May 21, 2014
Mr. Barry F. Mardock
Office of Regulatory Policy
Farm Credit Administration
1501 Farm Credit Drive
McLean, VA 22102-5090
Dear Mr. Mardock:
Thank you for 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 ag operation. I routinely have business transactions with a wide variety of individuals, some of whom might be FCW customers. For the most part, I don’t know whether someone I’m doing business with is an FCW customer. Even in instances where I know I’m dealing with an association customer, there is no conflict of interest since FCW directors do not have any role in approving loans or the terms of loans.
FCA’s proposed transaction disclosure requirements could create significant issues for my business. The transaction disclosure requirements would force me to establish an infrastructure within my business to track and report every transaction I had with an FCW borrower that came within the “transactions” described in the proposed regulations. This results in additional burden and risk, along with associated costs, that my business would have trouble handling. 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 likely will choose to do business elsewhere. As a fellow [farmer or rancher], I would feel obligated to advise them that I must report their transactions with me to FCW as required by federal law. Why would they be willing to continue to do business with me when there is no confidentiality regarding their business transactions? In today’s culture, the last thing a person is going to understand and tolerate is what will be perceived as “surveillance” of their business transactions. As a result, the transaction disclosure requirements could have severe impact on my business.
Requiring me to disclose transactions with FCW borrowers, even when I know I am doing business with one, is unrealistic and unworkable. The number of transactions I have in the normal course of my business means that both FCW and I would spend an enormous amount of time shuffling paperwork with absolutely no impact on any conflict of interest. Furthermore, the proposed transaction disclosure requirements impose an onerous burden on directors which will discourage qualified individuals from seeking to serve on the FCW board and would cause me to seriously question my willingness to continue to serve on the board.
In my crop insurance business I have many insurers who are also FCW customers, amongst other associations throughout the state. In my disclosures to FCW (per regulations) I have listed my profession and listed the possible conflicts through those relationships and disclose all family members who might be of conflict. However to proceed with asking each client, which is close to 200 separate individual entities, to disclose whether they are Farm Credit customers or not would hinder my relationship with them as they will most likely have the opinion that it is none of my business. In addition, most immediate and extended family members living in the area are agriculturalists and are tied to the ag community one way or another. To approach each relationship personal or professional and ask whether they are Farm Credit customers or not is truly beyond a level of privacy I am not comfortable asking about. To the best of my knowledge I have disclosed who I know personally and professionally as clients of Farm Credit. This should be the extent of my disclosure as per regulation.
I urge the FCA to revise the proposed rule substantially prior to issuing a final rule. I would also like to offer my support for the comments submitted by FCW. Thank you for your consideration.