Source: http://thefederalregister.com/2009/08/04/E9-18567.html
Timestamp: 2018-10-22 03:04:02
Document Index: 167652839

Matched Legal Cases: ['arts 1273', '§ 1101', '§ 1102', '§ 1302', 'art 925', 'art 941', '§ 1204', 'arts 12', 'arts 966', '§ 1201', 'art 1273', 'art 1273', '§ 1273', 'art 989', 'art 12', 'art 1274', '§ 1274', 'art 1274', 'art 985', 'ART 985', 'ART 1273', 'art 1273', '§ 1273', '§ 1273', 'art 1273', '§ 1273', 'arts 965', '§ 1273', '§ 1273', 'art 995', 'art 996', 'art 1273', '§ 966', '§ 1273', '§ 1273', '§ 917', '§ 917', 'ART 1274', '§ 1273']

Federal Register | Board of Directors of Federal Home Loan Bank System Office of
12 CFR Parts 1273, 1274
SUMMARY: Governed by the Federal Housing Finance Agency's (FHFA) regulations, the Federal Home Loan Bank System's (System) Office of Finance, issues debt ("consolidated obligations") on which the Federal Home Loan Banks (Banks) are jointly and severally liable and publishes combined financial reports on the Banks so that investors in the consolidated obligations can assess the strength of the System that stands behind them. The Office of Finance (OF) is governed by a board of directors, the composition and functions of which are determined by FHFA's regulations. The FHFA's experience with the System and with the OF's combined financial reports during the recent period of market stress suggests that the OF and the System could benefit from a reconstituted and strengthened board. This proposed regulation is intended to achieve that.
DATES: Comments on the proposed regulation must be received on or before October 5, 2009. For additional information,see SUPPLEMENTARY INFORMATION.
ADDRESSES: *U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service:The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA30, Federal Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington, DC 20552.
*Hand Delivery/Courier:The hand delivery address is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA30, 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 atRegComments@FHFA.gov.Please include "RIN 2590-AA30" in the subject line of the message.
FOR FURTHER INFORMATION CONTACT: Joseph A. McKenzie, 202-408-2845, Division of Federal Home Loan Bank Regulation, Federal Housing Finance Agency, 1625 Eye Street, NW., Washington, DC 20006; or Neil Crowley, Deputy General Counsel, 202-343-1316, or Thomas E. Joseph, Senior Attorney-Advisor, 202-414-3095, Office of General Counsel, 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.
The FHFA invites comments on all aspects of the proposed regulation, and will adopt a final regulation with appropriate changes after taking all comments into consideration. Copies of all comments will be posted on the Internet Web site athttps://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) 414-6924.
II. Background A. Creation of the Federal Housing Finance Agency and Recent Legislation
Effective July 30, 2008, the Housing and Economic Recovery Act of 2008 (HERA), Public Law 110-289, 122 Stat. 2654, transferred the supervisory and oversight responsibilities of the Office of Federal Housing Enterprise Oversight (OFHEO) over the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises), the oversight responsibilities of the Federal Housing Finance Board (FHFB or Finance Board) over the Banks and the Office of Finance (OF) (which acts as the Banks' fiscal agent) and certain functions of the Department of Housing and Urban Development to a new independent executive branch agency, the FHFA.See id.at § 1101, 122 Stat. 2661-62 (amending12 U.S.C. 4511). The FHFAis responsible for ensuring that the Enterprises and the Banks operate in a safe and sound manner, including that they maintain adequate capital and internal controls, that their activities foster liquid, efficient, competitive and resilient national housing finance markets, and that they carry out their public policy missions through authorized activities.See id.at § 1102, 122 Stat. 2663-64. The Enterprises, the Banks, and the OF continue to operate under regulations promulgated by OFHEO and the FHFB until the FHFA issues its own regulations.See id.at §§ 1302, 1313, 122 Stat. 2795, 2798.
