INFORMATION. 

ADDRESSES: You may submit your 

comments on the proposed regulation, 

identified by regulatory identifier 

number (RIN) 2590–AA12 by any of the 

following methods: 

• U.S. Mail, United Parcel Post, 

Federal Express, or Other Mail Service: 

The mailing address for comments is: 

Alfred M. Pollard, General Counsel, 

Attention: Comments/RIN 2590–AA12, 

Federal Housing Finance Agency, 

Fourth Floor, 1700 G Street, NW., 

Washington, DC 20552. 

• Hand Delivered/Courier: The hand 

delivery address is: Alfred M. Pollard, 

General Counsel, Attention: Comments/ 

RIN 2590–AA12, Federal Housing 

Finance Agency, Fourth Floor, 1700 G 

Street, NW., Washington, DC 20552. The 

package should be logged at the Guard 

Desk, First Floor, on business days 

between 9 a.m. and 5 p.m. 

• E-mail: Comments to Alfred M. 

Pollard, General Counsel, may be sent 

by e-mail at RegComments@FHFA.gov. 

Please include ‘‘RIN 2590–AA12’’ in the 

subject line of the message. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by e-mail to FHFA at 

RegComments@fhfa.gov to ensure 

timely receipt by the agency. Include 

the following information in the subject 

line of your submission: Executive 

Compensation Proposed Rule, RIN 

2590–AA12. 

FOR FURTHER INFORMATION CONTACT: 

Daniel E. Coates, Associate Director Risk 

Analysis and Research, Office of Federal 

Home Loan Bank Regulation, (202) 408– 

2959, Patrick Lawler, Associate Director, 

Office of Policy Analysis and Research, 

Chief Economist, (202) 414–3746, or 

Tina Dion, Associate General Counsel, 

(202) 414–3838 (not toll free numbers), 

Federal Housing Finance Agency, 

Fourth Floor, 1700 G Street, NW., 

Washington, DC 20552. The telephone 

number for the Telecommunications 

Device for the Deaf is (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Comments 

FHFA invites comments on all aspects 

of the proposed regulation and will take 

all comments into consideration before 

issuing the final regulation. Copies of all 

comments will be posted without 

change, including any personal 

information you provide, such as your 

name and address, on the FHFA Internet 

Web site at http://www.fhfa.gov. 

In addition, copies of all comments 

received will be available for 

examination by the public on business 

days between the hours of 10 a.m. and 

3 p.m., at the Federal Housing Finance 

Agency, Fourth Floor, 1700 G Street, 

NW., Washington, DC 20552. To make 

an appointment to inspect comments, 

please call the Office of General Counsel 

at (202) 414–3751. 

II. Background 

The Federal Housing Finance Agency 

(FHFA) was created on July 30, 2008, 

when the President signed into law the 

Housing and Economic Recovery Act of 

2008 (HERA).1 HERA created a regulator 

with all of the authorities necessary to 

oversee vital components of our 

country’s secondary mortgage markets— 

the Federal National Mortgage 

Association (Fannie Mae), the Federal 

Home Loan Mortgage Corporation 

(Freddie Mac), and the Federal Home 

Loan Banks (Banks). In addition, this 

law combined the staffs of the Office of 

Federal Housing Enterprise Oversight 

(OFHEO), the Federal Housing Finance 

Board (FHFB), and the GSE mission 

office at the Department of Housing and 

Urban Development (HUD). By pooling 

the expertise of the staffs of OFHEO, 

FHFB, and HUD, Congress strengthened 

the regulatory and supervisory oversight 

of the 14 housing-related GovernmentSponsored Enterprises (GSEs). Such 

regulation of the GSEs will promote a 

stronger, safer U.S. housing finance 

system. 

More specifically, HERA amended the 

Federal Housing Enterprises Financial 

Safety and Soundness Act of 1992 (12 

U.S.C. 4501 et seq.) (Safety and 

Soundness Act or Act) to establish 

FHFA as an independent agency of the 

Federal Government.2 FHFA was 

established to oversee the prudential 

operations of Fannie Mae, Freddie Mac 

(collectively, Enterprises), and the 

Banks (collectively, regulated entities) 

and to ensure that they operate in a safe 

and sound manner including being 

capitalized adequately; foster liquid, 

efficient, competitive and resilient 

national housing finance markets; 

comply with the Act and rules, 

regulation, guidelines and orders issued 

under the Act, and the respective 

authorizing statutes of the regulated 

entities; and carry out their missions 

through activities authorized and 

consistent with the Act and their 

authorizing statutes; and that the 

activities and operations of the 

regulated entities are consistent with the 

public interest. 


