[Federal Register Volume 62, Number 61 (Monday, March 31, 1997)]
[Rules and Regulations]
[Pages 15089-15094]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8000]
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FARM CREDIT ADMINISTRATION
12 CFR Parts 620 and 630
RIN 3052-AB62
Disclosure to Shareholders; Disclosure to Investors in Systemwide
and Consolidated Bank Debt Obligations of the Farm Credit System;
Quarterly Report
AGENCY: Farm Credit Administration.
ACTION: Final rule.
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SUMMARY: The Farm Credit Administration (FCA or Agency) adopts final
amendments to its regulations governing the preparation, filing, and
distribution of Farm Credit System (FCS or System) bank and association
reports to shareholders and investors. The rule implements a statutory
amendment that supersedes the regulatory requirement that FCS
institutions disseminate quarterly reports to shareholders.
The rule also imposes a new notice requirement designed to improve
shareholder access to timely information and disclosure regarding
adverse events affecting their institutions. Under the new regulations,
FCS institutions must prepare and distribute a notice to shareholders
when their permanent capital falls below the regulatory minimum
standard.
To facilitate the presentation of financial statements by FCS
institutions in a manner that conforms with generally accepted
accounting principles (GAAP), the rule removes the requirement that
banks must present their financial statements on a combined basis with
their related associations.
The rule also makes other technical changes to FCA regulations
governing disclosure to shareholders and investors.
DATES: The final rule shall become effective upon the expiration of 30
days after this publication during which either or both Houses of
Congress are in session. Notice of the effective date will be published
in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Laurie A. Rea, Policy Analyst, Policy Development and Risk Control,
Farm Credit Administration, McLean, VA 22102-5090, (703) 883-4498;
or
William L. Larsen, Senior Attorney, Office of General Counsel, Farm
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703)
883-4444.
SUPPLEMENTARY INFORMATION:
I. Background
On August 28, 1996, the FCA proposed amendments to its regulations
governing disclosure to shareholders and investors.1 The
rulemaking implements section 211 of the Farm Credit System Reform Act
of 1996 (1996 Act),2 addresses two regulatory petitions received
by the Agency, and takes other related actions. To conform with the
1996 Act, the FCA proposed amending subpart C of part 620 to eliminate
existing regulatory requirements for distribution of quarterly reports
to shareholders. To improve shareholder access to timely information
and disclosure regarding adverse events affecting their institutions,
the FCA proposed a new requirement that System institutions provide
notice to shareholders in the event of noncompliance with regulatory
permanent capital requirements, followed by subsequent notices in
situations of continued deterioration in permanent capital. The FCA
also responded to petitions of System institutions by proposing to
remove the requirement that banks present their
[[Page 15090]]
financial statements on a combined basis with their related
associations and to allow incorporation by reference of information
contained in offering documents for Farm Credit debt securities into
the Systemwide financial reports to investors.3 The FCA also
proposed technical changes to clarify the reporting requirements of
related organizations in their disclosure to shareholders and
investors.
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\1\ See 61 FR 53331, October 11, 1996.
\2\ Pub. L. 104-105, 110 Stat. 162 (Feb. 10, 1996). Section 211
of the 1996 Act provides that ``the requirements of the Farm Credit
Administration governing the dissemination to stockholders of
quarterly reports of System institutions may not be more burdensome
or costly than the requirements applicable to national banks.''
Section 211 applies only to dissemination requirements and does not
affect the requirement that FCS institutions continue to prepare and
file quarterly reports with the FCA in accordance with the quarterly
report filing and content requirements of part 620.
\3\ See 12 CFR Part 630.
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The FCA received two comment letters on the proposed rule. The Farm
Credit Council (FCC) submitted a letter based on input from individual
members and the System's Accounting Standards Work Group. The Farm
Credit Services of the Midlands, PCA/FLCA (Midlands), also commented.
In general, the commenters supported the FCA's proposal to implement
the 1996 Act, while also raising specific concerns and suggestions for
change. As set forth below, the final regulations retain much of the
content of the proposed regulations, but clarify and ease some proposed
requirements in response to comments.