The twelve Banks are instrumentalities of the United States organized under the Federal Home Loan Bank Act (Bank Act).1 See12 U.S.C. 1423, 1432(a). The Banks are cooperatives; only members of a Bank may purchase the capital stock of a Bank, and only members or certain eligible housing associates (such as State housing finance agencies) may obtain access to secured loans, known as advances or other products provided by a Bank.See12 U.S.C. 1426(a)(4), 1430(a), 1430b. Each Bank is managed by its own board of directors and serves the public interest by enhancing the availability of residential mortgage and community lending credit through its member institutions.See12 U.S.C. 1427. Any eligible institution (generally a Federally insured depository institution or State-regulated insurance company) may become a member of a Bank if it satisfies certain criteria and purchases a specified amount of the Bank's capital stock.See12 U.S.C. 1424; 12 CFR part 925.
1Each Bank is generally referred to by the name of the city in which it is located. The twelve Banks are located in: Boston, New York, Pittsburgh, Atlanta, Cincinnati, Indianapolis, Chicago, Des Moines, Dallas, Topeka, San Francisco, and Seattle.
As government-sponsored enterprises (GSEs), the Banks are granted certain privileges under Federal law. In light of those privileges and their status as GSEs, the Banks typically can borrow funds at spreads over the rates on U.S. Treasury securities of comparable maturity lower than most other entities. The Banks pass along a portion of their GSE funding advantage to their members—and ultimately to consumers—by providing advances and other financial services at rates that would not otherwise be available to their members. Consolidated obligations (COs), consisting of bonds and discount notes, are the principal funding source for the Banks. The OF issues all COs on behalf of the twelve Banks. Although each Bank is primarily liable for the portion of consolidated obligations corresponding to the proceeds received by that Bank, each Bank is also jointly and severally liable with the other eleven Banks for the payment of principal and interest on all COs.See12 CFR 966.9.
The OF was one of a number of joint Bank offices established by regulation by the former Federal Home Loan Bank Board (FHLBB), a predecessor agency to the FHFA.See65 FR 324, 326 (Jan. 4, 2000). The OF was originally formed from two other joint Bank Offices, the Office of System Finance and the Office of Fiscal Agent. Among other things, OF was assigned the duties previously vested in the Fiscal Agent which included facilitating the issuance of COs.Id.
In 1989, as part of the amendments made to the Bank Act by the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA),2 all joint offices of the Bank System other than the OF were abolished. The FHLBB was also abolished and its regulatory authority over the Bank System, including OF, was transferred to the Finance Board. The FHLBB's regulations were also transferred to the Finance Board.Id.In 1992, the Finance Board reorganized the OF as fiscal agent of the Finance Board for issuing COs under section 11(c) of the Bank Act, and set forth other duties for OF.3 See57 FR 11429 (Apr. 3, 1992) (adopting12 CFR part 941). The regulation also instituted a three-member board of directors for the oversight and management of the OF, made up of two Bank presidents and a private United States citizen with demonstrated expertise in financial markets.Id.
2Public Law 101-73, 103 Stat. 183 (Aug. 9, 1989).
3As it existed in 1992, section 11(c) of the Bank Act provided the Finance Board authority to issue the debt on which the Banks were jointly and severally liable. 12 U.S.C. 1431(c)(1992). HERA recently amended this provision and removed authority from the regulator to issue such debt on behalf of the Banks and provided the OF as agent for the Banks with authority to issue the COs.See§ 1204(3)(B), Public Law 110-289, 122 Stat. 2786.
In January 2000, the Finance Board proposed changes to its regulations to alter how COs were issued under section 11of the Bank Act, reorganize the OF and its board of directors, and expand the duties of the OF, including assigning OF the duty to prepare the Bank System combined annual and quarterly financial reports.See65 FR 324. As proposed, the January 2000 regulation transferred authority for issuance of the Bank COs from the Finance Board, which had been issuing debt pursuant to then-existing authority under section 11(c) of the Bank Act, to the Banks themselves pursuant to authority under section 11(a) of the Bank Act and subject to the requirement, among other things, that all such debt issued by the Banks be the joint and several obligations of all twelve Banks and be issued through OF as their agent.Id.Under the proposed regulation, the Finance Board retained the option to issue COs itself under section 11(c) of the Bank Act at any point in the future.
