[Federal Register Volume 68, Number 15 (Thursday, January 23, 2003)]
[Proposed Rules]
[Pages 3194-3196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-1298]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 68, No. 15 / Thursday, January 23, 2003 /
Proposed Rules
[[Page 3194]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Federal Housing Enterprise Oversight
12 CFR Part 1730
RIN 2550-AA25
Public Disclosure of Financial and Other Information
AGENCY: Office of Federal Housing Enterprise Oversight, HUD.
ACTION: Proposed regulation.
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SUMMARY: The Office of Federal Housing Enterprise Oversight is
proposing a regulation to set forth public disclosure requirements with
respect to financial and other information by the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation.
DATES: Written comments on the proposed regulation must be received by
March 24, 2003.
ADDRESSES: Send written comments concerning the proposed regulation to
Alfred M. Pollard, General Counsel, Office of Federal Housing
Enterprise Oversight, Fourth Floor, 1700 G Street, NW., Washington, DC
20552. Written comments may also be sent to Mr. Pollard by electronic
mail at [email protected]. OFHEO requests that written comments
submitted in hard copy also be accompanied by the electronic version in
MS Word or in portable document format (PDF) on 3.5'' disk.
FOR FURTHER INFORMATION CONTACT: David W. Roderer, Deputy General
Counsel, or Tina Dion, Associate General Counsel, telephone (202) 414-
6924 (not a toll-free number); Office of Federal Housing Enterprise
Oversight, Fourth Floor, 1700 G Street, NW., Washington, DC 20552. The
telephone number for the Telecommunications Device for the Deaf is
(800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Comments
The Office of Federal Housing Enterprise Oversight (OFHEO) invites
comments on all aspects of the proposed regulation, including legal and
policy considerations, and will take all comments into consideration
before issuing the final regulation. Copies of all comments received
will be available for examination by the public at the Office of
Federal Housing Enterprise Oversight, Fourth Floor, 1700 G Street, NW.,
Washington, DC 20552, or on the OFHEO Web site at http://www.ofheo.gov.
II. Background
A. Introduction
Title XIII of the Housing and Community Development Act of 1992,
Pubic Law 102-550, entitled the ``Federal Housing Enterprises Financial
Safety and Soundness Act of 1992'' (Act) (12 U.S.C. 4501 et seq.),
established OFHEO as an independent office within the Department of
Housing and Urban Development to ensure that the Federal National
Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage
Corporation (Freddie Mac) (collectively, the Enterprises) are
capitalized adequately and operate safely and in compliance with
applicable laws, rules, and regulations.
The relationship of the government-sponsored enterprises to
financial markets is critical to their viability. To accomplish their
missions, the Enterprises must have access to capital markets. In
supporting the primary mortgage markets, secondary market players,
including the Enterprises, access domestic and global financing sources
and offer a variety of issuances demanded by these markets. The
Enterprises are significant as participants in mortgage-backed
securities and agency debt markets, and in related hedging activities,
and as issuers and guarantors of securities.
As users of and participants in the financial markets, the success
of the Enterprises in meeting their public policy missions and in
maintaining their safe and sound operations is inextricably tied to
full and robust disclosure.\1\ Disclosure may provide information about
the corporate operations of a firm, the intricacies of a given
securities offering, or specialized information concerning particular
events or business practices. In addition, Enterprise securities have
become increasingly significant to domestic and foreign market
participants. The business practices of the Enterprises affect large
and small investors, debt markets and international debt holders alike.
Access to the markets and the price of that access are directly
affected by investor perceptions of the transparency of the Enterprises
and the safety and soundness of their operations. In such an
environment, as the Enterprises themselves acknowledge, they have an
interest in providing ``best in class'' disclosures.\2\
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\1\ See, Freddie Mac and Fannie Mae Enhancements to Capital
Strength, Disclosure and Market Discipline, 3-4 News, Archives
(October 19, 20000), available at http://www.freddiemac.com/; and
Franklin Raines, FDIC Panel: ``The Rise of Risk Management:
Challenges for Policy Makers,'' 1, 6 Media, Speeches (July 31,
2002), available at http://www.fanniemae.com/.
\2\ Id. See, for example, Fannie Mae, Franklin Raines, FDIC
Panel.
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B. Disclosure and Safe and Sound Operations
Full and adequate disclosure of information by the Enterprises
regarding their financial conditions and risks is an important part of
OFHEO's supervisory program. Full disclosure enhances market
discipline.\3\ OFHEO possesses both explicit and implied authorities to
address the Enterprises' disclosure practices.\4\ The office has at its
disposal a range of supervisory tools to require full and meaningful
disclosures.\5\
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\3\ See Basel Committee on Banking Supervision's consultative
paper entitled, ``A New Capital Adequacy Framework.'' (Basel
Committee Publications No. 50 (June 1999)).
