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Federal Register / Vol. 86, No. 174 / Monday, September 13, 2021 / Rules and Regulations In response to comments, the final rule also modifies the proposed list of minimum report contents as follows:
Clarifies that business matters includes loans and loan applications.
Clarifies that business matters reported must include those before the institution, a supervised institution, and a supervising institution.
Limits reported material transactions to those with any director, employee, agent or borrower of the institution, or a supervised or supervising institution; and Clarifies that the report must include gifts received or disposed of that are reportable under the institutions SOC program policies and procedures.
As a conforming change to the consolidation of proposed paragraphs a and b, this provision is now numbered as 612.2145b.

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i Reporting of Past, Present, and Future TransactionsParagraph b The Council, CoBank, FCB of Texas, three commenters from AgFirst, and most of those associations commenting expressed concern with being required to report all past transactions. These commenters asked that only current and new transactions be subject to reporting.
We agree that the obligation to report should be limited to current and new transactions and think that limiting transactions to the current year should be sufficient to capture any known or potential conflicts of interest. The final rule clarifies that transactional timeframes are those occurring in the current year, as that term is defined in the institutions SOC program policies and procedures.
ii Reporting any Business Interests Paragraph b1
The Council and FCB of Texas remarked that the requirement to report any interest in any business matter is too broad. The Council recommended moving into the rule text the preamble explanation that this provision captures direct and indirect business matters pertaining to the System institution, including those occurring through an entity. FCB of Texas recommended limiting the requirement to interests with System personnel. This commenter added that if we keep the provision as proposed, the phrase any business matter should create a link with the initial conflict of interest report. One association questioned the need for disclosure of personal relationships. In response to the request of some commenters, the final rule specifies that only those transactions with the institution or the supervising or
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supervised institution must be reported under paragraph b1.
iii Reporting Material Financial Interests With System Personnel Paragraph b2
The Council, three commenters from AgFirst FCB, and several others objected to the requirement to report all material financial interests regardless of any System connection, asking the reporting expectation to be limited to transactions with System institutions and System borrowers. The Council and CoBank asked that this element be further limited to reporting only those transactions that are outside the ordinary course of business. The Council remarked that without these constraints, the reporting requirement would be overly broad and burdensome.
FCB of Texas said this reporting requirement overlaps with those in proposed 612.2138, asking us to clarify if the intent is for both ordinary transactions and those outside the ordinary course of business be reported, or just those outside the ordinary course of business.
In 612.2145b2, a material interest with any director, employee, agent, or borrower must be reported, regardless of the nature of the interest. We understand this may result in an ordinary course of business transaction being reported because the transaction presents a conflict or is material in nature. The policies and procedures of the System institution should provide further clarification and explain how materiality of a conflict is identified.
FCB of Texas asked that business affiliates be removed from the provision to avoid confusion, while twenty other commenters asked that it be defined. The final rule in this area does not contain the phrase business affiliates as requested by commenters.
iv Reporting Transactions by Reportable Business EntitiesParagraph b3
The Council asked that reporting on reportable business entities be limited to only where the person holds a material interest in an entity that poses a conflict. The Council, FCB of Texas and several other commenters suggested following the existing rule under 612.2145b1, which only requires reporting those entities doing business with the System. The final rule does not make the requested change to only limit entity reporting on a materiality standard. We do not think it is necessary to limit reporting on reportable business entities to where the person holds a material interest in the entity because the term reportable
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business entity is based on ownership and control. However, the final rule does make the requested change to follow existing rules on with whom transactions occur that will make them reportable. The final rule limits the listing of reportable business entities to those transacting business in the current year with the institution, a supervised or supervising institution, or a borrower who has business with your System institution, or a supervised or supervising institution.
v Reporting Family Transactions With the SystemParagraph b4
AgFirst FCB remarked that the proposed definition of family would make the reporting requirement unduly burdensome, especially as the family definition does not require a legal relationship. This commenter and a few others said the requirement substantially increases the workload of the SOCO, who reviews all submissions.
AgFirst FCB and many others suggested the requirement be limited to reporting family members when there is actual knowledge of business transactions with the institution. CoBank and several other commenters stated the rule was unclear on if extended family needed to be reported and expressed support for keeping the current requirement to report only immediate family having business with the institution during the reporting year. One commenter suggested restricting the scope of family to immediate family to reduce the reporting burden and place focus on those family members who are most likely to present a risk of undue influence risk to the institution director or employee.
The Council, FCB of Texas and several other commenters objected to expanding existing requirements on naming family and placing no time constraints on activities to be reported.
The Council and several others suggested limiting the requirement to transactions occurring in the reporting year, including those that ended in the reporting year. In the alternative, the Council suggested following the proposed rule preamble explanation by leaving the reporting of past business transactions to each institutions discretion. FCB of Texas also said the transactions being reported should be tied to System transactions as is done in existing 612.2155b. Three others said reporting on family transactions should be limited to when it occurs rather than a set time annual timeframe. These commenters suggested keeping the existing rule provision requiring positive reporting on family when there is actual knowledge.

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