II. Final Amendments
A. Quarterly Reports
The commenters supported the FCA's proposal to implement section
211 of the 1996 Act regarding dissemination of quarterly reports to
shareholders. The FCA adopts as final the amendments to subpart C of
part 620 and related provisions 4 as proposed.
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\4\ Sections 620.1(o) and 620.2(a), (b)(3)(i), (f) through (i).
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Under the final regulations, routine distribution of quarterly
reports by System institutions to shareholders is voluntary rather than
mandatory. The FCA emphasizes that FCS institutions are not prohibited
by the 1996 Act or these regulations from continuing to publish or
distribute quarterly reports to their shareholders. Moreover, each FCS
bank and direct lender association is required to make quarterly
reports available to shareholders on request and must continue to file
quarterly reports with the FCA. Associations are no longer required to
distribute quarterly reports along with their information statements,
regardless of the date of their annual meetings.
Midlands commented on current Sec. 615.5250(a)(2) of this chapter,
which requires institutions to provide prospective borrowers with a
copy of the institution's most recent quarterly report (if more recent
than the annual report) prior to loan closing, at which time the
borrower must purchase equities as a condition for obtaining a loan.
Midlands agreed that prospective borrowers have the right to current
association financial information, but, citing logistical problems in
supplying an accurate number of quarterly reports to its branches,
suggested that the requirement be changed to require only notice of
availability of quarterly reports to prospective borrowers. The FCA
continues to believe that it is important to provide the most current
financial information at the time a borrower is required to purchase
the institution's equities. Thus, the current requirement is unchanged.
Any logistical problems that may be associated with providing a copy of
the quarterly report to prospective borrowers will have to be addressed
through available facilities such as fax, copier, and electronic or
overnight mail.
B. Notice to Shareholders
The FCA proposed that notice be provided to shareholders when an
institution's capital falls below the regulatory minimum permanent
capital standard. Proposed Sec. 620.15(a) would have required each FCS
bank and direct lender association to prepare, file with the FCA, and
distribute to shareholders, a notice within 20 days following the
monthend that the institution initially determines that it is not in
compliance with the minimum permanent capital standards established in
part 615 of FCA regulations. Under certain circumstances, reporting
institutions also would have been required to prepare and distribute a
subsequent notice to shareholders. If the reporting institution's
permanent capital ratio decreased by one-half of 1 percent or more from
the level reported in a notice, the reporting institution would be
required to distribute another notice to shareholders within 20 days of
the end of the current month. In addition, the FCA proposed minimum
content requirements for notices under new Sec. 620.17.
The FCC raised objections to the proposed requirement that notice
be provided to shareholders in instances of noncompliance with the
permanent capital standard. The FCC asserted that the proposed notice
requirement in Sec. 620.15(a) is unnecessary and could be confusing or
even misleading taken out of the context of an institution's financial
statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations. The FCC also found it difficult to
reconcile the notice requirement with the elimination of quarterly
report dissemination by the 1996 Act.
After consideration of these comments, the FCA continues to believe
that the notice requirement will benefit shareholders and impose no
undue burdens on System institutions. For the reasons set forth below
and as noted in the preamble to the proposed rule, the FCA issues a new
subpart D relating to the preparation and distribution of a notice to
shareholders substantially as proposed.
As discussed above, the FCA has deleted the quarterly report
dissemination requirement in accordance with the 1996 Act. The FCA
believes that the limited notice to shareholders is necessary to
provide shareholders with timely notice of important information that
affects the ability of the institution to distribute earnings and
retire stock.5 The Farm Credit Act of 1971, as amended (Act),
encourages borrower/shareholder participation in management, control,
and ownership of FCS institutions.6 In the Farm Credit Amendments
Act of 1985,7 Congress expressly authorized the FCA to regulate
disclosure to shareholders. Unlike shareholders of companies subject to
Securities and Exchange Commission (SEC) disclosure requirements who
have access to an established marketplace for financial information
based on SEC filings,8 System shareholders rely primarily on FCS
institutions to provide them with current information regarding their
institutions. The FCA believes it is critical that shareholders receive
timely notice of material changes in the capital position of the
institutions they own so that they are equipped to exercise their
ownership role.