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3See Golden Parachute Payments and 

Indemnification Payments—Interim Final 

Regulation with Request for Comments, 73 FR 

53356 (September 16, 2008), with Correcting 

Amendments at 73 FR 54309 (September 19, 2008) 

and 73 FR 54673 (September 23, 2008), codified at 

12 CFR 1231. See also, Proposed Amendment for 

Golden Parachute and Indemnification Payments, 

73 FR 67424 (November 14, 2008). 

4See Golden Parachute Payments, 74 FR 5101 

(January 29, 2009), to be codified at 12 CFR 1231. 

OFHEO and FHFB will be abolished 

one year after enactment of HERA. 

However, the regulated entities continue 

to operate under regulations 

promulgated by OFHEO and FHFB until 

such regulations are superseded by 

regulations promulgated by FHFA. 

III. Proposed Regulation 

The proposed regulation, when 

published in its final form, would 

supersede the OFHEO Executive 

Compensation regulation, 12 CFR part 

1770. The proposed regulation is issued 

to effect sections 1113 and 1117 of 

HERA. Section 1113 addresses the 

authority of the Director to prohibit and 

withhold compensation of executive 

officers of the regulated entities. Section 

1117 provides the Director with 

temporary authority to approve, 

disapprove, or modify the executive 

compensation of the regulated entities. 

The proposed regulation also 

continues the Director’s authority under 

the charter acts of the Enterprises to 

prior approve agreements or contracts of 

executive officers that provide 

compensation in connection with 

termination of employment. A similar 

prior approval authority for the Director 

of termination benefits of executive 

officers provided by the Banks is not set 

forth under the Federal Home Loan 

Bank Act or HERA. However, the total 

payment or value derived from 

termination benefits are included in the 

FHFA’s review of compensation 

provided by the Banks to their executive 

officers to determine whether the 

overall compensation is reasonable and 

comparable. This is because the term 

‘‘compensation’’ is broadly defined to 

include benefits to an executive officer 

that are derived from post-employment 

benefit plans or programs and other 

compensatory benefit arrangements 

containing termination benefits, which 

affect the executive officer individually 

or as part of a group. As a result, FHFA 

reviews the value of benefits provided 

under such plans, programs and 

arrangements on an ongoing basis in 

exercising its review authority. FHFA 

aggregates the benefits provided under 

such plans, programs and arrangement 

with all other payments of money or any 

other thing of current or potential value 

to determine whether an officer’s overall 

‘‘compensation’’ is reasonable and 

comparable. 

Additionally, the proposed regulation 

is issued to ensure that the regulated 

entities and the Office of Finance 

comply with processes used by FHFA in 

its oversight of executive compensation. 

The processes require the submission of 

relevant information by the regulated 

entities and the Office of Finance on a 

timely basis, in a format deemed 

appropriate by FHFA, to enable FHFA 

to efficiently carry out its executive 

compensation functions. For reasons 

noted above, as with the Enterprises, 

information required to be submitted to 

FHFA for its review and consideration 

by the Banks includes information 

relating to termination benefits for their 

executive officers. Additionally, 

although the Office of Finance is not 

directly covered by section 1113 of 

HERA, it is subject to the Director’s 

‘‘general regulatory authority’’ under 

section 1311(b)(2) of the Safety and 

Soundness Act (12 U.S.C. 4511(b)(2)), as 

amended by HERA. Therefore, in order 

to ensure safety and soundness, and to 

comply with the Director’s authority 

relating to golden parachutes and 

indemnification payments (noted 

below), information submission 

requirements under the proposed 

regulation also apply to the Office of 

Finance, as does the Director’s authority 

to prohibit excessive compensation. 

Notably, in addition to the Director’s 

authority under section 1113 of HERA 

to prohibit and withhold compensation 

of executive officers of the regulated 

entities (as effected in the proposed 

regulation), section 1114 of HERA 

provides the Director with additional 

authority to address golden parachutes 

and indemnification payments by the 

Enterprises and the Banks to entityaffiliated parties. FHFA has issued an 

interim final rule that clarifies the 

standards it will employ in exercising 

its authority regarding golden parachute 

payments.3 FHFA also has issued a final 

rule on golden parachute payments that 

sets forth factors to be considered by the 

Director of FHFA in acting upon the 

Director’s authority to limit golden 

parachute payments to entity-affiliated 

parties in connection with the regulated 

entities.4

Section 1313(f) of the Act (12 U.S.C. 

