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Federal Register / Vol. 86, No. 174 / Monday, September 13, 2021 / Rules and Regulations
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Receiving the disclosures required under 12 CFR 620.6a, e, and f as a supplement to any conflicts-of-interest report filed under part 612 from proposed 612.2138c4 and existing standards of conduct reporting requirements at 612.2145a, 612.2155a, and 612.2165b12;
Reviewing and acting upon filed reports, including documenting resolution efforts for material conflicts from proposed paragraphs d, e, and f;
Maintaining SOC program records from proposed paragraph f;
Conducting investigations authorized under FCA regulations or the institutions SOC program policies and procedures from existing rule text inadvertently omitted; and Promptly reporting to the institutions board of directors those matters as required under FCA
regulations or the institutions SOC
program policies and procedures from proposed paragraph g. We believe the consolidation and clarifications address the general comments made on this provision. Below we address more specific comments on certain SOCO
duties.
i Resolving Conflicts As proposed, the Standards of Conduct Official would make written determinations on how conflicts of interest will be resolved, consistent with the System institutions policies and procedures. The SOCO would also document resolved and unresolved material or significant conflicts of interest. One commenter observed the word significant is redundant and confusing. Another commenter questioned how the Standards of Conduct Official can resolve a conflict when the resolution is to fire the employee or director. One commenter remarked that conflict situations are fluid so one set process for reporting and addressing the conflicts as proposed is unrealistic. This commenter asked to keep resolution processes in the hands of the association through the SOC
program policies and procedure. The commenter also remarked that documenting conflicts is given too much importance when focus should be on reporting transactions and financial obligations as well as avoiding conflicts.
The final rule requires the SOCO to review and act upon reports and disclosures. In response to comments, we are not finalizing the requirement to document significant conflicts of interest but have retained a requirement on making determinations on how conflicts of interest will be resolved and documenting material conflicts, whether
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resolved or unresolved. The process of deciding the appropriate resolution to a conflict does not always empower the SOCO to enforce the resolution, that is dependent upon the institutions SOC
program policies and procedures as is the resolution process.
ii Recordkeeping Two commenters observed we had not proposed a record retention schedule on reported conflicts within 617.2170. We talk about maintaining SOC program documentation in 612.2137a so do not believe it is necessary to repeat it in this section.
6c. SOCO Training Responsibilities.
612.2170c In proposed paragraphs c1 through 6, the SOCO would give training for the following:
Procedures for the review of the institutions standards of conduct rules and the Code of Ethics, and recommendations of any updates;
Procedures for anonymously reporting known or suspected violations of standards of conduct and Code of Ethics and unethical conduct;
Rules for prohibited conduct;
Fiduciary duties;
Conflicts of interest and apparent conflicts of interest;
Reporting requirements; and New director and new employee training.
The Council, CoBank and several others commented that the list of items was prescriptive and did not consider whether all items would be appropriate for both directors and employees.
Commenters asked for more flexibility to develop appropriate training rather than detailed rules on the content of such training. Some commenters specifically asked that we remove the requirement for the training to cover revisions to an institutions SOC
program or Code of Ethics.
Commenters concerns with the specificity of the training requirements proposed in this section are reasonable.
Therefore, the final rule does not include the proposed list. We believe this allows each System institution the requested flexibility to develop the training that meets its needs and improve its ethical culture. We clarify that SOC program training could include separate training for directors, officers and other employees. We consider our removal of the training list as satisfying all other comments asking for changes to that list, including comments asking us to change terminology used and asking us to restrict training requirements for
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fiduciary duties to directors. We continue to see a need for targeted training for those employees with fiduciary duties and strongly encourage each institution to devote time to providing that training. The final rule continues to require that the SOC
program training include updates to the institutions Code of Ethics and standards of conduct policies and procedures.
The rule finalizes the proposal to require the SOCO to obtain certification of participation from every director and employee taking the SOC program training. Comments regarding the format of training certifications are addressed in III.B.2d of this preamble. Also, as discussed earlier at III.B.3e, the final rule relocates most provisions on standards of conduct training, including timelines, into 612.2137f.
6d. SOCO Investigative Duties.
612.2170d We did not propose keeping the SOCOs existing responsibilities regarding criminal referrals. We received no comments on this change but are not finalizing it. At the time of the proposed rulemaking, discussions were underway to modify the criminal referral process of subpart B of part 612.
However, FCA issued Bookletter073
instead of making a rule change,18
meaning the SOCOs existing duties for criminal referrals need to remain intact.
As a result, we are keeping the existing requirements of 612.2170a5 and 6
and b4. In coordination with the reorganization of subpart A, we move these provisions within 612.2170 to new paragraph d. We also make a technical correction to a reference currently contained in the existing regulations. The reference is changed to direct readers to criminal referrals made under subpart B of part 612, instead of part 617. Several years ago criminal referral provisions were moved from part 617 to subpart B of part 612 and the current cross reference should have been updated at that time.
7. Standards of Conduct for Agents.
New 612.2180
We proposed removing the current separate provision on standards of conduct for agents at 612.2260. At the request of commenters, we are not finalizing that change. The final rule retains this section but renumbers it as 612.2180. Additionally, the final rule makes small changes to improve readability and align the format of the section with the rest of the rule, such as 18 FCA Bookletter Criminal Referral Guidance BL073, issued January 19, 2021.

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