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\5\ See 12 U.S.C. 2154a(d)(1), which states that: ``* * * the
board of directors of a System institution may not reduce the
permanent capital of the institution through the payment of
patronage refunds or dividends or retirement of stock, if after or
due to such action, the permanent capital of the institution would
thereafter fail to meet the minimum capital adequacy standards
established under section 2154a of this title.'' See also 12 CFR
615.5215.
\6\ See 12 U.S.C. 2001(b).
\7\ Pub. L. 99-205, 99 Stat. 1678 (Dec. 23, 1985). See section
5.19(b)(1) of the Act.
\8\ In addition to annual and quarterly filings, under sections
13 or 15(d) of the Securities Exchange Act of 1934, registrants are
required to file a current report with the SEC within 5-15 days
(depending on the event) upon determination of the occurrence of any
of the following events: (1) changes in control of registrant, (2)
significant acquisition or disposition of assets, (3) bankruptcy or
receivership, (4) changes in registrant's certifying accountant, (5)
other events that the registrant deems of significant importance to
security holders, and (6) resignations of registrant's directors
because of a disagreement with the registrant on any matter relating
to the registrant's operation, policies, or practices. The SEC does
not require current reports to be distributed to shareholders.
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In proposing these regulations, the FCA sought to balance the
competing considerations of providing adequate
[[Page 15091]]
notice to shareholders concerning their investments and minimizing
regulatory burden on FCS institutions. FCS institutions required to
file and distribute a notice will incur costs associated with preparing
and distributing the materials. However, since notice is required only
in those extraordinary circumstances where an institution is not in
compliance with the FCA's minimum permanent capital standard,9 the
FCA does not expect the regulations will significantly increase
regulatory burden on System institutions. In the limited instances when
notice is required, the rule will help ensure timely and adequate
disclosure to shareholders/members who have investments at risk and
rely on the dependable credit services of the FCS institutions. In
addition, such notices will inform shareholders of the effect that
failure to meet the minimum capital standard has on their institution's
ability to retire stock and distribute earnings.
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\9\ All FCS institutions were in compliance with the regulatory
minimum permanent capital standard as of December 31, 1996.
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The FCC also expressed concern that both the time period for
calculating noncompliance with permanent capital requirements and the
timeframe allowed by the proposed rule for distributing the notice are
inadequate. Under proposed Sec. 620.15(a), each Farm Credit bank and
direct lender association required to prepare a notice would have been
required to distribute the notice to shareholders within 20 days
following the monthend that the institution initially determines that
it is not in compliance with the minimum permanent capital standard
prescribed under Sec. 615.5205 of this chapter. The FCC noted that
existing regulations only require that an institution's permanent
capital ratio (PCR) be reported on a quarterly basis. The FCC suggested
that the FCA substitute the phrase ``end of the fiscal quarter'' for
``monthend'' in Sec. 620.15(a) and ``any subsequent quarterend'' for
``any subsequent monthend'' in proposed Sec. 620.15(b).
The FCA declines to adopt a quarterly timeframe for the initial
notice of noncompliance with the PCR because it would undermine the
goal of disseminating this information to shareholders quickly.
Moreover, there is no added burden on FCS institutions in connection
with calculation of the PCR. Although FCS institutions are only
required by current regulations to report their PCR on a quarterly
basis, Sec. 615.5205(a) of this chapter requires that each FCS
institution shall at all times maintain permanent capital at a level of
at least 7 percent of its risk-adjusted assets. The FCA further expects
FCS institutions to have procedures in place that permit calculation of
their PCR on any given date.10
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\10\ FCA Bookletter No. 256-OFA, Permanent Capital Ratio-Average
Daily Balance, May 24, 1990.
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In response to the argument that monthly notices of subsequent
deterioration would be burdensome, the FCA accepts the suggestion of
the FCC to modify final Sec. 620.15(b) to require subsequent notices
following the end of any subsequent fiscal quarter instead of the end
of any subsequent month as proposed. The FCA does not believe that this
change seriously disadvantages shareholders. Once alerted by the
initial notice, concerned shareholders may elect to follow up on their
institution's condition more often than quarterly if they wish.
