Federal Housing Finance Agency Issues Final Rule on Minority, Women Inclusion Amendments Regulation
Minority and Women Inclusion Amendments
A Rule by the
Publication Date:
Agency:
Dates: This rule is effective
Effective Date:
Entry Type: Rule
Action: Final rule.
Document Citation: 80 FR 25209
Page: 25209 -25215 (7 pages)
CFR: 12 CFR 1207
RIN: 2590-AA67
Document Number: 2015-10374
Shorter URL: https://federalregister.gov/a/2015-10374
Action
Final Rule.
Summary
The
DATES:
This rule is effective
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
I. Background
A. General
Effective
The Safety and Soundness Act provides that FHFA is headed by a Director with general supervisory and regulatory authority over the regulated entities. FHFA is charged, among other things, with overseeing the prudential operations of the regulated entities. FHFA is also charged with ensuring that the regulated entities: Operate in a safe and sound manner including maintenance of adequate capital and internal controls; foster liquid, efficient, competitive, and resilient national housing finance markets; comply with the Safety and Soundness Act and the respective authorizing statutes of the regulated entities; carry out their missions through activities authorized and consistent with the Safety and Soundness Act and their authorizing statutes; and engage in activities and operations that are consistent with the public interest. [1]
B.
i. Statutory Requirements
Section 1116 of HERA amended section 1319A of the Safety and Soundness Act, 12 U.S.C. 4520, to require, in part, that the regulated entities establish an
ii. FHFA's Regulations
FHFA adopted regulations to implement section 1116 of HERA, 12 U.S.C. 1833e and Executive Order 11478, and to set forth the minimum requirements for the regulated entities' diversity programs and reporting requirements. Those regulations, located at 12 CFR part 1207, require each regulated entity and the
Part 1207 also requires each regulated entity and the
In addition, part 1207 provides that the FHFA Director has broad enforcement authority in that he or she may enforce this regulation and standards issued under it in any manner and through any means within his or her authority, including through identifying matters requiring attention, corrective action orders, directives, or enforcement actions under 12 U.S.C. 4513b and 4514. [7] To that end, the FHFA Director may conduct examinations of the activities of a regulated entity or the
C. The Bank System
The Bank System (System) was created by the Federal Home Loan Bank Act of 1932 (Bank Act) to support mortgage lending and related community investment. It is currently composed of 12 Banks, Bank member financial institutions, and the System's fiscal agent, the
The board of directors of the
Section 1202 of HERA altered the composition of the
Each member director nominee is required to execute a director eligibility certification form prescribed by FHFA. [14] A member director is a member of the board of directors of a Bank, who is a director or officer of a member institution located in the district in which the Bank is located. [15]
Each independent director nominee is required to execute an independent director application form prescribed by FHFA that demonstrates the individual is eligible and has the qualifications to be an independent director. [16] An independent director is a member of the board of directors of a Bank who is a bona fide resident of the district in which the Bank is located. [17] Each independent director who is not a public interest director is required to have demonstrated knowledge of, or experience in, financial management, auditing and accounting, risk management practices, derivatives, project development, organizational management, or such other expertise as the Director may prescribe by regulation. [18] FHFA regulations include the law as one of the areas in which an independent director may have knowledge of, or experience in, to qualify as an independent director. [19] Before nominating any individual to be an independent director, each Bank is required to determine that such knowledge or experience of the nominee is commensurate with that needed to oversee a financial institution with a size and complexity that is comparable to that of the Bank. [20] At least two of the independent directors are required to be public interest directors who shall have more than four years of experience in representing consumer or community interests on banking services, credit needs, housing, or consumer financial protection. [21]
FHFA's regulations include specific actions the
FHFA's regulations also set out the circumstances under which support may be provided for the nomination or election of an individual to a member or independent directorship.