4513(f)), as amended by section 1201 of 

HERA, requires the Director, when 

promulgating regulations relating to the 

Banks, to consider the differences 

between the Banks and the Enterprises 

with respect to the Banks’ cooperative 

ownership structure; mission of 

providing liquidity to members; 

affordable housing and community 

development mission; capital structure; 

and joint and several liability. The 

Director may also consider any other 

differences that are deemed appropriate. 

In preparing the proposed rule, the 

Director considered the differences 

between the Banks and the Enterprises 

as they relate to the above factors. 

The Director recognizes that there are 

differences between the Enterprises and 

the Banks in size, complexity, and 

function. Therefore, the approach by 

FHFA to oversight of executive 

compensation may differ in certain 

aspects between the Enterprises and the 

Banks. For example, in order to take 

into account the Banks’ size and 

structure, FHFA may consider the 

Federal Reserve Banks and the Farm 

Credit Banks as examples of appropriate 

comparators to assess the 

reasonableness and comparability of 

executive compensation provided by the 

Banks. Also, in consideration of the 

Banks’ size and structure, the Director’s 

oversight of compensation may cover a 

smaller number of positions in 

comparison to covered executive officer 

positions for the Enterprises. To 

accommodate any differences in aspects 

of executive compensation between the 

Enterprises and the Banks, FHFA will 

address such differences through an 

establishment of policies for appropriate 

compensation packages and termination 

benefits, and will provide routine 

guidance to the regulated entities. 

Except to the extent that the proposed 

rule distinguishes between the 

Enterprises and the Banks, the Director 

believes that the differences related to 

the factors set forth in 12 U.S.C. 4513(f) 

do not result in the need for 

substantively dissimilar coverage under 

the proposed regulation as both the 

Enterprises and the Banks, as ‘‘regulated 

entities,’’ are subject to the same 

statutory requirements with respect to 

oversight of their executive 

compensation by the Director. However, 

the Director requests comments from the 

public about whether differences related 

to these factors should result in a 

revision to the proposed regulation as 

they relate to the Banks. 

IV. Section-by-Section Analysis 

Section 1230.1 Purpose 

Proposed § 1230.1 provides that the 

purpose of the regulation is to 

implement requirements relating to the 

supervisory authority of FHFA under 

the Act with respect to compensation 

provided by the regulated entities and 

the Office of Finance to their executive 

officers. Additionally, the regulation 

would codify the structured process 

established by the Director for 

submission of relevant information by 


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the regulated entities, and the Office of 

Finance, in order to facilitate and 

enhance the efficiency of oversight of 

executive compensation by FHFA. 

Section 1230.2 Definitions 

Proposed § 1230.2 would define 

certain terms as used in the regulation. 

Section 1230.3 Prohibition and 

Withholding of Executive Compensation 

Proposed § 1230.3 addresses the 

Director’s authority to prohibit and 

withhold compensation provided by a 

regulated entity and the Office of 

Finance to an executive officer that is 

not reasonable and comparable; the 

prohibition of a regulated entity and the 

Office of Finance from providing 

compensation to an executive officer 

that is not reasonable and comparable; 

the type of factors that the Director may 

take into consideration in determining 

whether compensation to an executive 

officer is reasonable and comparable; 

certain prohibitions applicable to and 

during the Director’s review of 

compensation; the effect of prior 

approval of an agreement or contract 

pursuant to § 1230.4 with respect to any 

subsequent determination under the 

Director’s authority to prohibit and 

withhold executive compensation; and 

the form and manner in which the 

Director shall provide approval 

pursuant to paragraph (e)(1) of this 

section. 

Paragraph (e)(2) of this section limits 

the requirement for Director’s prior 

approval set forth in paragraph (e)(1) by 

specifying the types and circumstances 

of compensation subject to the 

requirement. Paragraph (e)(2)(i) states 

that approval is necessary for certain 

written arrangements: (a) A written 

arrangement that provides an executive 

officer a term of employment of six 

months or more; or (b) a written 

arrangement that provides 

compensation in connection with the 

termination of employment; or 

establishes a policy of compensation in 

connection with the termination of 

employment. It is noted that if the 

Director has approved a corporate-wide 

or ‘‘Top Hat’’ policy for a Bank or the 

Office of Finance that provides 

termination benefits to its executive 

officers, any individual written 

arrangement that does not exceed 

termination benefits provided under 

such a policy would not require prior 

approval of the Director. 

Paragraph (e)(2)(ii) of § 1230.3 

requires the prior approval of annual 

compensation, bonuses, and other 

incentive pay provided by a Bank to the 

president or by an Enterprise to the 

chief executive officer. Finally, 

paragraph (e)(2)(iii) states that prior 

approval would be required in the event 

that the Director provides the regulated 

entity or the Office of Finance with 

written notice of a specific review of 

compensation to be provided to an 

executive officer. 