The Finance Board also believed that “[a]s a natural and necessary adjunct to the issuance of COs, the Banks also should be responsible for the preparation of the disclosure documents that facilitate CO issuance and for the periodic combined financial statements for the Bank System.”Id.at 325. The Finance Board therefore proposed that OF, as the only joint Bank System office and existing agent for CO issuance, be assigned the duty of preparing the Bank System's combined financial reports.Id.The Finance Board also proposed to codify disclosure standards in the regulation, many of which had been set forth in a Finance Board policy statement. Other duties related to debt issuance and management were also proposed to be assigned to OF.
In light of the expanded duties assigned to OF as well as amendments to the Bank Act that had recently been made by the Gramm-Leach-Bliley Act (GLB Act),4 the Finance Board also thought it was appropriate to alter both the size and composition of the OF board.Id.at 326. The Finance Board had two main goals in proposing its changes. First, it wanted to build on the governance structure in the Bank Act by which the Banks should be provided greater autonomy to manage their affairs. Second, it wanted to assure each Bank had representation on the OF board to help achieve operational goals and wanted to assure that the OF board itself had directors with experience and qualification to help OF meet the evolving needs of the Bank System.
4Public Law 106-102, 113 Stat. 1338 (Nov. 12, 1999).
Under the 2000 proposal, the OF board of directors would have been expanded to 24 members, 12 of whom would have been appointed by the Banks, 6 of whom would have been elected by Bank members and 6 of whom would have been appointed by the Finance Board. The Finance Board also proposed that the chair and vice chair of the board be appointed by the Finance Board. The proposal would have required the OF board of directorsto establish an audit committee with duties similar to those established under the regulations for the Banks' audit committees, an executive committee, and a committee to coordinate the issuance and servicing of COs.
After consideration of the comments on the proposed regulation, the Finance Board adopted many of the changes including those authorizing the Banks to issue COs under section 11(a) of the Bank Act and assigning to OF the function of preparing the Bank System's combined financial reports, along with additional duties.See65 FR 36290 (June 7, 2000) (adoptingamong other parts 12 CFR parts 966 and 985). The Finance Board did not, however, adopt the proposed changes to the OF board structure or composition. Instead, the new regulation incorporated the prior three-person board structure. The Finance Board also specified some additional duties for the OF board consistent with the additional functions that had been assigned to OF over the years. Since the 2000 rulemaking, no significant changes to the regulations governing the OF have been proposed.
Section 1201 of HERA requires the Director, when promulgating regulations relating to the Banks, to consider the following differences between the Banks and the Enterprises: Cooperative ownership structure; Mission of providing liquidity to members; Affordable housing and community development mission; capital structure; and Joint and several liability.See§ 1201 Public Law 110-289, 122 Stat. 2782-83 (amending12 U.S.C. 4513). The Director also may consider any other differences that are deemed appropriate. In preparing this proposed regulation, the FHFA considered the differences between the Banks and the Enterprises as they relate to the above factors. The FHFA requests comments from the public about whether differences related to these factors should result in any revisions to the proposal.
III. The Proposed Regulation A. Reasons for the Proposed Regulation Changes
Proposed part 1273 would provide regulations which re-establish the OF and set forth its duties, and functions. Under part 1273 as proposed, the specification of the OF's authority and functions would remain substantially unchanged, although the language in the regulations would be altered to reflect the fact that the FHFA is no longer authorized to issue debt on behalf of the Banks and the OF would thus be acting only as a agent for the Banks with respect to its debt issuance duties.Seen.3supra.The Banks would also remain responsible for jointly funding the OF, and the process and requirements for providing such funding would not change to any great degree. Under proposed § 1273.5, however, the formula for calculating each Bank'spro ratashare of the reimbursement owed the OF would no longer be based on a formula set forth in the regulation. Instead, the OF board of directors would be allowed to establish any reasonable formula, subject to the right of the FHFA to review such formula and require changes to it.
As proposed, the specific requirements now set forth in 12 CFR part 989 would be readopted in part 12 CFR part 1274 almost in their entirety. The proposed regulation would make some conforming changes in § 1274.2 to reflect the fact that the FHFA is proposing an audit committee to be established for OF which would have a composition that is different from that of the OF board of directors as a whole. In addition, current section 989.4 of this title, which relates to voluntary Bank disclosure of financials, would not be re-adopted as part of the proposed part 1274 regulations. This particular provision pre-dated the Banks' registration of their stock with the Securities and Exchange Commission (SEC). Given that an individual Bank's disclosure of financial information is now subject to the SEC's regulations and oversight, the FHFA does not see a need to maintain this provision going forward.