Member Directors: A Bank director, officer, attorney, employee, or agent acting in his or her personal capacity, may support the nomination or election of any individual for a member directorship, provided no such individual shall purport to represent the views of the Bank in doing so. [25]
Independent Directors: A Bank director, officer, attorney, employee, or agent and the board of directors and
Beyond these specific allowances for support, a Bank director, officer, attorney, employee, or agent is otherwise prohibited, directly or indirectly, from supporting or opposing the nomination or election of a particular individual for a member or independent director vacancy, or from taking any other action to influence the voting with respect to any particular individual. [27]
D. Proposed Minority and Women Inclusion Amendments
On
The proposed rule would also add section 1207.23(b)(9)(ii), which would require the
The proposed amendment to section 1207.22(c) would require the
The 60-day comment period closed on
II. Final Rule
FHFA responds to specific concerns below as it explains aspects of the rule to which the comments pertain. After considering the comments received in response to the proposed rule, FHFA is adopting a final rule amending its minority and women inclusion regulations, which applies to the
A. Applicability of Amendments
A private citizen commented that the amendments should apply to the Enterprises as well as to the
B. Data Collection
i. Method of Collection
The nine
FHFA does not adopt this proposal in the final rule. These forms are used solely to collect information to determine whether each director meets the statutory and regulatory eligibility requirements. [37] The demographic status of a director or candidate for director is not a requirement for eligibility. In addition, completion of the annual director certification forms is mandatory, whereas submission of minority and gender classification data is voluntary. The final rule adopts the proposed requirement that the
The nine
ii. Diversity Categories
The proposed rule requires the
FHFA does not adopt the request to require the use of the minority categories as defined in part 1207. The definition of "minority" in part 1207 is consistent with that in section 1204(c) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, which is referenced by section 1319A of the Safety and Soundness Act, as amended by HERA. [40] The Form EEO-1 includes six diversity categories (i.e., Hispanic or Latino; Black or African American (not Hispanic or Latino); Native Hawaiian or Other Pacific Islander (not Hispanic or Latino); Asian (not Hispanic or Latino); American Indian or Alaska Native (not Hispanic or Latino); or Two or More Races (not Hispanic or Latino)). Part 1207 requires that the regulated entities use the Form EEO-1 to report their demographic workforce data. Use of the same minority categories to collect board diversity data will provide consistency of reporting and enhance the comparability of the
iii. Collection of Additional Data
The nine
The commenters noted that some
C. Outreach Activities
i. Broad View of Diversity
The nine
FHFA does not include a definition of "diversity" in this final rule and maintains that the
ii. Interplay With Director Nomination and Election Process
Also related to the outreach reporting requirement, the nine
The nine
The actions are part of a skills and experience assessment and statement, as permitted by section 1261.9(a);
The actions taken are in his or her personal capacity, to support the nomination or election of any individual for a member directorship, provided that he or she does not purport to represent the views of the Bank or its board of directors in doing so, as permitted by section 1261.9(b)(1); or
The actions support the candidacy of any individual nominated by the board of directors for election to an independent directorship, as permitted by section 1261.9(b)(2).
The commenters expressed concern that the regulatory restrictions on communication could limit a Bank's ability to address gender or minority identification in the election process, particularly with respect to member directorships. The commenters provided several examples of general outreach and education efforts to promote diversity on their respective boards of directors that they believe are consistent with the terms of section 1261.9. The examples included the following actions for promoting board diversity:
Engaging in general outreach to encourage a diverse pool of nominations for member directorships and applications for independent directorships;
including a statement about EEO in member director nomination, independent director application, and election materials;
encouraging trade associations to consider diverse candidates for member director nominations, or encouraging a Bank's
providing information about Bank directorships and the election process through general outreach to professional affinity groups to which officers and directors of member institutions may belong.
FHFA agrees that the scenarios provided by the
In addition, the commenters requested clarification on whether more direct actions would be permissible, such as a Bank identifying specific individuals as potential nominees and encouraging the nomination of an individual for a member directorship.
Member Directors: With respect to identifying and supporting specific individuals for nomination or election, the regulations permit a Bank director, officer, attorney, employee or agent, acting in his or her personal capacity, to support the nomination or election of any individual for a member directorship. The term " `personal capacity' is intended to preclude the use of a director's official title, position, or authority associated with the position of Bank director, such as through use of Bank stationery, to endorse a candidate." [43] While the regulations allow such support, they provide that no Bank director, officer, attorney, employee or agent may purport to represent the views of the Bank or its board of directors. [44] Thus, support for the nomination or election of individual member directors, including considerations of diversity, may be made by Bank directors, officers, attorneys, employees or agents acting only in a personal capacity.
