[Federal Register Volume 83, Number 167 (Tuesday, August 28, 2018)]
[Proposed Rules]
[Pages 43801-43825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18511]


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FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1231

RIN 2590-AA72


Golden Parachute and Indemnification Payments

AGENCY: Federal Housing Finance Agency.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Housing Finance Agency (FHFA) is proposing to 
amend its rule on golden parachute payments to better align the rule 
with areas of FHFA's supervisory concern and reduce administrative and 
compliance burdens. The current rule requires FHFA review and consent 
before a regulated entity or the Office of Finance (OF) enters into an 
agreement to make, or makes, a payment that is contingent on the 
termination of an affiliated party, if the regulated entity or OF is in 
a troubled condition, in conservatorship or receivership, or insolvent. 
FHFA's experience implementing the rule indicates that the rule 
requires review of some agreements and payments where there is little 
risk of excess or abuse, and thus that it is too broad.
    If amended as proposed, the rule would focus on the types of 
agreements and payments that are of greater supervisory concern to 
FHFA. In general, these are payments to and agreements with executive 
officers, broad-based plans covering large numbers of employees (such 
as severance plans), and payments made to non-executive-officer 
employees who may have engaged in certain types of wrongdoing. The 
proposed amendments would also revise and clarify definitions, 
exemptions, and procedures to implement FHFA's supervisory approach. 
Where possible, FHFA would also align procedures and outcomes of review 
under the Golden Parachute Payment Rule with requirements of FHFA's 
rule on executive compensation. FHFA expects implementation of these 
changes would result in reduced administrative and compliance burdens.

DATES: Comments must be received by October 12, 2018.

ADDRESSES: You may submit your comments on the proposed rule, 
identified by regulatory information number (RIN) 2590-AA72, by any one 
of the following methods:
     Agency website: www.fhfa.gov/open-for-comment-or-input.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by email 
to FHFA at [email protected] to ensure timely receipt by FHFA. 
Include the following information in the subject line of your 
submission: Comments/RIN 2590-AA72.
     Hand Delivered/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/

[[Page 43802]]

RIN 2590-AA72, Federal Housing Finance Agency, Eighth Floor, 400 
Seventh Street SW, Washington, DC 20219. Deliver the package at the 
Seventh Street entrance Guard Desk, First Floor, on business days 
between 9 a.m. and 5 p.m.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA72, Federal 
Housing Finance Agency, Eighth Floor, 400 Seventh Street SW, 
Washington, DC 20219. Please note that all mail sent to FHFA via U.S. 
Mail is routed through a national irradiation facility, a process that 
may delay delivery by approximately two weeks. For any time-sensitive 
correspondence, please plan accordingly.

FOR FURTHER INFORMATION CONTACT: Alfred Pollard, General Counsel, (202) 
649-3050, [email protected]; Lindsay Simmons, Assistant General 
Counsel, (202) 649-3066, [email protected]; or Mary Pat Fox, 
Manager for Compensation, Division of Enterprise Regulation, (202) 649-
3215, [email protected]. These are not toll-free numbers. The 
mailing address is: Federal Housing Finance Agency, 400 Seventh Street 
SW, Washington, DC 20219. The telephone number for the 
Telecommunications Device for the Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Comments

    FHFA invites comments on all aspects of the proposed rule and will 
take all comments into consideration before issuing a final rule. 
Copies of all comments will be posted without change, and will include 
any personal information you provide such as your name, address, email 
address, and telephone number, on the FHFA website at http://www.fhfa.gov. In addition, copies of all comments received will be 
available for examination by the public through the electronic 
rulemaking docket for this proposed rule also located on the FHFA 
website.