\4\ In general. see 12 U.S.C. 4513, 12 U.S.C. 4631, 4632, and
4636; 12 U.S.C. 4514; 12 U.S.C. 4501(6) as well as the chartering
acts for the Enterprises at 12 U.S.C. 1723a(k)(2) and 12 U.S.C.
1456(c)(2) and (3).
\5\ An unsafe or unsound practice may serve as a basis for
enforcement action by OFHEO pursuant to 12 CFR parts 1777 and 1780.
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While the offer and sale of their securities are exempt from the
registration requirements of the Securities Act of 1933 \6\ and their
securities are exempted securities under the Securities Exchange Act of
1934 (Exchange Act),\7\ the Enterprises last July indicated that they
would voluntarily register their common stock
[[Page 3195]]
with the Securities and Exchange Commission (SEC) under the provisions
of section 12(g) of the Exchange Act, 15 U.S.C. 78l(g). That section
permits companies not covered by the Exchange Act and its requirements
for periodic disclosures to submit voluntarily to SEC rules. Voluntary
registration triggers the attendant rules and regulations of the SEC,
including SEC enforcement authorities. Once a company volunteers, it
must remain under the strictures of the law, unless permitted to remove
itself by the SEC. OFHEO is proposing this regulation, in part, to
facilitate the process of voluntary registration by the Enterprises
under the Exchange Act.
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\6\ 15 U.S.C. 77a through 77aa.
\7\ 15 U.S.C. 78a through 78jj.
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OFHEO has a broad statutory mandate to adopt regulations, rules,
and guidances deemed to be appropriate to assuring the safety and
soundness of the Enterprises including appropriate disclosures that aid
in promoting market discipline. OFHEO is empowered fully to mandate
financial and securities disclosure and to take related actions to
implement such regulatory requirements through filings and submissions,
examination and oversight of disclosures. OFHEO anticipates no
duplication of regulation as it administers its broad safety and
soundness obligations.
III. Section-by-Section Analysis
Section 1730.1 Purpose
This part would require the Enterprises to prepare and submit
financial and other disclosures as specified by OFHEO. The required
disclosures are intended to complement the supervisory efforts of OFHEO
to ensure the capital strength of the Enterprises and to promote safe
and sound operations within each Enterprise and the mortgage-finance
system.
This section also would note that this regulation does not limit or
restrict the authority of OFHEO to act under its safety and soundness
mandate to regulate the Enterprises, including conducting examinations,
requiring reports and disclosures, and enforcing compliance with
applicable laws, rules and regulations.
Section 1730.2 Definitions
This section would set forth definitions relevant to the proposed
regulation.
Section 1730.3 Periodic Disclosures
This section would require each Enterprise to prepare disclosures
relating to its financial condition, results of operation, business
developments and management expectations that include supporting
financial information and certification thereof.
An Enterprise would satisfy the proposed requirement for periodic
disclosures required in the section if:
1. In the case of an Enterprise having a class of securities
registered pursuant to section 12 of the Exchange Act, the Enterprise
prepares an annual report, quarterly report, and current reports, and
such other materials that may be required under the rules and
regulations of the Commission, including interpretations by the
Commission and its staff and rules governing audited financial
statements;
2. The Enterprise files with the Commission all reports, statements
and forms required pursuant to section 14(a) and (c) of the Exchange
Act and by rules and regulations adopted by the Commission under that
section; and
3. The officers and members of the board of directors of the
Enterprise file with the Commission all reports and forms relating to
the common stock of the Enterprises required pursuant to section 16 of
the Exchange Act and by rules and regulations adopted by the Commission
under that section.
Section 1730.4 Submission of Disclosures
This section would require that, unless otherwise directed by
OFHEO, the Enterprises must provide to OFHEO on a concurrent basis
copies of all disclosures filed with the SEC under Sec. 1730.3.
Regulatory Impact
Executive Order 12866, Regulatory Planning and Review
The proposed regulation would not result in an annual effect on the
economy of $100 million or more or a major increase in costs or prices
for consumers, individual industries, Federal, State, or local
government agencies, or geographic regions; or have significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic or foreign markets.
Accordingly, no regulatory impact assessment is required. The proposed
regulation, however, has been submitted to the Office of Management and
Budget (OMB) for review under other provisions of Executive Order 12866
as a significant regulatory action.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires that
a regulation that has a significant economic impact on a substantial
number of small entities, small businesses, or small organizations must
include an initial regulatory flexibility analysis describing the
regulation's impact on small entities. Such an analysis need not be
undertaken if the agency has certified that the regulation will not
have a significant economic impact on a substantial number of small
entities. 5 U.S.C. 605(b). OFHEO has considered the impact of the
proposed regulation under the Regulatory Flexibility Act. The General
Counsel of OFHEO certifies that the proposed regulation, if adopted, is
not likely to have a significant economic impact on a substantial
number of small business entities because the regulation is applicable
only to the Enterprises, which are not small entities for purposes of
the Regulatory Flexibility Act.
