Title: FINAL RULE--Disclosure to Shareholders--12 CFR Part 620
Issue Date: 05/11/1988
Federal Register Cite: 53 FR 16696
FARM CREDIT ADMINISTRATION
12 CFR Part 620
Disclosure to Shareholders
ACTION: Final rule.
SUMMARY: The Farm Credit Administration (FCA) adopts in final form, with a minor clarifying change, the interim rule amending Part 620 that was published with request for comment on February 5, 1988. 53 FR 3334. The rule relates to disclosure of loans involving a greater than normal risk of collectibility to senior officers and directors and their immediate families and affiliated organizations. The rule implements a provision of the Agricultural Credit Act of 1987 (Pub. L. 100-233) (1987 Act), which amends section 5.17(a)(9) of the Farm Credit Act of 1971 (1971 Act), 12 U.S.C. 2252(a)(9), by placing limitations on the disclosure the FCA can require in shareholder reports of the condition or classification of loans to senior officers and directors and their immediate families.
DATES: This regulation shall become effective after the expiration of 30 days from publication during which either or both houses of Congress is in session. Notice of effective date will be published.
FOR FURTHER INFORMATION CONTACT:
Dorothy J. Acosta, Senior Attorney, Office of General Counsel, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090, (703) 883-4020
James, Thies, Assistant Chief, Financial Analysis and Standards Division, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090, (703) 883-4483, TDD (703) 883-4444.
TEXT: SUPPLEMENTARY INFORMATION: On February 5, 1988, the FCA published an interim rule with request for comment that implements a provision of the 1987 Act. Section 424 of the 1987 Act amended section 5.17(a)(19) of the 1971 Act, 12 U.S.C. 2252(a)(9), to prohibit the FCA from requiring in each institution's shareholder reports, disclosure of the condition or classification of a loan to a director who has resigned before the time for filing the applicable report with the Farm Credit Administration or whose term of office will expire no later than the date of the shareholder meeting to which the statement relates. In addition, the statutory amendment limits the family members from whom disclosure can be required to those who reside with directors or those in whose loan or business operation the director has a material financial or legal interest. The legislative history of the section indicates that Congress intended the limitations on disclosure to apply to senior officers as well. (See H.R. Rep. No. 490, 100th Cong., 1st Sess. 268.) The FCA stated in the preamble to the interim rule that the term "resign" will be interpreted to mean that the officer or director has actually vacated the office.
The FCA received three comments on the interim rule, one from the Farm Credit Corporation of America (FCCA), on behalf of its member banks, and one from each of two Farm Credit Districts, concurring with the FCCA comments. The FCCA supported the rule but requested several clarifications.
First, the FCCA requested clarification that the formal resignation can occur at any time up to the actual time of filing of the applicable report with the FCA. The FCA confirms the FCCA's interpretation, with the understanding that the actual filing will occur no later than the time for filing required by the regulation. Section 620.3(j)(3)(ii) of the interim rule has been changed in the final rule to clarify this point, by inserting the parenthetical phrase "(but in no case later than the date of actual filing)" after "Farm Credit Administration." The FCA also emphasizes that the officer or director must also have actually left office prior to the required time for filing of the applicable report, but in no case later than the date of the actual filing of the report. The FCA will monitor any such resignations through its examination process to assure that they have been accomplished in good faith and not merely to circumvent the regulation.
Second, the FCCA requested confirmation of its understanding that where the term of office will expire at an annual meeting of the stockholders and the director is not standing for re-election, a resignation prior to the date of the stockholder meeting would not be necessary in order to avoid disclosure. The FCA confirms that it intends the regulation to be so understood.
Third, the FCCA requested confirmation that if there are no loans to senior officers or directors or their immediate families requiring disclosure because they involve a greater than normal risk of collectibility, the separate statement required by the interim rule should be a general statement that there are no loans to senior officers and directors. The FCCA further stated its understanding that if there were such loans, they would be disclosed unless there were a timely resignation by the senior officer or director involved or an expiration of the term of office of the director. The FCA intends the regulation to operate as follows: If there are no loans to senior officers and directors, their affiliated organizations, or their immediate family members, requiring disclosure because they involve a greater than normal risk of collectibility (except for any loans to persons who have resigned in a timely manner or who do not seek re-election at the annual meeting), the institution should state that there are no loans to senior officers or directors, their affiliated organizations, or immediate family members who reside in the same household or in whose loan or business operation the officer or director has a material financial or legal interest, that require disclosure because they involve a greater than normal risk of collectibility. If there are such loans requiring disclosure because they require a greater than normal risk of collectibility, the institution should make such disclosure and state that except as disclosed in the report, there are no such loans requiring disclosure because they involve a greater than normal risk of collectibility.
List of Subjects in 12 CFR Part 620
Disclosure to shareholders, Annual reports, Quarterly reports, Association annual meeting information statements.
Accordingly, the interim rule amending 12 CFR Part 620 that was published at 53 FR 3334 on February 5, 1988 is adopted as a final rule with the following change:
PART 620 -- DISCLOSURE TO SHAREHOLDERS
1. The authority citation for Part 620 is revised to read as follows:
Authority: Secs. 5.17; 12 U.S.C. 2252; sec. 424 of Pub. L. 100-233.
2. Section 620.3(j)(3)(ii) is revised to read as follows:
§ 620.3 Contents of the Annual Report to Shareholders.
* * * * *
(j) * * *
(3) Loans to senior officers and directors. * * *
(ii) To the extent applicable, state that no loan to a senior officers or director, or to any organization affiliated with such person, or to any immediate family member who resides in the same household as such person or in whose loan or business operation such person has a material financial or legal interest, involved more than the normal risk of collectibility; provided that no such statement need be made with respect to any director or senior officer who has resigned before the time for filing the applicable report with the Farm Credit Administration (but in no case later than the actual filing), or whose term of office will expire or terminate no later than the date of the meeting of stockholders to which the report relates.
Dated: May 4, 1988.
David A. Hill,
Secretary, Farm Credit Administration Board.
[FR Doc. 88-10436 Filed 5-10-88; 8:45 am]
BILLING CODE 6705-01-M