II. Background

    FHFA has broad discretionary authority to prohibit or limit any 
``golden parachute payment,'' generally defined as any payment, or any 
agreement to make a payment, in the nature of compensation by a 
regulated entity for the benefit of an ``affiliated party'' that is 
contingent on the party's termination, when the regulated entity is in 
troubled condition, in conservatorship or receivership, or insolvent (a 
``troubled institution'').\1\ This provision, at 12 U.S.C. 4518(e) 
(``Section 4518(e)''), was added to the Federal Housing Enterprises 
Financial Safety and Soundness Act (the Safety and Soundness Act) in 
2008. Legislative history suggests it is intended to permit FHFA to 
prevent payments to departing employees and other affiliated parties 
that are excessive or abusive, could threaten (or further threaten) the 
financial condition of the troubled institution, or are inappropriate 
based on wrongdoing by the recipient.\2\
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    \1\ The ``regulated entities'' are the Federal National Mortgage 
Association (Fannie Mae) and any affiliate, the Federal Home Loan 
Mortgage Corporation (Freddie Mac) and any affiliate, (collectively, 
the Enterprises), and the Federal Home Loan Banks (the Banks). 12 
U.S.C. 4502(20). The Office of Finance (OF) is a joint office of the 
Banks, to which FHFA extends the Golden Parachute Payments rule 
through its general regulatory authority. See id. sec. 4511(b)(2); 
see also 78 FR 28452, 28456 (May 14, 2013) and 79 FR 4394 (Jan. 28, 
2014). In this notice, the terms ``regulated entity'' and ``troubled 
institution'' include the Enterprises, Banks, and OF, unless OF is 
otherwise expressly addressed.
    \2\ Section 4518(e) was based on a similar provision added to 
the Federal Deposit Insurance Act (FDI Act) in 1990, at 12 U.S.C. 
1828(k). FHFA considers the legislative history of Section 1828(k) 
as a resource for interpreting Section 4518(e). See generally, 36 
Cong. Rec. H783 (daily ed. March 14, 1990) and 136 Cong. Rec. H5882 
(daily ed. July 30, 1990).
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    Section 4518(e) requires the Director to promulgate rules defining 
``troubled condition'' and prescribing factors to be considered when 
prohibiting or limiting any ``golden parachute payment,'' and suggests 
some factors the Director may consider.\3\ FHFA first adopted a Golden 
Parachute Payments rule in 2008 as an Interim Final Rule with Request 
for Comments, which became final in 2009.\4\ In response to comments 
received on the Interim Final Rule, FHFA proposed amendments to the 
rule in 2009 and 2013.\5\ In response to comments received on those 
proposals, FHFA promulgated the current rule in 2014.\6\
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    \3\ Id. sec. 4518(e)(1) and (2).
    \4\ 73 FR 53356 (Sept. 16, 2008); see also 74 FR 5101 (Jan. 29, 
2009).
    \5\ See id. at 30975 (June 29, 2009); see also 78 FR 28452 (May 
14, 2013).
    \6\ See 79 FR 4400 (Jan. 28, 2014).
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    To ensure that FHFA has an opportunity to review and, if necessary, 
prohibit or limit golden parachute payments and agreements before they 
are made, the current rule prohibits all golden parachute payments and 
agreements that are not exempt from or permitted by the rule. 
Prohibited agreements or payments may be permitted by the Director 
after review. The rule defines terms, addresses payments that are 
exempt from the ``golden parachute payment'' definition or are 
permitted by the rule, establishes a process for FHFA to determine the 
permissibility of any other golden parachute payment or agreement, and 
sets forth review factors used by the Director in that process.
    Because the rule applies equally to golden parachute payments and 
agreements, it requires FHFA to determine the permissibility of 
prohibited agreements before they are entered into and of prohibited 
payments before they are made. In most cases, this means that a 
troubled institution must request FHFA's prior review and consent to a 
payment that would be made in accordance with an agreement to which 
FHFA has already consented. This ``double approval'' requirement was 
recognized by FHFA and commenters when the rule was proposed in 2013 
and finalized in 2014.\7\ FHFA noted then that it was an appropriate 
supervisory approach where conditions could change after the agreement 
was approved (for example, the condition of a troubled institution 
could further deteriorate, or an intended recipient could be found to 
have contributed to the deterioration or engaged in wrongdoing with a 
material adverse effect on the regulated entity).\8\ In practice, that 
approach has resulted in FHFA's receiving numerous requests for review 
of golden parachute payments and agreements.
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    \7\ 78 FR at 28454; see also 79 FR at 4396.
    \8\ Id.
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    Narrowly drafted exemptions from the rule have also given rise to 
numerous requests for review. For example, because severance pay plans 
of the regulated entities do not meet an exemption for 
``nondiscriminatory'' plans, troubled institutions are not permitted to 
make severance payments to any employees--even small payments to low 
level employees--without FHFA review and consent. Likewise, an 
exemption for payments pursuant to a ``bona fide deferred compensation 
plan or arrangement'' does not apply or is lost if the plan is 
established or amended in the one-year period prior to the time the 
regulated entity became a troubled institution, meaning such plans and 
any plan payments must be reviewed by FHFA.
    Based on FHFA's review experience, FHFA has now determined that the 
scope of the current rule is too broad, insofar as it requires a 
troubled institution to request, and FHFA to review, agreements and 
payments where there is very little concern about an abusive or 
excessive payment or threat to the financial condition of the paying 
regulated entity, and little likelihood