The proposed regulation does not contain any collections of information pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501et seq.). Therefore, the FHFA has not submitted any information to the Office of Management and Budget for review.
The proposed regulation applies only to the Banks, which do not come within the meaning of small entities as defined in the Regulatory Flexibility Act (RFA).See5 U.S.C. 601(6). Therefore in accordance with section 605(b) of the RFA, the FHFA certifies that this proposed regulation, if promulgated as a final regulation, will not have significant economic impact on a substantial number of small entities.
List of Subjects 12 CFR Part 985
Federal home loan bank, Securities.
Accounting, Federal home loan banks, financial disclosure.
Federal home loan banks, securities.
CHAPTER IX—FEDERAL HOUSING FINANCE BOARD Subchapter K—Office of Finance PART 985—THE OFFICE OF FINANCE
CHAPTER XII—FEDERAL HOUSING FINANCE AGENCY Subchapter D—Federal Home Loan Banks
PART 1273—OFFICE OF FINANCE Sec. 1273.1 Definitions. 1273.2 Authority of the OF. 1273.3 Functions of the OF. 1273.4 FHFA oversight. 1273.5 Funding of the OF. 1273.6 Debt management duties of the OF. 1273.7 Structure of the OF board of directors. 1273.8 General duties of the OF board of directors. 1273.9 Audit committee. Appendix A to Part 1273—Exceptions to the General Disclosure Standards Authority:
Audit Committeemeans the OF Independent Directors acting as the committee established in accordance with § 1273.9 of this part.
Bankwritten in title case, means a Federal Home Loan Bank established under section 12 of the Bank Act (12 U.S.C. 1432).
Bank Systemmeans the Federal Home Loan Bank System, consisting of the twelve Banks and the Office of Finance.
Chairmeans the chairperson of the board of directors of the Office of Finance.
Chief Executive OfficerorCEOmeans the chief executive officer of the Office of Finance.
Consolidated obligationsmeans any bond, debenture or note on which the Banks are jointly and severally liable and which was issued under section 11 of the Bank Act (12 U.S.C. 1431) and any implementing regulations, whether or not such instrument was originally issued jointly by the Banks or by the Federal Housing Finance Board on behalf of the Banks.
Financing CorporationorFICOmeans the Financing Corporation established and supervised by the FHFA under section 21 of the Bank Act (12 U.S.C. 1441).
Generally accepted accounting principlesorGAAPmeans accounting principles generally accepted in the United States.
Independent Directormeans a member of the OF board of directors who meets the qualifications set forth in § 1273.7(a)(2) of this part.
NRSROmeans a credit rating organization registered as a Nationally Recognized Statistical Rating Organization with the Securities and Exchange Commission.
Office of FinanceorOFmeans the Office of Finance, a joint office of the Banks established under this part 1273 and referenced in the Bank Act and the Safety and Soundness Act.
Resolution Funding CorporationorREFCORPmeans the Resolution Funding Corporation established by section 21B of the Bank Act (12 U.S.C. 1441b).
Safety and Soundness Actmeans the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4501et seq.), as amended.
(a)General.The OF shall enjoy such incidental powers under section 12(a) of the Bank Act (12 U.S.C. 1432(a)), as are necessary, convenient and proper to accomplish the efficient execution of its duties and functions pursuant to this part, including the authority to contract with a Bank or Banks for the use of Bank facilities or personnel in order to perform its functions or duties.
(b)Agent.The OF, in the performance of its duties, shall have the power to act on behalf of the Banks in issuing consolidated obligations and in paying principal and interest due on the consolidated obligations, or other obligations of the Banks.
(c)Assessments.The OF shall have authority to assess the Banks for the funding of its operations in accordance with § 1273.5 of this part.
(a)Joint debt issuance.Subject to parts 965 and 966 of this title, and this part, the OF as agent shall offer, issue and service (including making timely payments on principal and interest due) consolidated obligations.