The FCC also commented that it is likely that an institution
required to distribute a notice of noncompliance with regulatory
minimum capital standards would need to provide additional supplemental
information to make the information more meaningful. The FCC suggested
that the required timeframe for distributing the notice and any
subsequent notices in proposed Sec. 620.15 (a) and (b) be changed from
20 days to 45 days. The FCA agrees that additional information may make
the disclosures more meaningful to shareholders and, to facilitate such
additional disclosure, has decided to increase the timeframe for
preparation and distribution of the initial notice by 10 days. Final
Sec. 620.15(a) thus requires distribution of the notice within 30 days
following the monthend that the institution initially determines that
it is not in compliance with the minimum permanent capital standards.
The FCA adopts the suggestion of the FCC to permit distribution of
a subsequent notice to shareholders within 45 days following the end of
any subsequent quarter at which the institution's PCR decreases by one-
half of 1 percent or more from the level reported in the most recent
notice distributed to shareholders. This timeframe for preparation and
distribution of subsequent notices to shareholders under Sec. 620.15(b)
will coincide with the time allowed institutions to prepare and file
their quarterly reports with the FCA under Sec. 620.2. Final
Sec. 620.15(c) and the content requirements for the notice in
Sec. 620.17 are adopted as proposed.
The FCA also invited comments on the use of the total surplus to
risk-adjusted assets standard 11 to determine the point at which
shareholders would be informed that their institution is experiencing
financial difficulties. Both commenters opposed the use of the total
surplus ratio as the trigger for the notice requirement. The FCC
commented that the total surplus to risk-adjusted assets ratio is not
always an indicator of impaired financial condition and thus, such
notices could unnecessarily alarm shareholders when the institution
continues to have a reasonable margin to protect its investment. The
FCC also argued that the FCA should provide additional notice and
opportunity for comment before adopting a notice requirement triggered
by failure to meet the total surplus standard, which was not in effect
at the time the notice requirement was proposed.
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\11\ The total surplus to risk-adjusted assets standard is part
of the new capital requirements recently adopted by the FCA. See 62
FR 4429, January 30, 1997.
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The FCA believes that persuasive arguments exist for adopting a
total surplus trigger for the notice to shareholders, as explained in
the proposed and final capital regulations.12 However, the FCA has
decided not to adopt a total surplus standard as the triggering point
for the notice at this time. Rather, the FCA will carefully monitor
implementation of the new capital standards and will consider changing
the notice trigger from the PCR to the total surplus ratio as FCS
institutions gain experience with the new standards.
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\12\ See 60 FR 38521, July 27, 1995. See also ``Basis for
Conclusions and Positions Taken in the Final Capital Adequacy
Regulations'' at 62 FR 4429, 4434, January 30, 1997.
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III. Combined Financial Statement Presentation Requirements
The FCA proposed removing the requirement that banks must present
the financial statements of the bank and its related associations on a
combined basis. The intent of the proposal was to facilitate the
presentation of financial statements by FCS institutions in a manner
that conforms with GAAP. Under the proposed regulations, banks that
present their financial statements on a stand-alone basis would be
required to present, in the footnotes to their financial statements, a
condensed statement of condition and statement of income for their
related associations on a combined basis. The FCA adopts the
regulations substantially as proposed.
In its comment concurring with this proposal, the FCC requested
that the FCA clarify the language of Sec. 620.2(g)(2) to indicate that
banks presenting their financial statements on a stand-alone
[[Page 15092]]
basis are only required to present the supplemental combined statements
in the footnotes accompanying their annual reports. The final
regulations include this suggested clarification. Further, the FCC
requested that the FCA confirm that once a reporting entity is
determined under GAAP to be the preferred reporting entity, it would
require a significant change in facts and circumstances to change the
reporting basis of such entity. The FCA agrees that, under GAAP, it
would require a significant change in facts and circumstances to
support a change in a reporting entity's method of financial statement
presentation (e.g., from reporting on a combined basis to reporting on
a stand-alone basis).