Section 1230.4 Prior Approval of 

Termination Benefits 

Proposed § 1230.4 provides the 

general requirement that an Enterprise 

must obtain the prior approval of the 

Director with respect to agreements or 

contracts that provide termination 

benefits to an executive officer. The 

proposed section also clarifies the 

agreements or contracts subject to the 

prior approval requirement, as well as 

factors that the Director may consider in 

determining whether to approve or 

disapprove the termination benefits. 

Additionally, the section provides an 

exception to the prior approval 

requirement. 

Section 1230.5 Submission 

Requirements 

Proposed § 1230.5 describes the 

information, i.e., the types of materials 

and timeframe for submission, that the 

regulated entities, as well as the Office 

of Finance, would be required to 

provide to FHFA in order to facilitate 

the exercise of the Director’s oversight 

of executive compensation under the 

Act. The section provides that the 

information shall be submitted in a 

format, i.e., hardcopy or electronic, as 

deemed appropriate by FHFA. 

Section 1230.6 Temporary Power in 

Connection With Executive 

Compensation 

Proposed § 1230.6 provides that, 

notwithstanding any provision of this 

part, effective July 30, 2008, through 

December 31, 2009, the Director may 

approve, disapprove, or modify the 

executive compensation of a regulated 

entity. For purposes of the proposed 

section, the term ‘‘executive 

compensation’’ has the same meaning as 

defined under Regulation S–K, 17 CFR 

part 229. This section implements the 

authority granted the Director by section 

1117 of HERA. 

Section 1230.7 Compliance 

Proposed § 1230.7 provides that 

failure by a regulated entity or the Office 

of Finance to comply with the 

requirements of this part may result in 

supervisory action by FHFA. Such 

action may be taken in the form 

determined appropriate by the Director 

and may be taken separately from, in 

conjunction with, or in addition to any 

other corrective or remedial action, 

including an enforcement action to 

require an individual to make 

restitution to or reimbursement of 

excessive compensation or 

inappropriately paid termination 

benefits. 

Regulatory Impacts 

Paperwork Reduction Act 

The proposed regulation does not 

contain any information collection 

requirement that requires the approval 

of OMB under the Paperwork Reduction 

Act (44 U.S.C. 3501 et seq.). 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires that a 

regulation that has a significant 

economic impact on a substantial 

number of small entities, small 

businesses, or small organizations must 

include an initial regulatory flexibility 

analysis describing the regulation’s 

impact on small entities. Such an 

analysis need not be undertaken if the 

agency has certified that the regulation 

will not have a significant economic 

impact on a substantial number of small 

entities. 5 U.S.C. 605(b). FHFA has 

considered the impact of the proposed 

regulation under the Regulatory 

Flexibility Act. FHFA certifies that the 

proposed regulation, if adopted, is not 

likely to have a significant economic 

impact on a substantial number of small 

business entities because the regulation 

is applicable only to the regulated 

entities, which are not small entities for 

purposes of the Regulatory Flexibility 

Act. 

List of Subjects 

12 CFR Part 1230 

Administrative practice and 

procedure, Compensation, Confidential 

business information, Governmentsponsored enterprises, Reporting and 

recordkeeping requirements. 

12 CFR Part 1770 

Administrative practice and 

procedure, Confidential business 

information, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

Accordingly, for the reasons stated in 

the preamble, under the authority of 12 

U.S.C. 4526, the Federal Housing 

Finance Agency proposes to amend 

Chapters XII and XVII of Title 12 of the 

Code of Federal Regulations, as follows: 


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26992 Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Proposed Rules 

CHAPTER XII—FEDERAL HOUSING 

FINANCE AGENCY 

SUBCHAPTER B—ENTITY REGULATIONS 

1. Add part 1230 to Subchapter B to 

read as follows: 

PART 1230—EXECUTIVE 

COMPENSATION 

Sec. 

1230.1 Purpose. 

1230.2 Definitions. 

1230.3 Prohibition and withholding of 

executive compensation. 

1230.4 Prior approval of termination 

benefits. 

1230.5 Submission requirements. 

1230.6 Temporary power in connection 

with executive compensation. 

1230.7 Compliance. 

Authority: 12 U.S.C. 1427, 1431(l)(5), 

1452(h), 1455(l)(5), 4502(6), 4502(12), 4513, 

4514, 4517, 4518, 4526, 4631, 4632, 4636, 

1719(g)(5), 1723a(d). 

