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Federal Register / Vol. 86, No. 174 / Monday, September 13, 2021 / Rules and Regulations
FARM CREDIT ADMINISTRATION
12 CFR Part 612
RIN 3052AC44

Standards of Conduct Farm Credit Administration.
Final rule.

AGENCY:
ACTION:

The Farm Credit Administration FCA, we, or our is amending the its regulations governing standards of conduct SOC of directors and employees of Farm Credit System System institutions, excluding the Federal Agricultural Mortgage Corporation Farmer Mac. The final rule requires each System institution to have or develop a Standards of Conduct Program based on core principles to put into effect ethical values as part of its corporate culture.
DATES: This regulation will be effective 30 days after publication in the Federal Register during which either or both Houses of Congress are in session.
Pursuant to 12 U.S.C. 2252c1, we will publish a notification of the effective date in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Technical information: Lori Markowitz, Senior Policy Analyst, Office of Regulatory Policy, Farm Credit Administration, 703 8834487, TTY
703 8834056,ORPMailbox@fca.gov.
Legal information: Laura McFarland, Senior Counsel, Office of General Counsel, Farm Credit Administration, 703 8834020, TTY 703 8834056.
SUPPLEMENTARY INFORMATION:
SUMMARY:

I. Objectives The objectives of this final rule are to:
Establish principles for ethical conduct at System institutions;
Enhance Standards of Conduct Programs using core principles;
Require each System institution to adopt a Code of Ethics; and Encourage and enhance ethical behavior within the Farm Credit System.

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II. Background The Farm Credit Act of 1971, as amended, Act 1 establishes System institutions as federally chartered instrumentalities of the United States.2
This status confers on System institutions additional responsibility to strive for high ethical standards and business practices. We believe that public confidence in the integrity and ethical business practices of any
financial institution is fundamental to its ongoing viability. Unethical or preferential business practices can damage a financial institutions reputation and lead to earnings and credit risk. Further, Congress explained in section 514 of the Farm Credit Banks and Associations Safety and Soundness Act of 1992 1992 Act that disclosure of financial information and the reporting of potential conflicts of interest by System directors, officers, and employees helps enhances the financial integrity of the System.3 This concept is also reflected in many of the provisions of the Sarbanes-Oxley Act of 2002.4
We published a proposed rule on June 15, 2018, to update FCAs standards of conduct regulations.5 The 2018
proposed rule set forth core principles that would serve as the foundation for ethical conduct, including requiring each System institution to adopt a Code of Ethics and address the responsibilities of directors, employees, and Standards of Conduct Officials. Our intent in this rulemaking is to provide performance criteria in some areas while also setting safe and sound operational directions in others to provide for an effective safety and soundness framework. The final rule gives full consideration to the role our examinations play in ensuring safe and sound operations of the System.
The comment period for the 2018
proposed rule closed September 13, 2018.
III. Comments and Our Responses We received 151 comment letters, all of which came from System institutions or persons affiliated with the System. Of the comment letters received, one came from the Farm Credit Council Council acting on behalf of its membership. Each of the four Farm Credit banks submitted a letter, with 15 directors or officers from AgFirst FCB also submitting letters herein after collectively referred to as FC banks. Additionally, 121 letters came from associations, or directors and officers of an association, which represents 34 associations, and another 10 letters were submitted on behalf of one service corporation and two unincorporated business entities. A total of 139 comment letters expressed support for the Councils letter, with eighty-two stating specific support, among which were the four FC banks.
Of the comments received from 3 Public
Law 102552, 106 Stat. 4102, 4131.
Law 107204, July 30, 2002.
5 83 FR 27922. We last issued regulations on System standards of conduct May 13, 1994 59 FR
24894.
4 Public
1 Public
Law 92181, 85 Stat. 583.
for example, 12 U.S.C. 2011, 2071, 2091
and 2121.
2 See,
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associations and persons or entities affiliated with associations, a total of 44
letters stated support for the comments coming from the FC banks: 32 expressed support for comments made by AgFirst FCB, nine supported comments made by the Farm Credit Bank of Texas FCB of Texas and three expressed support for comments made by CoBank ACB. All 151 comment letters contained constructive comments, some supporting portions of the proposed rule, but most asking for changes. A few commenters requested we withdraw the proposed rule and keep the existing regulations in place. Several commenters expressed support for the proposed rules principles-based approach, explaining it allows for greater flexibility.
In our response to comments we have made some changes on certain proposed provisions, including not finalizing some proposed items, and have provided explanations to further clarify the final rule, all of which are discussed below.
A. General Comments The Council and several other commenters complained that the proposed changes would be administratively burdensome, require revisions of existing policies and procedures, amounting to a needless overhaul of existing System institution standards of conduct processes.
Comments were also made questioning our Regulatory Flexibility Act RFA
analysis and adherence to section 212 of the Farm Credit System Reform Act of 1996 1996 Act.6
We received general comments that the preamble to the proposed rule discussed things that the regulatory text did not say. We have addressed a few of those comments by moving preamble discussions into the relevant provisions in the final rule as clarifying changes, but, for the most part, because the intent of this rule is to present general parameters for compliance and allow the System institution the flexibility to develop a Standards of Conduct Program that best suits its own needs, we provide guidance within the preamble without putting forth accompanying regulatory requirements.
1. Regulatory Burden and 1996 Act Comments were made that the proposed rule presented items that were unnecessary, burdensome, or inconsistent with the 1996 Act. Section 212b of the 1996 Act requires us to continuously review our regulations to eliminate rules that are unnecessary, 6 Public
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Law 104105, 110 Stat. 162 H.R. 2029.

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