Executive Order 13132, Federalism
Executive Order 13132 requires that Executive departments and
agencies identify regulatory actions that have significant federalism
implications. A regulation has federalism implications if it has
substantial direct effects on the States, on the relationship or
distribution of power between the Federal government and the States, or
on the distribution of power and responsibilities among various levels
of government. The Enterprises are federally chartered corporations
supervised by OFHEO. The proposed regulation sets forth minimum
disclosure standards with which the Enterprises must comply for Federal
supervisory purposes and address the safety and soundness authorities
of the agency. The proposed regulation does not affect in any manner
the powers and authorities of any State with respect to the Enterprises
or alter the distribution of power and responsibilities between State
and Federal levels of government. Therefore, OFHEO has determined that
the proposed regulation has no federalism implications that warrant the
preparation of a Federalism Assessment in accordance with Executive
Order 13132.
List of Subjects in 12 CFR Part 1730
Government-sponsored enterprises, Financial disclosure, Reporting
and recordkeeping requirements, Records.
Accordingly, for the reasons stated in the preamble, OFHEO proposes
to add part 1730 to subchapter C of 12 CFR chapter XVII to read as
follows:
[[Page 3196]]
Subchapter C--Safety and Soundness
PART 1730--DISCLOSURE OF FINANCIAL AND OTHER INFORMATION
Sec.
1730.1 Purpose.
1730.2 Definitions.
1730.3 Periodic disclosures.
1730.4 Submission of disclosures.
Authority: 12 U.S.C. 4513; 12 U.S.C. 4514; 12 U.S.C. 4631; and,
12 U.S.C. 4632.
Sec. 1730.1 Purpose.
(a) The purpose of this part is to require the Enterprises to
prepare and submit financial and other disclosures as specified by
OFHEO.
(b) This part does not limit or restrict the authority of OFHEO to
act under its safety and soundness mandate to regulate the Enterprises,
including conducting examinations, requiring reports and disclosures,
and enforcing compliance with applicable laws, rules and regulations.
Sec. 1730.2 Definitions.
For purposes of this part, the term:
(a) Commission means the Securities and Exchange Commission (or
SEC).
(b) Disclosure or disclosures means any report[s], form[s], or
other information submitted by the Enterprises pursuant to this part
and may be used interchangeably with the terms ``reports[s]'' or
``form[s].''
(c) Enterprise means the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation; and the term
``Enterprises'' means, collectively, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation.
(d) Exchange Act means the Securities Exchange Act of 1934.
(e) OFHEO means the Office of Federal Housing Enterprise Oversight
(or the office).
Sec. 1730.3 Periodic disclosures.
(a) Each Enterprise shall prepare disclosures relating to its
financial condition, results of operation, business developments, and
management's expectations that include supporting financial information
and certifications.
(b) The requirement of paragraph (a) for disclosures will be
satisfied if:
(1) In the case of an Enterprise having a class of securities
registered pursuant to section 12 of the Exchange Act, the Enterprise
prepares and makes public an annual report, quarterly report and
current reports and such other materials that may be required under the
rules and regulations of the Commission, including interpretations of
the Commission and its staff and rules governing audited financial
statements;
(2) The Enterprise files with the Commission all reports,
statements, and forms required pursuant to sections 14(a) and (c) of
the Exchange Act and by rules and regulations adopted by the Commission
under those sections that would be required to be filed by the
Enterprises if the Enterprises has a class of equity securities
registered under section 12(g) of the Exchange Act that were not
exempted securities under the Exchange Act; and
(3) The officers and directors of the Enterprise file with the
Commission all reports and forms relating to the common stock of the
Enterprise that would be required to be filed by the officers and
directors pursuant to section 16 of the Exchange Act and by rules and
regulations adopted by the Commission under that section if the
Enterprises had a class of equity securities registered under section
12(g) of the Exchange Act that were not exempted securities under the
Exchange Act.
Sec. 1730.4 Submission of disclosures.
Unless otherwise required by OFHEO, the Enterprises shall provide
to OFHEO on a concurrent basis copies of all disclosures filed with the
SEC pursuant to Sec. 1730.3.
Dated: January 15, 2003.
Armando Falcon, Jr.,
Director, Office of Federal Housing Enterprise Oversight.
[FR Doc. 03-1298 Filed 1-22-03; 8:45 am]
BILLING CODE 4220-01-P