§ 1230.1 Purpose. 

The purpose of this part is to 

implement requirements relating to the 

supervisory authority of FHFA under 

the Safety and Soundness Act with 

respect to compensation provided by 

the regulated entities and the Office of 

Finance to their executive officers. This 

part also codifies the structured process 

established by the Director for 

submission of relevant information by 

the regulated entities, and the Office of 

Finance, in order to facilitate and 

enhance the efficiency of the FHFA’s 

oversight of executive compensation. 

§ 1230.2 Definitions. 

The following definitions apply to the 

terms used in this part: 

Charter acts mean the Federal 

National Mortgage Association Charter 

Act and the Federal Home Loan 

Mortgage Corporation Act, which are 

codified at 12 U.S.C. 1716 through 1723i 

and 12 U.S.C. 1451 through 1459, 

respectively. 

Compensation means any payment of 

money or the provision of any other 

thing of current or potential value in 

connection with employment. 

Compensation includes all direct and 

indirect payments of benefits, both cash 

and non-cash, granted to or for the 

benefit of any executive officer, 

including, but not limited to, payments 

and benefits derived from an 

employment contract, compensation or 

benefit agreement, fee arrangement, 

perquisite, stock option plan, postemployment benefit or other 

compensatory arrangement. 

Director means the Director of FHFA, 

or his or her designee. 

Enterprise means the Federal National 

Mortgage Association and the Federal 

Home Loan Mortgage Corporation 

(collectively, Enterprises) and, except as 

provided by the Director, any affiliate 

thereof. 

Entity-affiliated party means— 

(1) Any director, officer, employee, or 

controlling stockholder of, or agent for, 

a regulated entity; 

(2) Any shareholder, affiliate, 

consultant, or joint venture partner of a 

regulated entity, and any other person, 

as determined by the Director (by 

regulation or on a case-by-case basis) 

that participates in the conduct of the 

affairs of a regulated entity, provided 

that a member of a Bank shall not be 

deemed to have participated in the 

affairs of that Bank solely by virtue of 

being a shareholder of, and obtaining 

advances from, that Bank; 

(3) Any independent contractor for a 

regulated entity (including any attorney, 

appraiser, or accountant), if— 

(i) The independent contractor 

knowingly or recklessly participates 

in— 

(A) Any violation of any law or 

regulation; 

(B) Any breach of fiduciary duty; or 

(C) Any unsafe or unsound practice; 

and 

(ii) Such violation, breach, or practice 

caused, or is likely to cause, more than 

a minimal financial loss to, or a 

significant adverse effect on, the 

regulated entity; 

(4) Any not-for-profit corporation that 

receives its principal funding, on an 

ongoing basis, from any regulated entity; 

and 

(5) The Office of Finance. 

Executive officer means— 

(1) With respect to an Enterprise: 

(i) The chairman of the board of 

directors, chief executive officer, chief 

financial officer, chief operating officer, 

president, vice chairman, any executive 

vice president, and any individual who 

performs functions similar to such 

positions whether or not the individual 

has an official title; and 

(ii) Any senior vice president (SVP) or 

other individual with similar 

responsibilities, without regard to title: 

(A) Who is in charge of a principal 

business unit, division or function, or 

(B) Who reports directly to the 

regulated entity’s chairman of the board 

of directors, vice chairman, president or 

chief operating officer. 

(2) The Director shall inform the 

Enterprises of those officers covered by 

this definition. 

(3) With respect to a Bank: 

(i) Executive officers about whom the 

Banks must publicly disclose detailed 

compensation information under 

Regulation S–K, 17 CFR part 229, issued 

by the Securities and Exchange 

Commission; 

(ii) Any other executive who occupies 

one of the following positions or is in 

charge of one of the following subject 

areas: 

(A) Overall Bank operations, such as 

the Chief Operating Officer or 

equivalent; 

(B) Chief Financial Officer or 

equivalent; 

(C) Chief Administrative Officer or 

equivalent; 

(D) Chief Risk Officer or equivalent; 

(E) Asset and Liability Management, 

or equivalent; 

(F) Chief Accounting Officer or 

equivalent; 

(G) General Counsel or equivalent; 

(H) Strategic Planning or equivalent; 

(I) Internal Audit or equivalent; 

(J) Chief Information Officer or 

equivalent; or 

(iii) Any other individual, without 

regard to title: 

(A) Who is in charge of a principal 

business unit, division or function, or 

(B) Who reports directly to the Bank’s 

chairman of the board of directors, vice 

chairman, president or chief operating 

officer. 

