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employee, or agent of any institution of This paragraph shall not apply to any the Farm Credit System:

acquisition by will or inheritance; (a) Shall, in any manner directly or (f) Shall acquire, directly or indirectly indirectly, participate in the deliberation (including acquisition by membership in upon, or the determination of, any ques- syndicates), any interests in lands (intion affecting his personal interests, those cluding mineral interests being acquired of any person related to him by blood or incidentally with surface interests) marriage, or those of any partnership, as- which are mortgaged to any Farm Creut sociation, or any business organization in institution or which were thus mortgaged which he is directly or indirectly at any time within the preceding 12 interested;

months, without obtaining the specific (b) Shall, except in the performance prior approval of its board of directors of his otcial duties, divulge to another in addition to conforming with any other person, or utilize for his personal benefit applicable regulations. This paragraph or that of another, any fact or informa- shall not apply to any acquisition by wil tion acquired, directly or indirectly, by or inheritance; virtue of his employment;

(g) Shall participate, directly or in(c) Shall accept or receive any salary, directly, in any transaction concerning fee, commission, honorarium, or substan- the purchase or sale of corporate stock tial gift, or other benefit, directly or in- or bonds, commodities, or other propert directly, from any borrower from or

for speculative purposes if such action debtor to any institution of the Farm might tend to interfere with the proper Credit System, from any loan appli- and impartial performance of his duties cant or his representative, from any or bring discredit upon any Farm Credit seller to or purchaser from any borrower institution. Employees are not prohibited or applicant, or any person transacting by this paragraph from making bona business with any

institution of

fide investments. When an employee is the System, provided, however, that uncertain as to whether a contemplated any oficer, employee, or agent may enter transaction would constitute a conflict into bona fide transactions with borrow- of interest, he should consult his imers for services or for the purchase and mediate supervisor; sale of farm supplies or farm products (h) Shall have business relations, diused in or produced on his own farm, if

rectly or indirectly, involving activities such purchases and sales are reported with borrowers which permits or gives to and not disapproved by the board of

the appearance of permitting undue indirectors of the institution by which fluence, such as the purchase or sale of he is employed;

commodities or supplies, the placement of (d) Shall acquire, directly or indirectly insurance, sale of real estate, auction(including acquisition by membership in eering, sales barns, or appraisal service, syndicates), any lands or interests except in his official capacity as an emtherein, including mineral interests, ployee of the Farm Credit institution; which are owned by any Farm Credit provided that this prohibition shall not institution or which were thus owned at be applicable to any employee who was any time within the preceding 12 months.

engaged in such activity on May 1, 1972, As used in this $ 612.2160, “mineral in

until December 31, 1973; and thereafter

shall not be applicable to any such emterests" means any interest in minerals, oil, or gas, including, but not limited to, ployee exempt therefrom upon the any right derived directly or indirectly

recommendation of the bank board and from a mineral, oil, or gas lease, deed, or

approval of the Governor, taking into

account his contribution to the System royalty conveyance. This paragraph shall

and alternatives available. not apply to any acquisition by will or

(i) Shall, while he serves on a finance Inheritance.

committee or subcommittee thereof, pur(e) Shall separately acquire, directly or

chase or acquire, directly or indirectly, Indirectly (including acquisition by mem

ownership of any interest in any obligabership in syndicates), any mineral in

tions of the bank or banks for which he Eerests in lands which are mortgaged to participated in establishing rates; or eny Farm Credit institution or which (j) Shall serve also as an officer or were thus mortgaged at any time within director of a commercial bank or of an be preceding 12 months, but this shall organization which frequently or ocnot prohibit mineral interest being ac- casionally transacts lending business ruired incidentally with surface interests. with a Farm Credit institution; provided

to

that this prohibition shall not be applicable to any employee who was such an officer or director on May 1, 1972, until December 31, 1973. [37 FR 11417, June 7, 1972, as amended at 38 FR 27836, Oct. 9, 1973] $ 612.2165 Legal provision cited.

