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Federal Register / Vol. 86, No. 174 / Monday, September 13, 2021 / Rules and Regulations
liability in trying to control the conduct of third parties. The FCB of Texas and one other commenter stated the definition of agent is a longstanding issue and the proposed change does not improve the situation. These commenters added that merely adding the word fiduciary to the definition serves to complicate compliance with proposed provisions regarding third party adherence to the standards of conduct program. These commenters agreed that using fiduciary clarifies an agent has a legal relationship, but the definition should include that the person has agreed to be an agent with fiduciary duties.
The Council, CoBank, FCB of Texas, and several other commenters specifically objected to identifying cyber security and information technology professionals as agents of a System institution. The Council, FCB of Texas and one other commenter stated these persons are not members of a profession having a generally recognized code of conduct as the other professions listed in the definition e.g., attorney, appraiser, accountant and some commenters stated that System institutions will lose their best contractors. CoBank and several other commenters asked that we limit the meaning of agent to the legal meaning and manage vendors through contract and institution policies. Some commenters expressed concern with including vendors in the term agent when they clearly are not agents. FCB of Texas suggested that vendors like cyber security and information technology professionals be added as a subcategory of third parties subject to the institutions conduct policies.
We note that after issuance of the proposed rule and closure of the comment period, the Act was further amended by the Agricultural Improvement Act of 2018 2018 Farm Bill.7 Specifically, FCAs enforcement authorities were enhanced by adding section 5.31A 12 U.S.C. 2267a, which gives FCA enforcement jurisdiction over institution-affiliated parties. The 2018
Farm Bill also modified section 5.35 of the Act 12 U.S.C. 2271 to define an institution-affiliated party, which definition includes both agents and independent contractors of System institutions as well as any other person, as determined by the Farm Credit Administration by regulation or on a case-by-case basis who participates in the conduct of the affairs of a System institution.
We considered all the comments made on the meaning of agent and the 7 Public
Law 115334, 132 Stat. 4490.

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new authorities granted FCA in the 2018
Farm Bill. In general, the comments offered three suggestions:
Keep the existing definition;
Use the legal definition of agent; or Remove vendors from the definition.
In response to commenters, we finalize the rule using all three key suggestions in a manner that preserves the policy objectives behind the proposed rule.
The final rule uses the existing definition of agent,8 but removes references to any particular service being provided, and adds language to better reflect the basic legal meaning of the term, including fiduciary relationships. As a result, we finalize the term agent to mean any person who is not a director or employee of the institution but who has the power to act for the institution, by contract or apparent authority, in either a representational capacity or through provision of professional or fiduciary services.
1b. Code of Ethics A Code of Ethics was proposed to mean a written statement of the principles and values the System institution follows to establish a culture of ethical conduct for directors and employees. The FCB of Texas and a few others asked that Code of Ethics be referred to as code of conduct to avoid confusion with the existing financial disclosure code of ethics. FCB
of Texas also suggested adding including, at a minimum, the core principles set forth in 612.2136 to the definition. We decline to change the name from a Code of Ethics and finalize its meaning as proposed, with one change. We agree that the Code of Ethics should have a connection to the core principles and have included the statement recommended by FCB of Texas.
1c. Conflict of Interest We proposed to define a conflict of interest to mean a set of circumstances creating a risk that a secondary or nonwork-related interest could unduly influence or materially impact a directors or employees decisionmaking with respect to a primary interest. The Council, two FC banks and 32 others commented on this proposed definition. The Council, CoBank and some others commented that changes to this term are not customary, remarking on the ambiguity of using primary and 8 The existing term is defined as any person, other than a director or employee, who currently represents a System institution in contacts with third parties or who currently provides professional services to a System institution, such as legal, accounting, appraisal, and other similar services.

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secondary interests in the definition of a conflict of interest, with one commenter asking for more specificity.
FCB of Texas and CoBank asked for explanation of what are primary and secondary interests. The Council and some other commenters objected to expanding the definition to cover activities which could materially impact someones objectivity, stating the current scope of actual impact and appearance of impact are sufficient. The Council, CoBank and several others asked that proposed changes not be made, allowing the existing definition to remain. FCB of Texas stated no change to the existing definition was needed but offered a new definition it believed clarified what interests are primary in nature. FCB of Texas also asked that if the term was going to be expanded as proposed, that the companion term material be adjusted as well, and that guidance be given on when a set of circumstances would rise to a conflict.
FCB of Texas also commented that the proposed definition implied that a financial interest was not the only circumstance that could give rise to a conflict.
In response to comments, we have made changes to the proposed definition of conflict of interest. The final rule keeps the existing definition of conflicts of interest. In regards to the commenters who objected to expanding the definition to cover activities which could materially impact someones objectivity, we believe that potential conflicts of interest should remain in the definition because they can affect or give the appearance of affecting the impartiality of the director or employee and as such, need to be reported under 612.2145.
The final definition provides that a conflict of interest includes known circumstances or circumstances that appear to affect a persons ability to perform official duties and responsibilities in a totally impartial manner due to a financial interest in a transaction, relationship, or activity.
System institutions should understand that the definitions use of a reasonable persons perspective is applied in a manner that gives full consideration to the cooperative structure of the System.
1d. Employee Changes to the definition of employee were proposed to ensure that everyone working at the System institution, including temporary employees, would be part of the ethical corporate culture, regardless of length of employment. The Council, two FC
banks and twenty-two other commenters remarked upon this
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