[[Page 43803]]

that the employee or other affiliated party receiving payment could 
have engaged in the type of wrongdoing that FHFA would consider as the 
basis for prohibiting or limiting an agreement or payment.
    Separately, FHFA has also determined that the current Golden 
Parachute Payments rule could be harmonized with other requirements 
related to the compensation of executive officers of the regulated 
entities, including termination payments.\9\ These requirements are 
implemented through a separate FHFA rule on executive compensation, at 
12 CFR part 1230 (the Executive Compensation rule).\10\ FHFA's 
experience in applying both rules to such termination payments has 
suggested areas where processes and outcomes can be aligned, avoiding 
the need to request or engage in separate reviews.
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    \9\ Specifically, FHFA is required to prohibit any regulated 
entity from providing compensation to an executive officer that is 
not ``reasonable and comparable with compensation for employment in 
other similar businesses . . . involving similar duties and 
functions.'' 12 U.S.C. 4518(a). ``Compensation'' is broadly defined 
by statute, and includes termination payments. Id. sec. 4502(6); see 
also 74 FR 26989, 26990 (June 5, 2009); 78 FR 28442, 28443 (May 14, 
2013); and 79 FR 4389 (Jan. 28, 2014). In addition, the Enterprises 
may not enter into an agreement to provide any termination payment 
to an executive officer unless FHFA has approved the agreement in 
advance, after determining that it meets a comparability standard. 
12 U.S.C. 1452(h)(2) and 1723a(d)(3)(B).
    \10\ Among other things, that rule requires the regulated 
entities to provide notice to FHFA prior to entering into any 
compensation arrangement with, or paying compensation to, any 
``executive officer,'' including compensation in connection with an 
executive officer's termination. The regulated entity may provide 
the compensation if FHFA affirmatively provides a non-objection or 
approval, or does not prohibit it, within a stated review period. 12 
CFR 1230.3 and 1230.4.
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    Having considered FHFA's statutory authority and its experience 
implementing the Golden Parachute Payments and Executive Compensation 
rules, FHFA is proposing to amend the Golden Parachute Payments rule to 
better balance FHFA's supervisory concerns for golden parachute 
payments with the rule's administration and compliance burdens. FHFA 
invites comments on all aspects of the proposed amendments and will 
take all comments into consideration.