In the above connection, particular attention is directed to the following provisions of law containing the Federal penal provisions which relate particularly officers and employees of the institutions under the supervision of the Farm Credit Administration: Sections 212, 213, 215, 216, 371, 493, 657, 658, 1006, 1011, 1013, 1014, 1907 and 1909 of title 18, United States Code. § 612.2170 Cases involving trivial inter

est or relationship. If the degree of interest, relationship or benefit in any case, as determined by the supervisory bank, is so trivial as to create little probability that officer's or employee's impartiality of judgment and action has been affected, no question under $ 612.2160 shall be deemed involved. Each case shall be determined on its own facts, proper weight being given to the nature, amount and importance of the benefit involved, the degree or kind of relationship in question, and the character of the person concerned. Each determination made by the bank shall be reported to the bank board at its next meeting for consideration. [38 FR 27836, Oct. 9, 1973] § 612.2180 Gifts or favors from subordi.

nates. No salaried officer or employee of any Farm Credit institution shall at any time solicit contributions from other employees for a gift or present to anyone in a superior position, nor shall any such superior receive any gift or present offered or presented to him as a contribution from employees receiving & less salary than himself, nor shall any such oficer or employee make any donation as & gift or present to any official superior; provided, however, that this section shall not apply to gifts of a nominal value traditionally exchanged among business associates as part of acceptable social amenities. 8 612.2190 Borrowing from subordi.

nates. No salaried oficer employee shall borrow from or obtain endorsement

of a note or other obligation from any subordinate employee. 612.2200 Improper use of official

property. No director, officer, or employee shall use the space, personal property, communication, transportation, or other facility of a Farm Credit institution for activities or business in his personal interest or the personal interest of another, except under lease, contract, concession, or authorization in writing, pur. suant to agreements and negotiations fairly arrived at and evidenced in writing, setting forth the terms and conditions of such use. Official stationery shall not be used for personal communication or for communications on controversial public matters expressing opinions which do not represent the official views of those having a responsibility for expression of official views of the institution. § 612.2210 Evasions and circumventions

of rules of conduct. No officer or employee shall use any scheme or device to avoid compliance with any of the rules or guidelines established under $$ 612.2110 through 612.2200 or avoid compliance with the intent of those rules through the use of subterfuge, evasions, or circumventions. Examples of acts of subterfuge or circumventions include (a) obtaining a loan or assisting another borrower to obtain a loan from a Farm Credit insti. tution knowing that the proceeds thereof are planned to be used to provide financing for a person who is ineligible for such a loan, (b) inducing or assisting another person to obtain a loan from any institution of the System, the proceeds of which are planned to be used for the employee's benefit or for the benefit of any legal entity in which the employee has a direct or indirect personal interest. § 612.2220 Official loans.

Officers and employees as well as directors may receive bona fide loans to the extent that they are eligible for such loans and in strict compliance with policies and regulations governing such loans. 8 612.2230 Report by personnel.

The oficer, director or employee involved or interested in any transaction to which $$ 612.2120, 612.2160, 612.2170, and 612.2210 are applicable shall report ir

or

of

or

writing to the appropriate officer of the interested bank or association and disclose his interest and status in the matter unless, in the case of a loan application, the application itself discloses such information. The interested bank or association is the one that is a party to the transaction and not the employing bank or association unless they happen to be the same. $ 612.2240 Approval by interested bank

or association. All permitted transactions to which $$ 612.2120, 612.2160, 612.2170, and 612.2210 apply shall be subject to prior approval

the executive committee or loan committee of the interested Farm Credit institution and, unless the board of directors of that institution requires prior board approval of such transactions, shall be reported to the board for review. The officer, director, or employee involved or interested should absent himself from any meeting of the executive or loan committee or of the board, except when the committee or board requests information from him in person, while consideration is being given to the action on the transaction. This section supersedes any vested or delegated authority to the person involved. The final action on such transactions shall be recorded in the minutes of the committee or the board which shall reflect the fact that the person involved was not present when final consideration was given to the transaction. 8612.2250 Reports of transactions with

directors, officers, or employees. The associations shall report transactions to which $$ 612.2120, 612.2160, 612.2170, and 612.2210 apply fully in writing to the supervising bank and the bank shall report such final approval of the transaction to the Director of Credit Service unless the Board minutes of the supervising bank disclosing such final action are submitted promptly to the Farm Credit Administration. $612.2260 Reports of credit extended

to financing institutions. Any bank or association extending credit to a financing institution not in the Farm Credit System upon the basis of any note or other obligation of a director, officer, or employee of a Farm Credit institution, including any obligation or any

endorsement in which such director, ofticer, or employee has a personal, financial interest, shall be reported to the Director of Credit Service. This section shall not apply to the fulfillment of existing contracts with such institutions in accordance with their terms where there is no change in the parties of interest or the ownership of the related property, sales of surplus equipment and supplies in accordance with the rules of disposition of such property, or the discounting by a Federal intermediate credit bank of a PCA loan, or to the making of a loan by a bank for cooperatives except as such loans or discounts are required by other regulations to be submitted for prior approval. $ 612.2270 Other reports to the Farm