(b)Preparation of combined financial reports.The OF shall prepare and issue the combined annual and quarterly financial reports for the Bank System in accordance with the requirements of § 1273.6(b) and Appendix A of this part, using consistent accounting policies and procedures as established under § 1273.9 of this part.
(c)Fiscal agent.The OF shall function as the fiscal agent of the Banks.
(d)Financing Corporation and Resolution Funding Corporation.The OF shall perform such duties and responsibilities for FICO as may be required under part 995 of this title, or for REFCORP as may be required under part 996 of this title or authorized by the FHFA pursuant to section 21B(c)(6)(B) of the Bank Act (12 U.S.C. 1441b(c)(6)(B)).
(a)Oversight and enforcement actions.The FHFA shall have the same regulatory oversight authority over the OF, the OF board of directors, the officers, employees, agents, attorneys, accountants, or other OF staff, as it has over a Bank and its respective directors, officers, employees, agents, attorneys, accountants, or other staff.
(b)Examinations.Pursuant to section 20 of the Bank Act (12 U.S.C. 1440), the FHFA shall examine the OF, all funds and accounts that may be established pursuant to this part 1273, and the operations and activities of the OF, as provided for in the Bank Act, the Safety and Soundness Act, or any regulations promulgated pursuant thereto.
(c)Combined financial reports.The FHFA shall determine whether a combined Bank System annual or quarterly financial report complies with the standards of this part.
(a)Generally.The Banks are responsible for jointly funding all the expenses of the Office of Finance, including the costs of indemnifying the members of the OF board of directors, the Chief Executive Officer, and other officers and employees of the OF, as provided for in this part.
(b)Funding policies.(1) At the direction of and pursuant to policiesand procedures adopted by the OF board of directors, the Banks shall periodically reimburse the OF in order to maintain sufficient operating funds under the budget approved by the OF board of directors. The OF operating funds shall be:
(2) Each Bank's respectivepro ratashare of the reimbursement described in paragraph (b)(1) of this section shall be based on a reasonable formula approved by the OF board of directors. Such formula shall be subject to the review of the FHFA, and the OF board of directors shall make any changes to the formula as may be ordered by the FHFA from time to time.
(c)Alternative funding method.With the prior approval of the FHFA, the OF board of directors may, by contract with a Bank or Banks, choose to be reimbursed through a fee structure, in lieu of or in addition to assessment, for services provided to the Bank or Banks.
(d)Prompt reimbursement.Each Bank from time to time shall promptly forward funds to the OF in an amount representing its share of the reimbursement described in paragraph (b) of this section when directed to do so by the Chief Executive Officer pursuant to the procedures of the OF board of directors.
(e)Indemnification expenses.All expenses incident to indemnification of the members of the OF board of directors, the Chief Executive Officer, and other officers and employees of the OF shall be treated as an expense of the OF to be reimbursed by the Banks under the provisions of this part.
(f)Operating funds segregated.Any funds received by the OF from the Banks pursuant to this section for OF operating expenses promptly shall be deposited into one or more accounts and shall not be commingled with any proceeds from the sale of consolidated obligations in any manner.
(a)Issuing and servicing of consolidated obligations.The OF shall issue and service (including making timely payments on principal and interest due, subject to §§ 966.8 and 966.9 of this title) consolidated obligations pursuant to and in accordance with the policies and procedures established by the OF board of directors under this part.
(b)Combined financial reports requirements.The OF, under the oversight of the Audit Committee, shall prepare and distribute the combined annual and quarterly financial reports for the Bank System in accordance with the following requirements:
(c)Capital markets data.The OF shall provide capital markets information concerning debt to the Banks.
(d)NRSROs.The OF shall manage the relationships with NRSROs in connection with their rating of consolidated obligations.
(e)Research.The OF shall conduct research reasonably related to the issuance or servicing of consolidated obligations.
(f)Monitor Banks' credit exposure.The OF shall timely monitor, and compile relevant data on, each Bank's and the Bank System's unsecured credit exposure to individual counterparties.
