Pub. 1 2012 Issue 8

22 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s required if either the CEO’s or the aggregate of all other senior officers’ compensation . . . increased or decreased by 15 percent or more from the previous reporting period . . . association shareholders [also could] petition for a vote at any time.” As the FCA reported, “all commentators strongly objected to the non-binding advisory vote and asked that it be withdrawn.” FCA further reported that “most commentators expressed a view that advisory votes do not further cooperative principles or promote the safety and soundness of the [FCS] and would have a negative impact on the cooperative business model” . . . and “would result in undermin - ing the discretion and decision-making authority of the board and the compensation committee.” Still other commentators stated that “say on pay” is “an unfair expectation of the [FCS] membership.” Fortunately, the FCA ignored this nonsense when finalizing its rule. Under federal rules governing new regulations, a regulation “made final” by an agency such as the FCA does not take effect until “30 days after publication in the Federal Register during which either or both Houses of Congress are in session.” Congress is now in recess for the elections and will not return to Washington for a “lame duck” session until Tuesday, November 13. Therefore, the earliest this regulation can take effect would be in mid-December, and possibly not until early January. Given overwhelming opposition from within the FCS to greater compensation disclosure and “say on pay,” FCS insiders quite likely are expressing their objections to members of Congress, and especially to members of the Agriculture Committees, while they are campaigning. It will be interesting to see if an Ag Committee holds a hearing on this regulation during the lame duck session, signaling to the FCA that it needs to reconsider the regulation. Congress might go even further and block the regulation through the Farm Bill or a Farm Bill extension it will likely enact during the lame duck session. The FCAWants Greater Transparency on Enforcement Orders? A MINOR, YET POTENTIALLY IMPORTANT ELE- ment of the compensation regulation is a requirement that FCS institutions provide “timely and transpar - ent communication to shareholders and investors of significant or material events that occur at [FCS] institutions between annual reporting periods.” An FCA summary of the regulation goes on to state that “Boards of Directors must develop policies to identify events to be communicated. Notice must be made within 90 days of the event’s occurrence. The events may be com - municated in either a separate notice to shareholders or as part of the quarterly report to shareholders.” The regulation then states that FCS “institutions should consider the following when identifying material and significant events [including] . . . reportable FCA supervisory and enforcement actions,” ideally on the first page of the institution’s quarterly report. [emphasis supplied] As FCW readers know, the FCA is very closed-mouth about enforce - ment actions it takes against FCS institutions – unlike the bank regulators the FCA never names the entities or persons subject to an enforcement order. For example, the FCS’s June 30, 2012, Quarterly Information Statement stated that eight of the FCS’s 82 associations, with total assets of $3.26 billion, had entered into “written agreements” (i.e., enforcement actions). None have been publicly named. One of those associations, with $975 million in assets, was slapped with an enforcement order during the second quarter of 2012. A bit of sleuthing revealed that association to be Farm Credit of Florida. While existence of that order is buried deep in the association’s second-quarter report, one can readily wonder how many of its borrower/shareholders, much less other parties, know about this order. If the FCA is to get serious about transparency, it needs to establish how associations will report all supervisory actions to their members as well as to the general public. More importantly, the FCA should follow the lead of the bank regulators and promptly disclose who it has taken an enforcement action against. REPORT FCS LENDING ABUSES TO: GREEN-ACRES@ELY-CO.COM continued frompage 21