Credit Administration, Loan transactions, which by other regulations are required to be submitted to the Director of Credit Service for prior approval for advice and counsel, should be accompanied by the information required by this regulation when applicable, in which event a separate reporting to meet the requirements of this regulation will not be necessary. Such steps as may be necessary should be taken in each bank to see that all officers, directors, and employees are advised of the circumstances in which reports are required of them by this regulation. § 612.2280 Fidelity bonds required.

Provision shall be made by the banks for insurance coverage against losses by all bank and association employees through the continuation of present coverage. Bankers Blanket Bond, Standard Form No. 10, or a substitute, may be used. The Act does not require a faithful performance provision in the bond coverage. The district boards shall determine that bond coverage is in an amount that will adequately protect the banks and associations, taking into consideration the increased dollar amount of assets and lending activity of these institutions. 8 612.2290 Policy applicable to design

and administration of employee benefit programs in the Farm Credit

System. (a) All employee benefits should be developed and based on clearly defined objectives with full coordination of benefits to eliminate coverage gaps and duplication of benefits and costs.

(b) The sharing of cost between the employer and employee should take into consideration current industry and local practices and the tax consequences to both the employer and employee.

(c) All employee benefits should be reviewed periodically to make certain they are competitive as measured by industrial and local standards so that such plans can be used as an effective management tool (incentives, recruitment, etc.).

(d) The selection of insurer to underwrite the Group Insurance Program should be based on sound underwriting principles and an evaluation of operational expenses, risk assumptions, proper accounting concepts and cost control procedures.

(e) The amendment of a pension plan to eliminate future contributions from employees will be permitted under the following conditions:

(1) Prior employee contributions plus interest shall not be immediately refunded to employees in cash. (Options in cases of separation or death before retirement remain the same as under existing programs.) Instead, they will be retained as a part of the pension plan to either reduce employer costs or to provide benefits in addition to those provided by employer contributions, or to do both. This rule shall not prohibit the transfer of prior employee contributions plus interest to a new Thrift Plan which an employer may establish at the same time as future employee contributions are eliminated from the pension plan.

(2) Post-retirement group life insurance benefits to be provided present employees will be either (1) eliminated, (ii) reduced to no more than $2,500, (iii) frozen at the amounts which would have been provided under the group life insurance program had the employee's present rate of earnings continued to retirement. Post-retirement group life insurance for all employees hired in the future will be limited to a maximum of $2,500.

(3) Accidental death and dismemberment included in a group life insurance program will be terminated at the time of the employee's retirement.

(4) The funding medium to be employed to fund pension benefits may involve either a trust fund or a pension investment contract issued by an insurance company of a type which will provide a maximum rate of return commensurate with the degree of risk involved,

maximum flexibility of financing, and expenses which are reasonable and justi. fied, taking into consideration the services being provided by the insurance company.

(5) The overall costs of employee benefits will be determined on a realistic and sound financial basis and be in line with current industrial and local conditions.

(6) The pension formula will take into consideration, directly or indirectly, present and anticipated future levels of social security benefits. § 612.2291 Thrift plan requirements.

Subject to the restrictions previously set forth and those indicated below an employer may adopt an Employee Thrift Plan:

(a) Voluntary employee contributions will be in multiples of 1 percent but not to exceed 6 percent of their earnings, except as provided in paragraph (c) of this section.

(b) Matching employer contributions may be determined by a schedule designed to fit employer objectives but in no event will the rate of matching employer contributions exceed 50 cents for each dollar contributed by an employee.

(c) Voluntary employee contributions in excess of 6 percent but not beyond 10 percent may be permitted but in no event will such excess employee contributions be credited with a matching employer contribution.