Independent Directors: Although not addressed by the commenters, FHFA notes that nothing in the existing nomination and election regulations prohibits board members and others from discussing the importance of diversity when nominating, or considering the nomination of, individuals for independent directorships. For example, Board members may introduce the topic and discuss the role diversity plays in the solicitation and nomination processes for independent directorships.
FHFA has also addressed the commenters' concerns in the final rule. FHFA acknowledges this "interplay" between the outreach requirements in the minority and women inclusion regulations and the Bank board of directors nomination and election regulations and further clarifies it by adding a reference to section 1261.9 in section 1207.23(b)(9)(ii) in the final rule to require that the
D. Reports
i. Due Date for Initial Data Submission
FHFA did not receive any comments regarding the proposed rule's requirement to submit the demographic board data concurrent with the
ii. Timeline for Reporting Comparative Data
The nine
iii. Use of Data
FHFA does not adopt this recommendation in the final rule. FHFA reiterates its position as stated in the
FHFA considers the reports and data to be related to examinations and examination, operation, or conditions reports. In general, FHFA will consider all the information and the data attributed to a particular regulated entity to be non-public, subject to the Freedom of Information Act Exemption (b)(8) and to the examination privilege. The agency does not intend to make attributed information public. However, FHFA intends to use the information and data arrayed or aggregated in a variety of ways, without attribution to specific institutions, in order to identify trends, success or lack of success, or best practices each regulated entity can use to assess or improve its own programs. Additionally, FHFA may use such unattributed information in various formats to inform the public on such trends, success, lack of success and best practices among the regulated entities. [46]
The commenter also noted that it is standard practice for FHFA, the
III. Consideration of Differences Between the
Section 1313(f) of the Safety and Soundness Act, as amended by section 1201 of HERA, requires the Director, when promulgating regulations relating to the
IV. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) requires that FHFA consider the impact of paperwork and other information collection burdens imposed on the public. [50] Under the PRA and the implementing regulations of the
As required by the PRA, FHFA requested comments on the new collection of information in the proposed rule. [52] The agency received no comments on that issue. As is also required by the PRA, FHFA submitted an analysis of the new collection of information to OMB for review in conjunction with the publication of the proposed rule. [53] OMB assigned to this collection of information control number 2590-0014, but has not yet approved the collection; however, FHFA expects OMB will do so by the effective date of the final rule.
Summary: Under section 1207.23(b)(9)(i), each Bank and the
Use: FHFA will use the information collected under section 1207.23(b)(9)(i) to assess the effectiveness of the policies and procedures that each of the
Respondents: Respondents will be the approximately 210 individuals serving on the boards of directors of the
Frequency: The information will be collected annually.
Annual Burden Estimate: FHFA estimates the total annualized hour burden for all respondents to the proposed information collection to be 21 hours. FHFA estimates that an average of 210 board directors will provide information annually and that each response will take approximately 0.1 hours on average (210 respondents dz 0.1 hours per response = 21 hours). There will be no annualized cost to the Federal government.
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C.
The General Counsel of FHFA certifies that the final rule is not likely to have a significant economic impact on a substantial number of small entities because the regulation is applicable only to the
List of Subjects in 12 CFR Part 1207
Discrimination
Diversity
Equal employment opportunity
Minority businesses
Outreach
Regulated entities
Authority and Issuance
For the reasons stated in the SUPPLEMENTARY INFORMATION, and under the authority of 12 U.S.C. 4526, FHFA amends part 1207 of title 12 of the Code of Federal Regulations as follows:
PART 1207--MINORITY AND WOMEN INCLUSION
1.The authority citation for part 1207 continues to read as follows:
Authority:
12 U.S.C. 4520 and 4526; 12 U.S.C. 1833e; E.O. 11478.
Subpart C--Minority and Women Inclusion and Diversity at Regulated Entities and the
2.Amend section 1207.22 by adding a new sentence at the end of paragraph (c) to read as follows:
section 1207.22 Regulated entity and
(c) * * * The data required to be reported by section 1207.23(b)(9) shall be submitted no later than
3.Amend section 1207.23 as follows:
a. Redesignate paragraphs (b)(9) through (19) as paragraphs (b)(10) through (20); and
b. Add new paragraph (b)(9) and revise newly redesignated paragraph (b)(10) to read as follows:
section 1207.23 Annual reports--format and contents.