III. Summary of Proposed Amendments

A. Overview

    In general, FHFA has higher supervisory concern for golden 
parachute payments to and agreements with executive officers than lower 
ranking employees, because executive officers hold positions of greater 
responsibility and influence within a company. FHFA also has a higher 
supervisory concern for agreements, and in particular for broad-based 
agreements or plans such as severance plans, than for a subsequent 
payment in accordance with a plan or agreement. A broad-based agreement 
or plan typically covers numerous employees, bases the amount to be 
paid on criteria such as job level or length of employment, and 
provides for payments based on the occurrence of stated events. When 
reviewing the plan, FHFA can assess whether proposed payments to 
employees as members of a defined class or group would be excessive for 
that class or group (for example, whether a severance payment 
determined by job level and length of service is excessive for that 
level and service term). In addition, FHFA can assess the cumulative 
impact on the regulated entity if the same event were to occur for many 
employees at the same time or over a short time span, resulting in a 
high aggregate payout (for example, a severance plan that provides 
payments on involuntary termination not for cause may result in a high 
aggregate payment for a significant reduction in force). Finally, FHFA 
has a higher supervisory interest in payments to employees where there 
is a concern that the employee may have engaged in wrongdoing that had 
a material effect on the financial condition of the regulated entity or 
in certain financial crimes, or may be substantially responsible for 
the regulated entity's becoming a troubled institution. Review in such 
cases can inform FHFA of the employee's possible conduct and whether 
additional supervisory action may be appropriate.
    To better reflect these supervisory policies, FHFA proposes to 
amend the rule to distinguish agreements from payments, executive 
officers from other affiliated parties, and affiliated parties for whom 
there is a concern about wrongdoing from those for whom there is not. 
Generally, the amended rule would require a troubled institution to 
obtain prior review of and consent for (1) most agreements with and 
payments to executive officers; (2) most agreements with employees who 
are below the executive officer level (including plans covering such 
employees); and (3) most payments to employees who are below the 
executive officer level, where the regulated entity has concerns that 
the employee may have engaged in certain types of wrongdoing.
    FHFA has also reviewed the current rule for clarity and has 
determined that several changes could make it easier to understand and 
apply. These include relocating exempt payments and agreements, which 
do not require FHFA review or consent, from the rule's definitions 
section to its substantive provisions and changing rule terminology 
that could be confusing. FHFA also considered consistency with the 
treatment of compensation agreements with and payments to executive 
officers under the Executive Compensation rule, because the Executive 
Compensation and Golden Parachute Payment rules can overlap in some 
cases. FHFA expressly desires to align procedures and outcomes where 
possible, thereby further reducing administrative and compliance 
burdens.

B. Golden Parachute Agreements and Payments Subject To Review

    FHFA proposes to retain the rule's current approach and require 
FHFA review of golden parachute agreements and payments unless they are 
expressly permitted by the rule. This framework serves to notify a 
troubled institution that, if an agreement or payment is not exempt 
from the definition of ``golden parachute payment'' or permitted by the 
terms of the rule, then the troubled institution must obtain FHFA's 
consent prior to entering into the agreement or making a payment.
    Fundamentally, the current approach requires an understanding of 
the scope of the ``golden parachute payment'' definition--whether an 
agreement or payment is subject to review under the rule first turns on 
whether it is covered. In that regard, FHFA is clarifying its 
interpretation of ``golden parachute payment'' and proposing some 
amendments to the rule definition.
    First, the statutory definition addresses payments (including 
agreements) ``in the nature'' of compensation.\11\ FHFA interprets this 
phrase to expand upon the meaning of ``compensation'' and to include 
payments that are not traditionally understood as wages earned or money 
paid for services performed by an employee in connection with 
employment. As one example, FHFA interprets ``golden parachute 
payment'' to include individually negotiated settlement agreements and 
associated payments. There the amount paid may involve potential 
damages from claims arising out of the employment relationship and so 
may relate to compensation, though it may also include valuation of 
litigation risk, reputation risk, and other costs and fees.
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    \11\ 12 U.S.C. 4518(e)(4)(A).
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    The current rule definition addresses any ``golden parachute 
payment'' that is ``contingent on the termination of [a party's] 
affiliation with the regulated entity'' (as the statute provides) as 
well

