June 19, 2014
Mr. Barry F. Mardock
Office of Regulatory Policy
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090
Dear Mr. Mardock,
I appreciate being given the opportunity to comment on FCA's recent proposed rule regarding Standards of Conduct. Adherence to appropriate Standards of Conduct is important to the integrity of the Farm Credit System and a topic which should be carefully considered. The FCA's proposed rule, however, does far more harm than good and should be substantially revised.
As a director of Farm Credit West ("FCW"), I find the transaction disclosure requirements in the Conflicts of Interest section of the proposed rule to be entirely inappropriate and completely unrealistic. The transactions coming under the reporting and approval requirement include any transaction where I would "directly or indirectly borrow from, lend to, or become financially obligated with or on behalf of, a director, employee.....[of FCW] or a borrower [of FCW]. The proposed rule ignores my association's cooperative structure and the way I do business in my own agricultural operation. I routinely have business transactions with a wide variety of individuals in the farming community, some of whom might be FCW customers. I generally have no way of knowing whether these parties borrow from FCW or some other financial institution, in fact, I do not consider knowing any business of mine. The Farm Credit System has gone to great lengths to distance itself from the days where directors would oversee every loan and I consider this disclosure requirement a step backward in privacy. Considering the fact that FCW directors do not have any role in approving loans or even the terms of a loan, I would submit that there is no conflict of interest generated by typical transactions.
FCA's proposed transaction disclosure requirements could create significant issues for my business. The transaction disclosure requirements would force me to track and report every transaction I had with a FCW borrower that came within the "transactions" described in the proposed regulations. This results in additional burden and risk, along with the associated costs that my business would be forced to absorb. Additionally, this transaction reporting requirement could potentially impact the viability of my business. If other FCW borrowers know that my transactions with them have to be reported, they may choose to do business with someone else. I would definitely feel obligated to inform them of the requirement to report their transactions with me to FCW, as would then be required by federal law. I suspect they might choose to avoid conducting business with me, as a result of losing confidentiality. As a result, I am very concerned with the known and unknown impacts a requirement such as this will generate.
The requirement to disclose transactions with FCW borrowers is unrealistic, overbearing, and unworkable. With the large number of individuals and companies with which I conduct business, I find that the variety of transactions would likely prove unmanageable, generating excessive workload to track and process daily. Add to this cost of time and money, the duplicative effort that will be required by FCW and the imposition proves overwhelming. Furthermore, the proposed transaction disclosure requirements impose an onerous burden on directors, which will likely discourage qualified individuals from seeking election to the FCW board and would cause me to seriously consider my willingness to continue to serve on the board. If it becomes necessary to report every contemplated sale or purchase of used farm machinery that I consider prior to concluding the exchange, I don't know that I would chose to remain a director.
In closing, I strongly urge the FCA to revise the proposed rule substantially, prior to finalization. I would also like to confirm my support of the comments previously submitted by our Farm Credit West association.
Richard J. Enns
Richard J. Enns, Farm Credit West Director