(4) The Director may add or remove 

persons, positions, or functions to or 

from the list set forth in paragraph (3)(ii) 

of this definition by communication to 

the Banks or a Bank from time to time. 

(5) With respect to the Office of 

Finance: 

(i) Any individual who occupies a 

position in any of the top five pay 

bands; or 

(ii) Any individual, without regard to 

title, who is in charge of a principal 

business unit, division, or function. 

Federal Home Loan Bank or Bank 

means a bank established under the 

Federal Home Loan Bank Act; the term 

‘‘Federal Home Loan Banks’’ or ‘‘Banks’’ 

means, collectively, all the Federal 

Home Loan Banks. 

FHFA means the Federal Housing 

Finance Agency. 

Office of Finance means the Office of 

Finance of the Federal Home Loan Bank 

System (or any successor thereto). 

Reasonable and comparable means 

compensation that is— 

(1) Reasonable—compensation, taken 

in whole or in part, that would be 

customary and appropriate for the 

position and based on a review of 

relevant factors including, but not 

limited to: 

(i) Unique duties and responsibilities 

of the position as contrasted with 

comparable positions at other firms; 

(ii) Absence of duties and 

responsibilities of the position as 

contrasted with comparable positions at 

other firms; 

(iii) Compensating factors that 

indicate added or diminished risks, 


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constraints, or aids in carrying out the 

responsibilities of the position relative 

to comparable positions at other firms as 

well as within the entity; and 

(iv) Performance of the regulated 

entity or the specific employee with 

respect to achievement of goals and 

compliance with applicable law, 

regulation, guidance, and internal rules 

of the entity. 

(2) Comparable—compensation that, 

taken in total or in part, does not 

materially exceed benefits paid at 

similar institutions for similar duties 

and responsibilities. In particular, 

comparable includes consideration of 

benefit levels and comparability of 

duties and responsibilities. 

(i) Benefit levels—FHFA generally 

considers comparable to be at or below 

the median compensation for a given 

position at similar institutions. In 

particular circumstances, consideration, 

as described in paragraph (1) of this 

definition, may indicate the 

appropriateness of higher or lower 

benefit amounts to which FHFA would 

not object. 

(ii) Similar institutions—FHFA 

considers similar institutions for the 

Banks and Enterprises to be institutions 

that are similar in size, complexity and 

function, and may communicate such 

institutions or types of institutions to 

the Banks and Enterprises from time to 

time. 

Regulated entity means the Federal 

National Mortgage Association and any 

affiliate thereof; the Federal Home Loan 

Mortgage Corporation and any affiliate 

thereof; or any Federal Home Loan 

Bank; the term ‘‘regulated entities’’ 

means, collectively, the Federal 

National Mortgage Association and any 

affiliate thereof; the Federal Home Loan 

Mortgage Corporation and any affiliate 

thereof; and any Federal Home Loan 

Bank. 

Safety and Soundness Act or Act 

means the Federal Housing Enterprises 

Financial Safety and Soundness Act of 

1992, (12 U.S.C. 4501 et seq.), as 

amended by the Housing and Economic 

Recovery Act of 2008 (HERA), Public 

Law No. 110–289, 122 Stat. 2654 (2008). 

§ 1230.3 Prohibition and withholding of 

executive compensation. 

(a) In general. The Director may 

review the compensation arrangements 

for any executive officer of a regulated 

entity or the Office of Finance at any 

time, and shall prohibit the regulated 

entity or the Office of Finance from 

providing compensation to any such 

executive officer that the Director 

determines is not reasonable and 

comparable with compensation for 

employment in other similar businesses 

(including other publicly held financial 

institutions or major financial services 

companies) involving similar duties and 

responsibilities. No regulated entity or 

the Office of Finance shall pay 

compensation to an executive officer 

that is not reasonable and comparable 

with compensation paid by such similar 

businesses involving similar duties and 

responsibilities. 

(b) Factors to be taken into account. 

In determining whether compensation 

provided by a regulated entity or the 

Office of Finance to an executive officer 

is not reasonable and comparable, the 

Director may take into consideration 

any factors the Director considers 

relevant, including any wrongdoing on 

the part of the executive officer, such as 

any fraudulent act or omission, breach 

of trust or fiduciary duty, violation of 

law, rule, regulation, order, or written 

agreement, and insider abuse with 

respect to the regulated entity or the 

Office of Finance. 

(c) Withholding of compensation. 

During a review under paragraph (a) of 

this section, the Director may require a 

regulated entity or the Office of Finance 

to withhold any payment, transfer, or 

disbursement of compensation to an 

executive officer, or to place such 

compensation in an escrow account. 