[[Page 43804]]

as any such payment that is ``by its terms payable on or after'' 
termination.\12\ The latter phrase was added when the rule was first 
adopted to address the possibility of a regulated entity's evading a 
``golden parachute payment'' by simply making a payment to a party 
after, but not contingent on, termination.
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    \12\ Compare id. sec. 4518(e)(4)(A)(i) and 12 CFR 1231.2.
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    However, some payments received after termination, such as payments 
that would have been provided to the employee during the employment 
period had an intervening event (termination) not occurred, do not 
become ``golden parachute payments'' merely because of the timing of 
payment. Two examples of such payments are the last payment of earned 
salary and cashed out accrued but unused vacation benefits. FHFA has 
provided these interpretations to troubled institutions in the past, 
but has not previously published them. To avoid suggesting that the 
timing of a payment alone--on or after termination--causes the payment 
to be a ``golden parachute payment,'' and to ensure an appropriate 
nexus between the occurrence of termination and the golden parachute 
payment, FHFA proposes to replace the phrase ``by its terms is payable 
on or after termination'' with the phrase ``is contingent on or 
provided in connection with'' termination. FHFA requests comment on 
this proposed amendment.
    FHFA is also proposing other amendments to the rule definition. As 
noted above, the statutory ``golden parachute payment'' definition 
covers both payments and agreements to make payments, clearly 
permitting FHFA to prohibit or limit both an agreement to make a 
payment and, separately, the payment itself. FHFA now proposes to amend 
the rule to establish outcomes or treatments that depend on whether a 
troubled institution is entering into an agreement to make a golden 
parachute payment or is making a payment. In contrast, the current rule 
definition of ``golden parachute payment'' follows the form of the 
statutory definition, which includes within ``golden parachute 
payment'' both payments and agreements and thus makes it difficult to 
address one in a manner distinct from the other. FHFA now proposes to 
remove reference to ``any agreement'' from the rule's ``golden 
parachute payment'' definition and use the terms ``golden parachute 
payment agreement'' or ``agreement to make a golden parachute payment'' 
when specifically referring to such agreements. This amendment is not 
intended to change the scope of the rule, which will continue to cover 
both golden parachute agreements and payments. FHFA is also proposing a 
definition of an ``agreement'' to make a golden parachute payment, 
which is intended to be broad and clarify that the term includes broad-
based plans such as severance plans, as well as agreements that are 
individually negotiated with an affiliated party.
    FHFA also proposes to remove the phrase ``pursuant to an obligation 
of the regulated entity or the Office of Finance'' from the rule's 
``golden parachute payment'' definition. The statutory definition 
addresses payments that are ``pursuant to an obligation'' of the 
regulated entity, made by the regulated entity when it is a troubled 
institution.\13\ FHFA's current rule definition reflects the statute 
and includes reference to an ``obligation''--but where Section 4518(e) 
clarifies that FHFA's authority to prohibit or limit payments includes 
those made pursuant to an obligation, using the phrase ``pursuant to an 
obligation'' within the rule could be construed as limiting its 
application to payments that a troubled institution is contractually 
obligated to make. This is not FHFA's intention.
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    \13\ 12 U.S.C. 4518(e)(4)(A).
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    FHFA's experience implementing the current rule has been that the 
overwhelming majority of golden parachute payments are the subject of 
an ``obligation.'' However, FHFA does not interpret Section 4518(e) or 
its current rule as impeding FHFA's ability to prohibit or limit 
improper payments that are not pursuant to an ``obligation.'' As safety 
and soundness supervisor for the regulated entities, FHFA could always 
prohibit (or limit) improper gifts or contributions to an affiliated 
party,\14\ and it is inconsistent with the policy of Section 4518(e) to 
interpret it or FHFA's implementing rule as permitting excessive or 
abusive payments that are made gratuitously, not pursuant to an 
obligation. Indeed, FHFA has interpreted the current rule as covering 
gifts, and troubled institutions have requested FHFA's review of and 
consent to proposed retirement gifts. Nonetheless, FHFA requests 
comment on its proposal to remove the phrase ``pursuant to an 
obligation of the regulated entity or the Office of Finance'' from the 
rule definition of ``golden parachute payment.''
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    \14\ See generally, 12 U.S.C. 4511(b)(2), 4513(a)(1), 4513b, and 
4526.
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    FHFA also notes that the statutory and rule definitions include any 
payment that would be a ``golden parachute payment'' but for the fact 
it was made before the paying regulated entity became a troubled 
institution, if the payment was made ``in contemplation of'' becoming a 
troubled institution.\15\ FHFA is proposing to amend the rule to 
include a rebuttable presumption that any payment that would otherwise 
be a ``golden parachute payment,'' made within the 90-day period prior 
to a regulated entity's becoming a troubled institution, is made ``in 
contemplation of'' and thus will be treated as a ``golden parachute 
payment.'' FHFA proposes the timeframe of 90 days prior because the 
events that would cause a regulated entity to become a troubled 
institution--becoming in troubled condition (which the rule defines 
with reference to examination ratings of 4 or 5 or initiation of 
certain enforcement actions), appointment of FHFA as conservator or 
receiver, or becoming insolvent--usually are not events that occur 
suddenly, without any prior awareness by the regulated entity of its 
deteriorating condition and FHFA's increasing supervisory concern. FHFA 
also finds support for a 90-day timeframe in the federal bankruptcy 
code, where a somewhat analogous provision would permit the avoidance 
of certain transfers made within 90 days prior to the filing of a 
bankruptcy petition.\16\
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    \15\ Id. sec. 4518(e)(4)(B); see also 12 CFR 1231.2.
    \16\ See generally, 11 U.S.C. 547.
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    Since the presumption is rebuttable, a regulated entity need not 
request review of any agreements or payments made within the 90-day 
period where there is a reasonable basis for concluding that such 
agreements or payments were not made ``in contemplation of'' becoming a 
troubled institution. On the other hand, FHFA also expects that if a 
regulated entity took a more conservative approach and sought FHFA 
review of agreements and payments made during the 90-day period, the 
actual number of review requests would not increase materially. 
Pursuant to its obligations for oversight of executive compensation, 
FHFA must review agreements with and payments to executive officers 
regardless of their timing relative to the regulated entity's becoming 
a troubled institution. There may be a slight increase in the number of 
requests for review of plans or agreements with other employees, but 
FHFA review and consent in those cases could be stabilizing to the 
regulated entity as it works to improve its condition (because 
employees may be reassured that any promised payments on termination 
would be permissible even if the