In general, the FCA believes the relationship between a bank and
its related associations is an important one that warrants discussion
in the financial statements to achieve full and complete disclosure
regardless of how the bank presents its financial statements. In
adopting the regulations substantially as proposed, the FCA reiterates
its position that presentation of combined financial statements
conforms with GAAP and is the most appropriate method of disclosure to
shareholders of FCBs and their related associations. Similarly, based
on the financial and operational interdependence of the banks and their
associations, and the banks' joint and several liability for Systemwide
debt securities, the FCA believes combined financial statements
continue to provide the most meaningful disclosure under GAAP for
purposes of the System's reports to investors.
Under final Sec. 620.4, any bank that presents its financial
statements on a combined basis must distribute its annual report to the
shareholders of related associations. Where bank preparation of bank-
only financial statements is supported by GAAP, the regulation does not
require that the bank distribute its annual report to the shareholders
of related associations in ordinary circumstances. However,
Sec. 620.4(b)(2) provides that for periods where the bank has
experienced a significant event that has a material effect on the
associations, the bank's annual report must be distributed to the
related associations' shareholders.
IV. Technical Changes to Part 620
The FCA proposed several technical changes to part 620 to clarify
the reporting requirements of related organizations. The FCA received
no comments on the proposed changes. The amendments are adopted as
proposed.
V. Report to Investors
Lastly, the FCA proposed to add new Sec. 630.3(f), which would
permit the Federal Farm Credit Banks Funding Corporation to incorporate
by reference information contained in offering documents for Farm
Credit debt securities into the Systemwide financial reports to
investors. The FCA received one comment in support of the new section
and adopts Sec. 630.3(f) as proposed.
VI. Regulatory Impact
The FCA has determined that the final regulations will not have a
significant effect on the general economy and are not a significant
regulatory action under Executive Order 12866. In addition, the final
regulations pertain only to FCS institutions and, therefore, will not
conflict with the rules and regulations of other financial regulatory
agencies. Due to the nature of the regulations, it is unlikely that the
regulations will have any material impact on governmental entitlements,
grants, user fees, or loan programs.
List of Subjects
12 CFR Part 620
Accounting, Agriculture, Banks, banking, Reporting and
recordkeeping requirements, Rural areas.
12 CFR Part 630
Accounting, Agriculture, Banks, banking, Credit, Organization and
functions (Government agencies), Reporting and recordkeeping
requirements, Rural areas.
For the reasons stated in the preamble, parts 620 and 630 of
chapter VI, title 12 of the Code of Federal Regulations are amended to
read as follows:
PART 620--DISCLOSURE TO SHAREHOLDERS
1. The authority citation for part 620 continues to read as
follows:
Authority: Secs. 5.17, 5.19, 8.11 of the Farm Credit Act (12
U.S.C. 2252, 2254, 2279aa-11); sec. 424 of Pub. L. 100-233, 101
Stat. 1568, 1656.
Subpart A--General
2. Section 620.1 is amended by redesignating paragraphs (o), (p),
and (q) as new paragraphs (p), (q), and (r), respectively, and adding
new paragraph (o) to read as follows:
Sec. 620.1 Definitions.
* * * * *
(o) Report refers to the annual report, quarterly report, notice,
or information statement required by this part unless otherwise
specified.
* * * * *
3. Section 620.2 is amended by revising paragraphs (a), (b)(3)(i),
and (f) through (i) to read as follows:
Sec. 620.2 Preparing and filing the reports.
* * * * *
(a) Three copies of each report required by this section, including
financial statements and related schedules, exhibits, and all other
papers and documents that are part of the report shall be filed with
the Chief Examiner, Farm Credit Administration, McLean, Virginia 22102-
5090, or with such other Farm Credit Administration offices as the
Chief Examiner designates. The Farm Credit Administration must receive
the report within the period prescribed under applicable subpart
sections. The reports shall be available for public inspection at the
issuing institution and the Farm Credit Administration office with
which the reports are filed. Bank reports shall also be available for
public inspection at each related association office.
(b) * * *
(3)(i) For each quarterly report or notice filed under this
section, each member of the board or one of the following board members
formally designated by action of the board to certify reports of
condition and performance on behalf of the individual board members:
The chairperson of the board; the chairperson of the audit committee;
or a board member designated by the chairperson of the board.
* * * * *
(f) No disclosure required by subparts B and E of this part shall
be deemed to violate any regulation of the Farm Credit Administration.
