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Federal Register / Vol. 86, No. 174 / Monday, September 13, 2021 / Rules and Regulations
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unduly burdensome, costly, or not based on law. The 1996 Act specifies that we are to make these eliminations only if they would be consistent with law, safety, and soundness. Congress charged us to issue regulations to ensure the safety and soundness of the System.
Congress explained in section 514 of the 1992 Act that reporting of potential conflicts of interest by System directors, officers, and employees helps ensure the financial viability of the Farm Credit System. This rule is consistent with the law and safety and soundness concerns.
2. Regulatory Flexibility Act RFA
The Council and a couple of others commented that the rule should not be exempt from the RFA as our analysis should focus on the individual impact of this rulemaking to each System institution and not consider financial affiliations between the FC banks and associations. Under the RFA, an agency must certify that a rulemaking will not have a significant economic impact on a substantial number of small entities. If the rulemaking will have such an impact, then the agency must conduct a regulatory flexibility analysis. The RFA
definition of a small entity incorporates the Small Business Administration SBA definition of a small business concern, including its size standards. A small business concern is one independently owned and operated, and not dominant in its field of operation. The SBA explains that independently owned and operated is determined, in part, by the entitys affiliation with other businesses.
Generally, an affiliate is one that is controlled by, or has control over, the entity. Businesses with ownership, management, and contractual relationships that make them economically dependent may also be affiliates.
For purposes of the RFA, the interrelated ownership, control, and contractual relationship between associations and their funding banks are sufficient to permit them to be treated as a single entity. Further, System institutions fall under the SBA Credit Intermediation and Related Activities size category for small business concerns and the All Other NonDepository Credit Intermediation subcategory. This subcategory defines a small entity as one with average annual assets less than $6 million. As affiliates, the combined average annual assets of each Farm Credit bank and its affiliated associations exceed $6 million.
Therefore, System institutions do not satisfy the RFA definition of small entities. Because System institutions are not small entities and the FCA

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regulations apply only to System operations, FCA regulations generally do not and will not have a substantial economic impact on small entities.
3. Organization We proposed consolidating, renaming and assigning new regulatory section numbers to most existing provisions as well as removing other sections altogether. The Council and its supporters objected to the proposed reorganization of subpart A of part 612, asking us to retain existing rule numbering wherever possible. Fourteen commenters found the consolidation of director and employee provisions problematic, stating the existing separation in the rules makes them wellstructured and easy to follow. In response to these concerns, we are finalizing some, but not all, of our proposed reorganization. Specifically, we are finalizing the proposed changes to section headings and the consolidation of provisions to remove separate sections on director and employee conduct matters. However, we are keeping most existing sections numbers for matters covering the same subject matter as what was proposed.
We are also keeping the separate section for standards of conduct for agents but renumbering it as 612.2180. We discuss later in this preamble content changes to the existing provisions on agents resulting from our proposals on the issue and comments received.
B. Specific Issues 1. Definitions. 612.2130
We proposed adding new terms, as well as either removing or modifying the meaning of some existing terms used in subpart A of part 612. Specifically, we proposed as new terms:
Code of Ethics Preferential Reportable business entity Resolved Standards of Conduct Program We proposed removing the terms controlled entity, OFI, officer, relative, and service corporation due to redundancy. We also proposed revising the following existing terms:
Agent Conflict of Interest Employee Entity Family Financial interest Financially obligated Material Ordinary course of business Standards of Conduct Official System institution As proposed, there would be a total of twenty terms in the definition section.

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The final rule contains twenty-one terms in 612.2130 due to keeping the definition of officer.
We received 129 comment letters on proposed changes to 612.2130, including a letter each from the Council and three FC banks. Comments were directed at thirteen of the twenty terms contained in this section of the proposed rule, plus the removal of the term officer. Over half of the commenters objected to the proposed changes to the meaning of agent and family. One-third of the commenters sought changes to the terms conflict of interest, employee, and standards of conduct official. Less than a quarter of comments were on the term reportable business entity. The remaining comments were on the terms:
entity, ordinary course of business, resolved, Code of Ethics, material, preferential, and standards of conduct program. In addition, twenty-two commenters, including the Council, CoBank, and FCB
of Texas, objected to removing the term officer. Two commenters expressed specific support for removing the term relative.
What follows is a discussion of the comments on the definitions and our responses. If a term is not discussed, it is finalized as proposed.
1a. Agent As proposed, changes to the definition of agent would have explained that an agent is someone who currently represents the System institution as a fiduciary in contacts with third parties, including cybersecurity and internet technology providers. We received 78 comments objecting to our proposed changes to this term. The Council and many other commenters remarked that the changes expand the reporting burden, with some commenters stating that those covered by the proposed definition may be prevented by other laws from filing conflict reports. Letters from the Council, FCB of Texas and several other commenters asked that the definition be confined to the legal meaning of agent where a fiduciary duty is included.
Some commenters stated that an agent is more than someone with fiduciary duties, but also one with power to act for the institution. Some commenters remarked that the change was too broad and the term should exclude those already bound by a code of professional conduct. One commenter said it would be better to ensure those with fiduciary duties act in accordance with a Code of Ethics then extend the SOC program by changing definition of agent. Another commenter expressed concern with
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