(d) In the event prior employee contributions to a pension plan are transferred to the Thrift Plan, the value of such contributions will not be subject to withdrawal while the employee is stil employed except in the event of financial emergencies as defined in the Thrift Plan. § 612.2300 Civil service retirement cor

erage. (a) Section 5.6(b)(1) of the Act specifies which of the officers and employees of the banks shall be under the Civil Service Retirement Act after 1959. The creditability of service in the banks prior to 1960 is unaffected by the Act.

(b) District personnel officers are supplied with copies, and current amend. ments, of the Federal Personnel Manual and other material regarding civil service retirement, which contain complete in. formation on the civil service retirement laws and regulations thereunder.

$612.2310 District retirement plans.

The district boards and the bank boards shall provide retirement benefits for their employees who are not under the Civil Service Retirement Act. It is recognized that the district retirement plans should be designed to be uniform, As far as practicable, between the various banks and associations in the same district. Retirement benefits, with due allowance for the social security benefits available, should be competitive with industry and area practices with appropriate consideration of the cost. Any such retirement plans, including thrift or savings plans, and any amendments thereto, shall be submitted for the prior approval of the Farm Credit Administration, Approval of the plan by the Internal Revenue Service shall be secured. $612.2320 Personnel reports.

The Farm Credit Administration will request reports of personnel strength and listings of personnel on a semiannual basis.

PART 613_ELIGIBILITY AND SCOPE

OF FINANCING

Subpart A-General Sec. 613.3000 Authority. Subpart B--Eligibility To Borrow From Federal

Land Banks and Production Credit Associations 613.3010 Person defined. 613.3015 Combined operations. 613.3020 Farmers and ranchers. 613.3030 Producers or harvesters of aquatic

products. 613.3040 Rural residents. 613.3050 Farm-related businesses. Subpart C-Eligibility of Financial Institutions To Borrow From the Federal Intermediate Credit Bank 613.3060 Institutions eligible. Subpart D-Eligibility of Cooperatives To Borrow

From a Bank for Cooperatives 613.3070 Cooperative. 613.3080 Federated cooperative. 613.3090 Cooperative basis. 613.3100 Farm or aquatic supplies and

farm business services. 615.3110 Eligibility. 613.3120 Scope of financing.

Subpart Nondiscrimination in Lending 613.3140 Policy. 613.3150 Nondiscrimination in lending and

other services. 613.3160 Nondiscriminatory advertising. 613.3170 Equal Housing Lender Posters.

AUTHORITY: The provisions of this part 613 issued under secs. 5.9, 5.18, 5.26, 85 Stat. 619, 621, 624; 12 U.S.C. 2243, 2252, 2001 nt.

SOURCE: The provisions of this Part 613 appear at 37 F.R. 11421, June 7, 1972, unless otherwise noted.

Subpart A-General 8 613.3000 Authority,

The Act, sections 1.8, 2.3, 2.15, authorizes the Federal land banks, Federal intermediate credit banks and production credit associations to make loans to bona fide farmers and ranchers, rural residents and persons furnishing to farmers and ranchers services directly related to their on-farm operating needs. Production credit associations also may make loans to producers or harvesters of aquatic products. Similarly, sections 3.7 and 3.8 of the Act authorize the banks for cooperatives to make loans to eligible cooperatives. Subpart 8-Eligibility To Borrow From

Federal Land Banks and Produc

tion Credit Associations $ 613.3010 Person defined.

A “person" is an Individual or a legal entity. A "legal entity” is any partnership, corporation, estate, trust or other entity which is legally vested with authority to conduct a business. $ 613.3015 Combined operations.

(a) Where an applicant's operations include a combination of farming, producing or harvesting aquatic products, or & farm-related business the determination of eligibility can be made on the basis of the criteria set out for either or any combination of these operations. $ 613.3020 Farmers and ranchers.

(a) Definition. A bona fide farmer or rancher is a person owning agricultural land, or engaged in the production of agricultural products, including aquatic products under controlled conditions.

(b) To be eligible to borrow, an individual shall establish as a part of his application for credit his qualification as a bona fide farmer or rancher.

(c) A legal entity shall meet these same requirements and at least one of the following qualifications to be eligible to borrow:

(2) More than 50 percent of the value or number of shares of its outstanding

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