(a)Membership.The OF board of directors shall consist of fifteen to seventeen part-time members as follows:
(1) The twelve Bank presidents,ex officio,provided that if the presidency of any Bank becomes vacant, the person temporarily fulfilling the duties of president of that Bank may sit on the OF board of directors until the presidency is filled permanently; and
(b)Terms.(1) Except as provided in paragraphs (b)(2) and (c)(1) of this section, each Independent Director shall serve for five-year terms (which shall be staggered so that no more than one Independent Director seat would be scheduled to become vacant in any one year), and shall be subject to removal or suspension or other enforcement action in accordance with § 1273.4(a) of this section. An Independent Director may not serve more than two full, consecutive terms. Time served by a private citizen member of the OF Board pursuant to an appointment made prior to the effective date of this part shall not count as a term for purposes of this restriction.
(2) The OF board of directors shall fill any vacancy among the Independent Directors occurring prior to the scheduled end of a term by majority vote, subject to the FHFA's review of, and non-objection to, the new Independent Director. The OF board of directors shall provide the FHFA with relevant biographic and background information, including information demonstrating that the new Independent Director meets the requirements of paragraph (a)(2) of thissection, at least 20 business days before the person assumes any duties as a member of the OF board of directors. A person elected under this paragraph to fill a vacancy on the OF board of directors shall serve only for the remainder of the term associated with the vacant directorship.
(c)Initial selection of Independent Directors.(1) As soon as practicable after the effective date of this regulation, the FHFA shall fill the initial Independent Director positions by appointment. The Independent Directors shall be appointed for such periods of time, not to exceed five years, to assure the terms are staggered in accordance with paragraph (b)(1) of this section.
(d)Election of Independent Directors after the initial terms.Once the terms of the Independent Directors initially appointed by the FHFA expire or the positions otherwise become vacant, the Independent Directors subsequently shall elected by majority vote of the OF board of directors, subject to FHFA's review of, and non-objection to, each new Independent Director. The OF board of directors shall provide the FHFA with relevant biographic and background information, including information demonstrating that the new Independent Director meets the requirements of paragraph (a)(2) of this section, at least 20 business days before the person assumes any duties as a member of the OF board of directors. If the OF board of directors, in the FHFA's judgment, fails to elect a suitably qualified person, the FHFA may appoint some other person who meets the requirements of paragraph (a)(2) of this section.
(e)Initial Selection of Chair and Vice Chair.The first Chair and Vice Chair of the OF board of directors after the effective date of this regulation shall be appointed by the FHFA. The Chair shall be selected from among the Independent Directors appointed under paragraph (c)(1) of this section. The Vice-chair shall be selected from among all OF board directors.
(f)Subsequent Election of Chair and Vice-Chair.After the terms of the persons selected under paragraph (e) of this section expire or the positions otherwise become vacant:
(g)Committees.In addition to the Audit Committee required under § 1273.9 of this part, the OF board of directors may establish other committees, including an Executive Committee. The duties and powers of such committee, including any powers delegated by the OF board of directors, shall be specified in the by-laws of the board of directors or the charter of the committee, which shall be subject to review and approval by the FHFA.
(h)Compensation.(1) The Bank presidents shall not receive any additional compensation or reimbursement as a result of their service as a director of the OF board.
(i)Indemnification.The OF shall indemnify its directors, the CEO, and other officers and employees of the OF under such terms and conditions as shall be determined by the OF board of directors,provided thatsuch terms and conditions are consistent with the terms and conditions of indemnification of directors, officers, and employees of the Bank System generally.
(j)Delegation.In addition to any delegation to a committee allowed under paragraph (g) of this section, the OF board of directors may delegate any of its authority or duties to any employee of the OF in order to enable OF to carry out its functions, provided that such delegation remains subject to the review of the FHFA, and the FHFA reserves the right in its sole discretion to require the OF board of directors to withdraw or change the scope of the delegation.
(k)Outside staff and consultants.In carrying out its duties and responsibilities, the OF board of directors, or any committee thereof, shall have authority to retain staff and outside counsel, independent accountants, or other outside consultants at the expense of the OF.
(a)General.(1)Conduct of business.Each director shall have the duties described in § 917.2(b) of this title, as appropriate.
(2)Bylaws.The OF board of directors shall adopt bylaws in accordance with the provisions of § 917.10 of this title.
