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Federal Register / Vol. 86, No. 174 / Monday, September 13, 2021 / Rules and Regulations to specify what methods will be used within their standards of conduct policies and procedures.13 Institutions are cautioned that the option to use electronic methods does not mean the contents of any standards of conduct filings may differ depending on the format used: The contents are the same whether paper or electronic means are used. Institutions must also ensure that any electronic conversion of these disclosures does not adversely affect the filing of annual reports.
3. Elements of a Standards of Conduct Program. 612.2137
Proposed 612.2137 would set forth a System institutions responsibility to establish a Standards of Conduct Program that includes policies and procedures and a Code of Ethics, among other things, to implement the objectives of this rule. We received 118
comment letters on this section of the proposed rule, including letters from the Council and three FC banks. A
significant number of the commenters asked that we retain current rule provisions in certain areas, including the treatment of agents, family and reportable business entities under the Standards of Conduct Program.
Commenters also asked for clarifications and exceptions to what was proposed, with a few asking us to relocate reporting information to the section on disclosures and training information to the section on SOCO duties.
We finalize the rule with changes based on comments received and we discuss those changes in the subsections below. We also make small changes to improve readability and align the format of the rule, such as adding headings to main paragraphs and clarifying language on designing a standards of conduct program.

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3a. Core Principles and SOCO.
612.2137a and b Proposed 612.2137a would establish that the Standards of Conduct Program set forth the core principles in 612.2135 and provide resources for its implementation. FCB of Texas suggested that language be inserted after the reference to 612.2135 to make explicit that the Standards of Conduct Program comply with more than just the core commerce. Standards of conduct disclosures are not considered business transactions so neither the ecommerce or e-sign provisions of part 609 apply.
13 Institution employees have a different legal status than do directors. Employees can be required to use electronic filing procedures as a condition of employment, but directors are not employees so cannot be treated as such. Instead, to require electronic filing for directors, the SOC policies and procedures would need to specifically address the issue.

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principles of the regulation. We agree and have revised the regulatory text in final rule 612.2137a accordingly.
This commenter also suggested that the preamble language including but not limited to, additional staffing or access to outside counsel where necessary, be added to the end of 612.2137a. We are making this change but not using specific language provided. Instead, we have added language to require resources for both implementation and operation of the SOC program. We leave specificity on the type of resources to each institution. For example, reference to adequate resources could include staffing and access to outside counsel if the institution deems it necessary. It is up to each institutions board of directors to provide the necessary resources to implement an effective SOC
program.
i Recordkeeping and SOC Program.
612.2137a Proposed 612.2137 would require a System institution to maintain records of conflicts of interest reports, investigations, and other documents for at least 6 years. As proposed, institutions would be required to protect these records and other confidential information obtained as part of the standards of conduct program from unauthorized release. Each institution would also have to periodically review and update the SOC program. One commenter expressed general agreement with the recordkeeping requirements but asked for wording changes. Another commenter suggested that these records be maintained by outside counsel for confidentiality reasons. FCB of Texas suggested naming the person responsible for the reviews and updates.
In response to the comment asking us to clarify record retention and consolidate like provisions, we move language from proposed paragraph d to this paragraph, which requires maintaining conflict of interest reports a minimum of six years. Language from proposed paragraph e1 on maintaining SOC program records of investigations for six years is also moved into paragraph a. No significant wording was revised but the suggested language of the commenter was considered. Although not in rule text, we clarify that a System institution may choose to place records with outside counsel, but we decline to make it a requirement. We also apply to this section the comment from FCB of Texas on naming responsible parties in the section addressing SOC program administration.

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ii Appointing a SOCO. 612.2137b In 612.2137b, we finalize the requirement to appoint a SOCO and add language in response to comments on who may serve as a SOCO. When offering comments on proposed duties of the SOCO, thirty-two commenters also remarked on the proposed limit of who may be SOCO in two regards: The limitation of the SOCO being an employee and the supervisory implications of the SOCO reporting directly to the board. These commenters generally expressed that the board should retain full discretion in selecting the SOCO and espoused the belief that using a person outside the institution as SOCO provides greater independence and security in monitoring and reporting conflicts. Six commenters from one association explained that at smaller associations only the Chief Executive Officer CEO reports directly to the board and the CEO may not be the best person to serve as the SOCO. These same commenters expressed a preference for continuing the existing practice of contracting with an outside law firm, where the SOCO is free from undue pressures by management and offers an independence desirable to employees for discussing conflict issues.
Twenty commenters from two associations stated that the board should retain the discretion to select the SOCO
whether inside or outside the institution. One other commenter stated that FCAs reasons for proposing the SOCO be an employee can be satisfied to a greater extent by outsourcing the position, as the independence from internal operations gives greater objectivity in standards of conduct issues and makes reporting directly to the board more manageable. Another commenter expressed significant concern with having a SOCO report to its board for standards of conduct issues but report to management on other job tasks. This commenter asks if FCA is insisting institutions create a standalone, full time SOCO position. If so, the commenter said that would be a real burden for smaller associations. Another commenter stated the proposed SOCO
limitation threatens critical independence and objectivity. This commenter also remarked that the proposed change removes clarity, makes the SOCO role more difficult for employees to hold as the proposed SOCO duties appear to require legal expertise. This commenter also remarked upon the day-to-day work environment for employees serving as SOCO, especially once the employee takes actions against co-workers or
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