(g) Each Farm Credit institution shall present its reports in
accordance with generally accepted accounting principles and in a
manner that provides the most meaningful disclosure to shareholders.
(1) Any Farm Credit institution that presents its annual and
quarterly financial statements on a combined or consolidated basis
shall also include in the report the statement of condition and
statement of income of the institution on a stand-alone basis. The
stand-alone statements may be in summary form and shall disclose the
basis of presentation if different from accounting policies of the
combined or consolidated statements.
(2) Any bank that prepares its financial statements on a stand-
alone basis shall provide in the footnotes
[[Page 15093]]
accompanying its annual report supplemental information containing a
condensed statement of condition and statement of income for the bank's
related associations on a combined basis. The condensed statements may
be unaudited and shall disclose the basis of presentation if different
from accounting policies of the bank-only statements.
(h)(1) Each annual report or notice shall include a statement in a
prominent location within the report or notice that the institution's
quarterly reports are available free of charge on request. The
statement shall include approximate dates of availability of the
quarterly reports and the telephone numbers and addresses where
shareholders may obtain a copy of the reports.
(2) Each association shall include a statement in a prominent
location within each report that the shareholders' investment in the
association may be materially affected by the financial condition and
results of operations of the related bank and (if not otherwise
provided) that a copy of the bank's financial reports to shareholders
will be made available free of charge on request. The statement shall
also include the telephone numbers and addresses where shareholders may
obtain copies of the related bank's financial reports.
(3) Each institution shall, after receiving a request for a report,
mail or otherwise furnish the report to the requestor. The first copy
of the requested report shall be provided to the requestor free of
charge.
(i) Any events that have affected one or more related organizations
of the reporting institution that are likely to have a material effect
on the financial condition, results of operations, cost of funds, or
reliability of sources of funds of the reporting institution shall be
considered significant events for the reporting institution and shall
be disclosed in the reports. Any significant event affecting the
reporting institution that occurred during the preceding fiscal
quarters that continues to have a material effect on the reporting
institution shall be considered significant events of the current
fiscal quarter and shall be disclosed in the reports.
Subpart B--Annual Report to Shareholders
4. Section 620.4 is amended by revising paragraph (b) to read as
follows:
Sec. 620.4 Preparing and distributing the annual report.
* * * * *
(b)(1) Any bank that presents its financial statements on a
combined basis shall distribute its annual report to the shareholders
of related associations within the period required by paragraph (a) of
this section. Each bank shall coordinate such distribution with its
related associations.
(2) Any bank that presents its financial statements on a bank-only
basis shall distribute its annual report to the shareholders of related
associations within the period required by paragraph (a) of this
section in all instances where the bank experiences a significant event
that has a material effect on the associations. Each bank shall
coordinate such distribution with its related associations.
* * * * *
5. Section 620.5 is amended by revising paragraph (g)(2)(vi) to
read as follows:
Sec. 620.5 Contents of the annual report to shareholders.
(g) * * *
(2) * * *
(vi) Discuss any events affecting a related organization that are
likely to have a material effect on the reporting institution's
financial condition, results of operations, cost of funds, or
reliability of sources of funds.
* * * * *
Subpart C--Quarterly Report
6. The heading for subpart C is revised as set forth above.
7. Section 620.10 is revised to read as follows:
Sec. 620.10 Preparing the quarterly report.
(a) Each Farm Credit bank and direct lender association shall
prepare a quarterly report within 45 days after the end of each fiscal
quarter, except that no report need be prepared for the fiscal quarter
that coincides with the end of the fiscal year of the institution.
(b) The report shall contain, at a minimum, the information
specified in Sec. 620.11 and, in addition, such other material
information (including significant events) as is necessary to make the
required disclosures, in light of the circumstances under which they
are made, not misleading.
8. Part 620 is amended by redesignating subparts D, E, and F as new
subparts E, F, and G, respectively, and adding a new subpart D to read
as follows:
Subpart D--Notice to Shareholders
Sec. 620.15 Notice.