(b) * * *
(9)(i) Data showing for the reporting year by minority and gender classification, the number of individuals on the board of directors of each Bank and the
(A) Using data collected by each Bank and the
(B) Using the same classifications as those on the Form EEO-1; and
(ii) A description of the outreach activities and strategies executed during the preceding year to promote diversity in nominating or soliciting nominees for positions on boards of directors of the
(10) A comparison of the data reported by
Dated:
Director,
[FR Doc. 2015-10374 Filed 5-1-15;
BILLING CODE 8070-01-P
Footnotes
1. Section 1102 of HERA, 122 Stat. 2663 and 2664.
2. 12 CFR 1207.21(b).
3. 12 CFR 1207.21(b)(5).
4. 12 CFR 1207.22(c) and 1207.23.
5. 12 CFR 1207.23(b)(1).
6. The race and ethnicity categories used on the Form EEO-1 are: Hispanic or Latino; White (Not Hispanic or Latino); Black or African American (Not Hispanic or Latino); Native Hawaiian or Other Pacific Islander (Not Hispanic or Latino); Asian (Not Hispanic or Latino); American Indian or Alaska Native (Not Hispanic or Latino); Two or More Races (Not Hispanic or Latino).
7. 12 CFR 1207.24.
8. Id.
9. 12 CFR 1273.3(a).
10. 12 CFR 1273.3(b)-(d).
11. 12 CFR 1273.7(a).
12. 12 CFR 1273.7(d); See 75 FR 23163 (
13. Previously, section 7 of the Bank Act required each Bank's board of directors to be comprised of 14 directors, 8 of whom were elected by members and 6 of whom were appointed by the former Federal Housing Finance Board.
14. 12 CFR 1261.7(c).
15. 12 U.S.C. 1427(a)(4)(B).
16. 12 CFR 1261.7(d).
17. 12 U.S.C. 1427(a)(4)(A).
18. 12 U.S.C. 1427(a)(3)(B)(i).
19. 12 CFR 1261.7(e)(1).
20. 12 CFR 1261.7(e)(1).
21. 12 U.S.C. 1427(a)(3)(B)(ii); 12 CFR 1261.7(e)(2).
22. 12 CFR 1261.9.
23. 12 CFR 1261.9(a).
24. 12 CFR 1261.9(a).
25. 12 CFR 1261.9(b)(1).
26. 12 CFR 1261.9(b)(2).
27. 12 CFR 1261.9(c).
28. 79 FR 35960-35963 (
29. See 79 FR 35963 (
30. Id.
31. Id.
32. See 79 FR 35961-35962 (
33. See 79 FR 35963 (
34. Id.
35. Id.
36. See 79 FR 35961 (
37. The Independent Director Annual Certification Form applies to each incumbent Bank director, and the Member Director Eligibility Certification Form applies to both candidates for and incumbents of member directorships.
38. See 29 CFR 1602.7.
39. See EEO-1 Instruction Booklet, Appendix, paragraph 4.
40. 12 U.S.C. 4520(b).
41. See 75 FR 81396 (
42. 74 FR 51453 (
43. When proposing the predecessor regulation, the
44. 12 CFR 1261.9(b)(1).
45. See 79 FR 35961-35962 (
46. 75 FR 81400 (
47. Section 342(e) of Public Law 111-203,
48. Id.
49. 12 U.S.C. 4520(d).
50. See 44 U.S.C. 3507(a) and (d).
51. See 44 U.S.C. 3512(a); 5 CFR 1320.8(b)(3)(vi).
52. See 44 U.S.C. 3507(a)(1)(D); 5 CFR 1320.11(a).
53. See 44 U.S.C. 3507(d)(1)(A); 5 CFR 1320.11(b).
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