(b)Meetings and quorum.The OF board of directors shall conduct its business by majority vote of its members at meetings convened in accordance with its bylaws, and shall hold no fewer than six in-person meetings annually. Due notice shall be given to the FHFA by the Chair prior to each meeting. A quorum, for purposes of meetings of the OF board of directors, shall not be less than ten members.
(c)Duties regarding COs.The OF board of directors shall oversee the establishment of policies regarding COs that shall:
(d)Other duties.The OF board of directors shall:
(e)No rights created.Nothing in this part shall create or be deemed to create any rights in any third party.
(a)Composition.The Independent Directors shall serve as the Audit Committee.
(b)Responsibilities.(1) The Audit Committee shall be responsible for overseeing the audit function of the OF and the preparation and accuracy of the Bank System's combined financial reports.
(c)No delegation.The Audit Committee may not delegate the responsibilities assigned to it under this section to any person, or to any other committee or sub-committee of the OF board of directors.
A. Related-party transactions.Item 404 of Regulation S-K, 17 CFR 229.404, requires the disclosure of certain relationships and related party transactions. In light of the cooperative nature of the Bank System, related-party transactions are to be expected, and a disclosure of all related-party transactions that meet the threshold would not be meaningful. Instead, the combined annual report will disclose the percent of advances to members an officer of which serves as a Bank director, and list the top ten holders of advances in the Bank System and the top five holders of advances by Bank, with a further disclosure indicating which of these members had an officer that served as a Bank director. The combined financial report will also disclose the top ten holders of advances in the Bank System by holding company, where the advances of all affiliates within a holding company are aggregated.
B. Biographical information.The biographical information required by Items 401 and 405 of Regulation S-K, 17 CFR 229.401 and 405, will be provided only for members of the OF board of directors, including the Bank presidents, the chair and vice chair of the board of directors of each Bank, and the Chief Executive Officer of OF.
C. Compensation.The information on compensation required by Item 402 of Regulation S-K, 17 CFR 229.402, will be provided only for Bank presidents and the CEO of the OF. Since stock in each Bank trades at par, the OF will not include the performance graph specified in Item 402(1) of Regulation S-K, 17 CFR 229.402(1).
D. Submission of matters to a vote of stockholders.No information will be presented on matters submitted to shareholders for a vote, as otherwise required by Item 4 of the SEC's form 10-K, 17 CFR 249.310. The only item shareholders vote upon is the annual election of directors.
E. Exhibits.The exhibits required by Item 601 of Regulation S-K, 17 CFR 229.601, are not applicable and will not be provided.
F. Per share information.The statement of financial information required by Items 301 and 302 of Rule S-K, 17 CFR 229.301 and 302, is inapplicable because the shares of the Banks are subscription capital that trades at par, and the shares expand or contract with changes in member assets or advance levels.
G. Beneficial ownership.Item 403 of Rule S-K, 17 CFR 229.403, requires the disclosure of security ownership of certain beneficial owners and management. The combined financial report will provide a listing of the ten largest holders of capital stock in the Bank System and a listing of the five largest holders of capital stock by Bank. This listing will also indicate which members had an officer that served as a director of a Bank. The combined financial report will also disclose the top ten holders of Bank stock in the Bank System by holding company, where the Bank stock of all affiliates within a holding company is aggregated.
PART 1274—FINANCIAL STATEMENTS OF THE BANKS Sec. 1274.1 Definitions. 1274.2 Audit requirements. 1274.3 Requirements to provide financial and other information to the FHFA and the OF. Authority:
Auditmeans an examination of the financial statements by an independent accountant in accordance with generally accepted auditing standards for the purpose of expressing an opinion thereon.
Audit reportmeans a document in which an independent accountant indicates the scope the audit made and sets forth an opinion regarding the financial statement taken as a whole, or an assertion to the effect that an overall opinion cannot be expressed. When anoverall opinion cannot be expressed, the reasons therefor shall be stated.
Office of FinanceorOFhas the same meaning as set forth in § 1273.1 of this chapter.
Dated: July 29, 2009. James B. Lockhart III, Director, Federal Housing Finance Agency.