(d) Prohibition of setting 

compensation by Director. In carrying 

out paragraph (a) of this section, the 

Director may not prescribe or set a 

specific level or range of compensation. 

(e) Prohibition of payment or 

agreement by regulated entity. (1) 

Subject to paragraph (e)(2) of this 

section, a regulated entity or the Office 

of Finance shall not transfer, disburse, 

or pay compensation to any executive 

officer, or enter into an agreement with 

such executive officer, without the 

approval of the Director, for matters 

being reviewed by the Director under 

§ 1230.3. 

(2) For purposes of paragraph (e)(1) of 

this section, the requirement for the 

Director’s prior approval applies only 

to: 

(i) Any written arrangement that: 

(A) Provides an executive officer a 

term of employment for a term of six 

months or more; or 

(B) Provides compensation in 

connection with the termination of 

employment, or establishes a policy of 

compensation in connection with the 

termination of employment. 

(ii) Annual compensation, bonuses, 

and other incentive pay provided by a 

Bank to the president or by an 

Enterprise to the chief executive officer; 

or 

(iii) Any compensation to be provided 

to an executive officer for whom the 

Director has provided the regulated 

entity or the Office of Finance with 

written notice that the compensation is 

subject to a specific review by the 

Director. 

(f) Effect of prior approval of an 

agreement or contract. The Director’s 

approval of an executive officer’s 

termination of employment benefits 

pursuant to § 1230.4 shall not preclude 

the Director from making any 

subsequent determination under this 

section to prohibit and withhold 

executive compensation. 

(g) Form of approval. The Director’s 

approval pursuant to paragraph (e)(1) of 

this section may occur in such form and 

manner as the Director shall provide 

through written notice to the regulated 

entities or the Office of Finance. 

§ 1230.4 Prior approval of termination 

benefits. 

(a) In general. An Enterprise may not 

enter into any agreement or contract to 

provide any payment of money or other 

thing of current or potential value in 

connection with the termination of 

employment of an executive officer 

unless the agreement or contract is 

approved in advance by the Director. 

(b) Covered agreements or contracts. 

An agreement or contract that provides 

for termination payments to an 

executive officer of an Enterprise that 

was entered into before October 28, 

1992, is not retroactively subject to 

approval or disapproval by the Director. 

However, any renegotiation, 

amendment, or change to such an 

agreement or contract entered into on or 

before October 28, 1992, shall be 

considered as entering into an 

agreement or contract that is subject to 

approval by the Director. 

(c) Factors to be taken into account. 

In making the determination whether to 

approve or disapprove termination 

benefits, the Director may consider— 

(1) Whether the benefits provided 

under the agreement or contract are 

comparable to benefits provided under 

such agreements or contracts for officers 

of other public or private entities 

involved in financial services and 

housing interests who have comparable 

duties and responsibilities; 

(2) The factors set forth in § 1230.3(b); 

and 

(3) Such other information as deemed 

appropriate by the Director. 

(d) Exception to prior approval. An 

employment agreement or contract 

subject to prior approval of the Director 

under this section may be entered into 

prior to that approval, provided that 

such agreement or contract specifically 

provides notice that termination 

benefits under the agreement or contract 


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26994 Federal Register / Vol. 74, No. 107 / Friday, June 5, 2009 / Proposed Rules 

shall not be effective and no payments 

shall be made under such agreement or 

contract unless and until approved by 

the Director. Such notice should make 

clear that alteration of benefit plans 

subsequent to FHFA approval under 

this section, which affect final 

termination benefits of an executive 

officer, requires review at the time of the 

individual’s termination from the 

Enterprise and prior to the payment of 

any benefits. 

§ 1230.5 Submission requirements. 

(a) In general. Any information 

required to be submitted for purposes of 

obtaining approval of the Director under 

this part must be provided in a timely 

fashion by each regulated entity and the 

Office of Finance to the Director or as 

otherwise specified in guidance or other 

issuances of FHFA. 

