Title: PROPOSED RULE--Disclosure to Shareholders--12 CFR Part 620
Issue Date: 01/12/1993
Federal Register Cite: 58 FR 3872
FARM CREDIT ADMINISTRATION
12 CFR Part 620
Disclosure to Shareholders
ACTION: Proposed rule.
SUMMARY: The Farm Credit Administration (FCA) proposes to amend § 620.2(b)(3), which requires, in part, that quarterly reports filed with the FCA under part 620 be certified by each member of the board of directors (board) of filing Farm Credit System (FCS) institutions. Under the proposed regulations, at least one of the following directors of the board of a filing institution would be required to certify quarterly reports on behalf of the entire board: (1) The chairperson of the board; (2) the chairperson of the audit committee; or (3) a director designated by the chairperson of the board. Other board members of the institution would no longer be required to sign quarterly reports, unless such directors elect otherwise.
DATES: Written comments must be received on or before February 11, 1993.
ADDRESSES: Comments must be submitted in writing (in triplicate) to Patricia W. DiMuzio, Division Director, Regulation Development Division, Office of Examination, Farm Credit Administration, McLean, Virginia 22102-5090. Copies of all communications received will be available for examination by interested parties in the Regulation Development Division, Farm Credit Administration.
FOR FURTHER INFORMATION CONTACT:
Tong-Ching Chang, Staff Accountant, Technical and Operations Division, Office of Examination, Farm Credit Administration, McLean, Virginia 22102-5090, (703) 883-4483, TDD (703) 883-4444, or
William L. Larsen, Senior Attorney, Regulatory Operations Division, Office of General Counsel, Farm Credit Administration, McLean, Virginia 22102-5090, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: In connection with amendments to part 620, Disclosure to Shareholders, undertaken to implement the 1987 amendments (Pub. L. 100-233) to the Farm Credit Act of 1971 (1971 Act), 12 U.S.C. 2001 et seq., the FCA amended § 620.2(b)(3) to require each member of the board of an FCS institution to certify quarterly reports filed with the FCA within 45 days after the end of each reporting quarter. See 56 FR 29412 (June 27, 1991). After the amended regulations became effective on September 10, 1991, the FCA received letters from several FCS institutions indicating that requiring directors to certify quarterly reports is burdensome and creates a logistical problem for their quarterly report filings. The institutions stated that, due to the frequency and timing of their board meetings and the geographic dispersion of board members, directors cannot certify quarterly reports in time to file the reports by the due dates required by the regulations.
To address these logistical and timing problems in certification of quarterly reports, the FCA proposes to revise § 620.2(b)(3) expanding the options available to institutions for compliance with quarterly report director certification requirements. The proposed amendment would require quarterly reports filed with the FCA to be certified by, at a minimum, one of the [*3873] following directors on behalf of the entire board of the filing institution: (1) The chairperson of the board; (2) the chairperson of the audit committee; or (3) a board member designated by the chairperson of the board. Other directors of the filing institution would no longer be required to sign quarterly reports filed with the FCA.
Under proposed § 620.2(b)(3)(i), individual directors may continue to certify quarterly reports if they so choose, or, by formal board action, they may delegate the obligation of certifying quarterly reports to one or more directors. After formal board action authorizing the designation, the designated signing director(s) may certify quarterly reports on behalf of the nonsigning members of the board. This could eliminate the need for each director to certify quarterly reports.
The FCA continues to believe that a requirement for directors' certification of quarterly reports is appropriate because it provides a mechanism to ensure that board members are regularly involved in their institution's operations and are monitoring its performance. Certification helps ensure that directors maintain the level of awareness of the institution's activities and financial condition needed to carry out the board members' fiduciary responsibility as directors. While the board may delegate day-to-day operations to management, it remains responsible for ensuring that the institution operates within the board's prescribed policies, in compliance with applicable laws and regulations, and in a safe and sound manner. The delegation does not relieve directors of the need to be informed about their institution's activities and financial condition.
Since directors are accountable, to the best of their knowledge and belief, for the institution's affairs, whether directors certify the institution's periodic reports or not does not affect directors' responsibility as it exists under applicable laws and regulations. Accordingly, the boards of FCS institutions should have policies in place to ensure timely review by all directors prior to filing periodic reports. Within this framework of director responsibility, the proposed rule should alleviate the regulatory burden of FCS institutions and their directors without compromising the regulatory concern regarding directors' accountability embodied in the requirement of § 620.2(b)(3).
List of Subjects in 12 CFR Part 620
Accounting, Agriculture, Banks, Banking, Organization and functions (Government agencies), Credit, Reporting and recordkeeping requirements, Rural areas.
For the reasons stated in the preamble, part 620 of chapter VI, title 12 of the Code of Federal Regulations is proposed to be amended to read as follows:
PART 620 -- DISCLOSURE TO SHAREHOLDERS
1. The authority citation for part 620 is revised to read as follows:
Authority: Secs. 5.17, 5.19, 8.11 of the Farm Credit Act; 12 U.S.C. 2252, 2254, 2279aa-11; sec. 424 of Pub. L. 100-233, 101 Stat. 1568, 1656.
Subpart A -- General
2. Section 620.2 is amended by revising paragraph (b)(3) to read as follows:
§ 620.2 Preparing and filing the reports.
* * * * *
(b) * * *
(3)(i) For each quarterly report filed under this section, each member of the board or, at a minimum, one of the following board members formally designated by action of the board to certify quarterly reports on behalf of individual board members: The chairperson of the board; the chairperson of the audit committee; or a board member designated by the chairperson of the board.
(ii) For all other reports, each member of the board.
* * * * *
Dated: January 6, 1993.
Curtis M. Anderson,
Secretary, Farm Credit Administration Board.
[FR Doc. 93-553 Filed 1-11-93; 8:45 am]
BILLING CODE 6705-01-M