[Federal Register Volume 60, Number 136 (Monday, July 17, 1995)]
[Notices]
[Pages 36415-36416]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17433]
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FARM CREDIT ADMINISTRATION
Proposed Related Services; Real Estate Brokerage, Farm
Management, and Mineral Management
AGENCY: Farm Credit Administration.
ACTION: Notice; request for public comment.
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SUMMARY: The Farm Credit Administration (FCA or Agency), by the Farm
Credit Administration Board (Board), requests public comment on an
inquiry by a Farm Credit System (System or FCS) institution for
approval to offer Real Estate Brokerage, Farm Management, and Mineral
Management service programs as authorized ``Related Services.'' The
requested services are being published for a 60-day public comment
period prior to the FCA acting on a request to offer such services.
DATES: Comments must be submitted to the FCA within September 15, 1995.
ADDRESSES: Comments should be mailed or delivered (in triplicate) to
Patricia W. DiMuzio, Associate Director, Regulation Development, Office
of Examination, Farm Credit Administration.
FOR FURTHER INFORMATION CONTACT:
Linda C. Sherman, Policy Analyst, Regulation Development, Office of
Examination, Farm Credit Administration, McLean, VA 22102-5090, (703)
883-4498, TDD (703) 883-4444,
or
Gary K. Van Meter, Senior Attorney, Administrative Law and Enforcement
Division, Office of General Counsel, Farm Credit Administration,
McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-4444.
SUPPLEMENTARY INFORMATION: On June 15, 1995, the FCA Board voted to
adopt final regulations on related services at 12 CFR part 618. (See 60
FR 34090, June 30, 1995.) Under title I, section 1.12; title II,
sections 2.5 and 2.12 (15); and title III, section 3.7 of the Farm
Credit Act of 1971, as amended (the Act), the FCA is responsible for
promulgating regulations governing the offering and administering of
technical assistance, financial assistance, and financially related
services (hereinafter referred to as ``related services'') by System
banks and associations. The statute authorizes System institutions to
provide financial and technical assistance to borrowers, applicants,
and members and make available to them related services appropriate to
their on-farm, aquatic and cooperative operations under regulations
prescribed by the FCA.
Related service, as defined in Sec. 618.8000(c) (see 60 FR 34090,
June 30, 1995), means ``any service or activity provided by a System
bank or association that is appropriate to the recipient's on-farm,
aquatic, or cooperative operations, including control of related
financial matters.'' The FCA notes that, should the requested service
be authorized, farm-related businesses or persons eligible for rural
housing loans would not be eligible unless they otherwise satisfy the
eligibility criteria for related services in Sec. 618.8005.
The revised regulation at Sec. 618.8000 requires a prior
determination that any new services, not previously authorized and
placed on the Related Services List (RS List), are legally authorized
and do not present excessive risk to the requesting institution or the
System as a whole. In order to evaluate safety and soundness risks, the
submitting institution must be specific in its request as to what types
of services will be provided and, if necessary, what controls would be
appropriate to address potential risks.
The following services would be provided to persons eligible to
receive such services from the Farm Credit System under Sec. 618.8005:
Real Estate Brokerage Services: The applicant would offer real
estate brokerage services to buyers or sellers (or both parties) of
agricultural property. Commissions on sales transactions of property
would be competitive with other brokerage services in the service
territory. Key factors of the program would include the following:
Location of sales professionals throughout proposed service territory;
national and regional advertising; complete auction services; large
network of qualified buyers; recommended pricing strategies for
clients; prompt and efficient sales closings; and suggestions for
assistance with financial structuring for purchasers.
Farm Management Services: Regional teams of professionals familiar
with the market would provide a full complement of farm land services
to all types of agricultural land owners in the service territory,
subject to eligibility constraints. Farm management includes defining
ownership goals, identifying problems, analyzing alternatives and
making recommendations for achieving business goals. Farm managers
would present the customer with a full spectrum of lease or custom
farming alternatives and help the owner decide how to ultimately get
the best return on the owner's assets. Key factors of the service would
include developing a comprehensive farm operating plan, securing
operators/renters and negotiating leases, providing property reporting
including annual budgets and projections, periodic inspections of crop
programs and conservation measures, analysis of government programs,
formulation and implementation of capital improvement and repairs, and
handling commodity sales.
Mineral Management Services: The applicant would provide
professional mineral management services to eligible customers.
Marketing techniques would be utilized to maximize lease bonuses and
assure that energy companies are aware of the clients' unleased/
available mineral acreage. Key factors of the service include
supervision and management of mineral assets, collection and processing
of revenue from producing assets, property evaluation, unitization,
review and payment of taxes, review and tracking of authorizations for
expenses, lease evaluation and negotiation, lease payment record
maintenance, review of lease and other mineral-related agreements,
processing division orders and assignments, and regular property
reviews for each account.
Because of the complex nature of these proposed services, the FCA
solicits public comment prior to acting on the request, in accordance
with the guidelines recently adopted in
[[Page 36416]]
Sec. 618.8010(c)(3). The Agency believes that its evaluation of the
proposal will be aided by public comment on issues raised by the
proposal. Specifically, the FCA requests comments on the risks inherent
in offering these services, such as the potential for conflicts of
interest and liability or environmental concerns, particularly in
regard to providing such services to borrowers with distressed loans.
The Agency also requests comments on the potential benefits to farmers,
how the provider ensures that services are provided to eligible
entities, feasibility and appropriateness of such services for Farm
Credit institutions, the impact of such services on the lending
function, and any other pertinent issues. In addition, the FCA requests
commenters to consider what Systemwide issues might be raised by a
decision to authorize such services.
The FCA also requests commenters to propose how they believe
identified concerns might be mitigated. Commenters should bear in mind
that the identified concerns could also be addressed by the FCA's
standard of conduct regulations, or by applicable State laws and
regulations, licensing requirements, and industry ethical standards, or
in appropriate circumstances, by requiring pertinent disclosure or
anti-tying requirements for certain services. Additionally, internal
controls could be adopted that limit the amount of risk taken on by an
institution offering such services.
The FCA has concluded that some of the conflict of interest or
liability concerns might be addressed by offering any or all of the
services through a service corporation and requests comment on the
following issues:
(a) What, if any, limits should there be on board structure or
composition?
(b) If necessary, how should the amount of capital a bank can
invest in the service corporation be limited?
(c) Are there any organizational or procedural constraints or
limits that may be appropriate?
In its evaluation of the proposed services, the FCA will focus on
systemic issues rather than on institution or program-specific factors.
If the FCA authorizes the above-related services, any System bank or
association may develop a program and subsequently offer the related
service(s) to eligible recipients, subject to any special conditions or
limitations imposed by the FCA. The Agency may, at the time of
approval, impose such special conditions or limitations on any approved
service as the FCA in its sole discretion may deem necessary or
appropriate to ensure safety and soundness or compliance with law or
regulation. These programs would be subject to review during the
examination process.
Dated: July 11, 1995.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 95-17433 Filed 7-14-95; 8:45 am]
BILLING CODE 6705-01-P