(b) Information relating to prohibition 

and withholding of executive 

compensation. The following materials, 

unless otherwise specified, shall be 

provided by each regulated entity and 

the Office of Finance to FHFA, in a 

format deemed appropriate by FHFA, 

for review within one week after the 

specified action or event— 

(1) Resolutions, with no redactions, 

including supporting materials and 

related reports, from meetings of the 

board committee responsible for 

compensation when the committee 

takes any action regarding a 

compensation matter that under the 

committee’s authority is effective 

without further action by the committee 

or the board of directors of the regulated 

entity; 

(2) Resolutions, with no redactions, 

including supporting materials and 

related reports, not otherwise provided 

to FHFA under paragraph (b)(1) of this 

section, from meetings of the board of 

directors relating to executive 

compensation when the board of 

directors takes any action regarding a 

compensation matter that is effective 

without any further action by the board 

of directors; 

(3) Minutes, with no redactions, 

including supporting materials and 

related reports, when adopted by the 

committee responsible for compensation 

and those portions of minutes of the 

board of directors, including supporting 

materials and related reports, related to 

compensation matters, except for 

materials previously provided under 

paragraphs (b)(1) or (2) of this section; 

(4) General benefit plans applicable to 

executive officers when adopted or 

amended; 

(5) Any study conducted by or on 

behalf of a regulated entity or the Office 

of Finance with respect to compensation 

of executive officers, when delivered; 

(6) With respect to an Enterprise, the 

annual compensation report to Congress 

when submitted to Congress; 

(7) A current organizational chart 

when changes occur affecting the status 

of executive officers under this part; 

(8) Proxy statements when issued; and 

(9) Such other information as deemed 

appropriate by the Director. 

(c) Timing of submissions related to 

prior approval of termination benefits. 

An Enterprise shall provide all relevant 

information to FHFA, unless already 

provided under paragraph (b) of this 

section: 

(1) Except as provided in § 1230.4(d), 

before an Enterprise enters into any 

agreement or contract with a new or 

existing executive officer that includes 

termination benefits; 

(2) Before an Enterprise makes any 

extension or other amendment to such 

an agreement or contract; 

(3) Before an Enterprise takes any 

other action to provide termination 

benefits to a specific executive officer, 

regardless of how effected; or 

(4) When an Enterprise makes any 

changes to the termination provisions of 

any compensation or benefit program 

affecting multiple executive officers. 

(d) Specific information required for 

calculation of termination benefits. For 

submissions relating to termination 

benefits, a regulated entity and the 

Office of Finance shall submit to FHFA, 

in a format deemed appropriate by 

FHFA, the following materials: 

(1) The details of the agreement or 

program change, e.g., employment 

agreements, termination agreements, 

severance agreements, and portions of 

minutes of the board of directors 

relating to executive compensation and 

minutes and supporting materials of the 

committee of the board of directors 

responsible for compensation; 

(2) All information, data, assumptions 

and calculations for the potential total 

dollar value or range of values of the 

benefits provided, such as, but not 

limited to salary, bonus opportunity, 

short-term incentives, long-term 

incentives, special incentives and 

pension provisions or related contract or 

benefit terms; and 

(3) Such other information deemed 

appropriate by the Director, except that 

information required to be submitted 

under paragraph (c) of this section or 

under this paragraph shall not include 

information on benefit plans of general 

applicability. 

§ 1230.6 Temporary power in connection 

with executive compensation. 

Notwithstanding any provision of this 

part, effective July 30, 2008, through 

December 31, 2009, the Director may 

approve, disapprove, or modify the 

executive compensation of a regulated 

entity. For purposes of this section, the 

term ‘‘executive compensation’’ has the 

same meaning as defined under 

Regulation S–K, 17 CFR part 229. 

§ 1230.7 Compliance. 

Failure by a regulated entity or the 

Office of Finance to comply with the 

requirements of this part may result in 

supervisory action by FHFA. Such 

action may be taken in the form 

determined appropriate by the Director 

and may be taken separately from, in 

conjunction with, or in addition to any 

other corrective or remedial action, 

including an enforcement action to 

require an individual to make 

restitution to or reimbursement of 

excessive compensation or 

inappropriately paid termination 

benefits. 

CHAPTER XVII—OFFICE OF FEDERAL 

HOUSING ENTERPRISE OVERSIGHT, 

DEPARTMENT OF HOUSING AND URBAN 

DEVELOPMENT 

PART 1770—[REMOVED] 

2. Remove part 1770. 

May 29, 2009. 

James B. Lockhart III, 

Director, Federal Housing Finance Agency. 

[FR Doc. E9–13117 Filed 6–4–09; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2009–0509; Directorate 

Identifier 2009–CE–029–AD] 

RIN 2120–AA64 

Airworthiness Directives; PILATUS 

Aircraft Ltd. Model PC–7 Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for the 

products listed above. This proposed 

AD results from mandatory continuing 

airworthiness information (MCAI) 

originated by an aviation authority of 

another country to identify and correct 

an unsafe condition on an aviation 

product. The MCAI describes the unsafe 

condition as: 

This Airworthiness Directive (AD) is 

prompted due to reported corrosion on the 


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