[[Page 43805]]

condition of the regulated entity continued to deteriorate).
    FHFA is proposing one change to the ``golden parachute payment'' 
definition to improve its readability. Currently, the statute defines 
``golden parachute payment'' with reference to a regulated entity that 
has experienced a triggering event: The regulated entity is in troubled 
condition (as defined by FHFA by regulation); FHFA has been appointed 
conservator or receiver for the regulated entity; or the regulated 
entity has become insolvent.\17\ Following the form of the statute, the 
rule incorporates the listed triggering events, including ``troubled 
condition,'' into its definition of ``golden parachute payment.'' 
Separately, the rule defines ``troubled condition.''
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    \17\ 12 U.S.C. 4518(e)(4)(A)(ii).
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    This rule construct has the effect of dividing the triggering 
events between two definitions and also makes it difficult to refer to 
a regulated entity that has experienced a triggering event. FHFA 
proposes to amend the ``golden parachute payment'' definition to cover 
payments made by a regulated entity that is, or is in contemplation of 
becoming, a ``troubled institution,'' and proposes to add ``troubled 
institution'' as a newly defined term that will list all of the 
triggering events, including those that previously defined ``troubled 
condition.'' The current rule's definition of ``troubled condition'' 
would be removed. FHFA believes that this approach would continue to 
meet the statutory requirement that FHFA define ``troubled condition'' 
by regulation, but would result in a rule that is easier to understand.
    FHFA requests comment on the preceding proposed amendments to the 
``golden parachute payment'' definition.