(a) Each Farm Credit bank and direct lender association shall
prepare, file with the Farm Credit Administration, and distribute a
notice to shareholders, within 30 days following the monthend that the
institution initially determines that it is not in compliance with the
minimum permanent capital standard prescribed under Sec. 615.5205 of
this chapter.
(b) An institution that has given notice to shareholders pursuant
to paragraph (a) of this section or subsequent notice pursuant to this
paragraph shall also prepare, file with the Farm Credit Administration,
and distribute to shareholders a notice within 45 days following the
end of any subsequent quarter at which the institution's permanent
capital ratio decreases by one-half of 1 percent or more from the level
reported in the most recent notice distributed to shareholders.
(c) Each institution required to prepare a notice under Sec. 620.15
(a) or (b) shall distribute the notice to shareholders by mail or
otherwise furnish the information required in the notice by publishing
it in any publication with circulation wide enough to be reasonably
assured that all of the institution's shareholders have access to the
information in a timely manner.
Sec. 620.17 Contents of the notice.
(a) The information required to be included in a notice must be
conspicuous, easily understandable, and not misleading.
(b) A notice, at a minimum, shall include:
(1) A statement that:
(i) Briefly describes the regulatory minimum permanent capital
standard established by the Farm Credit Administration and the notice
requirement of Sec. 620.15(a);
(ii) Indicates the institution's current level of permanent
capital; and
(iii) Notifies shareholders that the institution's permanent
capital is below the Farm Credit Administration regulatory minimum
standard.
(2) A statement of the effect that noncompliance has had on the
institution and its shareholders, including whether the institution is
currently prohibited by statute or regulation from retiring stock or
distributing earnings or whether the Farm Credit Administration has
issued a capital directive or other enforcement action to the
institution.
(3) A complete description of any event(s) that may have
significantly contributed to the institution's noncompliance with the
minimum permanent capital standard.
(4) A statement that the institution is required by regulation to
distribute another notice to shareholders within 45
[[Page 15094]]
days following the end of any subsequent quarter at which the
institution's permanent capital ratio decreases by one half of 1
percent or more from the level reported in the notice.
Subpart E--Association Annual Meeting Information Statement
9. Section 620.20 is amended by removing paragraph (c) and revising
paragraph (b) to read as follows:
Sec. 620.20 Preparing and distributing the information statement.
* * * * *
(b) The statement shall incorporate by reference the annual report
to shareholders required by subpart B of this part and contain the
information specified in Sec. 620.21 and such other material
information as is necessary to make the required statement, in light of
the circumstances under which it is made, not misleading.
PART 630--DISCLOSURE TO INVESTORS IN SYSTEMWIDE AND CONSOLIDATED
BANK DEBT OBLIGATIONS OF THE FARM CREDIT SYSTEM
10. The authority citation for part 630 is revised to read as
follows:
Authority: Secs. 5.17, 5.19 of the Farm Credit Act (12 U.S.C.
2252, 2254).
Subpart A--General
11. Section 630.3 is amended by redesignating existing paragraphs
(f) and (g) as new paragraphs (g) and (h), respectively, and adding new
paragraph (f) to read as follows:
Sec. 630.3 Publishing and filing the report to investors.
* * * * *
(f) Information in documents prepared for investors in connection
with the offering of debt securities issued through the Federal Farm
Credit Banks Funding Corporation may be incorporated by reference in
the annual and quarterly reports in answer or partial answer to any
item required in the reports under this part. A complete description of
any offering documents incorporated by reference must be clearly
identified in the report (e.g., Federal Farm Credit Banks Consolidated
Systemwide Bonds and Discount Notes--Offering Circular issued on
[insert date]). Offering documents incorporated by reference in either
an annual or quarterly report prepared under this part must be filed
with the Chief Examiner, Farm Credit Administration, McLean, Virginia
22102-5090, either prior to or at the time of submission of the report
under paragraph (h) of this section. Any offering document incorporated
by reference is subject to the delivery and availability requirements
set forth in Sec. 630.4(a) (5) and (6).
* * * * *
Dated: March 20, 1997.
Jeanette Brinkley,
Acting Secretary, Farm Credit Administration Board.
[FR Doc. 97-8000 Filed 3-28-97; 8:45 am]
BILLING CODE 6705-01-P