C. Exempt Agreements and Payments

    Agreements and payments that are exempt from the ``golden parachute 
payment'' definition are not subject to the Golden Parachute Payment 
rule.\18\ Because statutory exemptions are presented as exemptions from 
the ``golden parachute payment'' definition and because that definition 
covers both agreements and payments, FHFA interprets statutory 
exemptions expressed in terms of payments as extending to both the 
payment and any agreement to make it. As noted above, however, FHFA is 
now proposing to remove reference to any ``agreement'' from the 
``golden parachute payment'' definition, which could imply that an 
exemption for a specific type of payment is operative only as to the 
payment, and that an agreement to make an exempt payment is not, 
itself, exempt. FHFA is clarifying here that an exemption for a payment 
extends to any plan or agreement to make that payment. The proposed 
rule text supports this interpretation, as it would prohibit an 
agreement to make a ``golden parachute payment'' and, conversely, would 
not prohibit any agreement to make a payment that is not a ``golden 
parachute payment,'' i.e., a payment that is exempted from the ``golden 
parachute payment'' definition.
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    \18\ These payments may be subject to other rules, however. For 
example, the Executive Compensation rule generally requires the 
regulated entities to provide notice to FHFA prior to providing 
compensation to an executive officer, and requires FHFA to prohibit 
compensation that does not meet a statutory ``reasonable and 
comparable'' standard. Payments (or agreements to make payments) 
that are exempt from the ``golden parachute payment'' definition 
could be--and likely would be--``compensation'' for purposes of the 
Executive Compensation rule.
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    FHFA is also clarifying that it interprets the statutory ``golden 
parachute payment'' definition as not covering indemnification 
payments. Thus, rule provisions on golden parachute payments and 
agreements do not apply to indemnification payments.
    Generally, it may be possible to construe indemnification payments 
as ``golden parachute payments,'' through interpretation of the phrase 
``in the nature of compensation'' (where an indemnification payment 
arises from the party's affiliation with a regulated entity and would 
reimburse the affiliated party for expenses he would otherwise bear) 
and application of the current rule definition to payments made after 
an affiliated party's affiliation is terminated (where a termination 
agreement could include the troubled institution's promise of 
indemnification in future actions arising from the party's 
affiliation). FHFA also notes, however, that payment of indemnification 
is contingent on a legal action and, similar to a last salary payment 
after termination, is an expense that could have been incurred and paid 
during the period of affiliation. Thus, FHFA does not view either 
indemnification agreements covering payments to be made, or actual 
indemnification payments that are made, after termination as 
``contingent on termination.''
    FHFA also observes that Section 4518(e) addresses ``indemnification 
payments'' separately from ``golden parachute payments'' but does not 
exempt such payments from the statutory ``golden parachute payment'' 
definition. FHFA interprets this construct as demonstrating the 
assumption that it was not necessary to exempt indemnification payments 
because those types of payments were never viewed as within the 
``golden parachute payment'' definition. Thus, instead of reading 
Section 4518(e) as carving out from the ``golden parachute payment'' 
definition only the subset of ``indemnification payments'' that Section 
4518(e) expressly addresses, FHFA believes it is more plausible that 
Section 4518(e) applies separately to golden parachute payments and 
indemnification payments, such that ``golden parachute payment'' should 
not be construed to cover indemnification payments in general. 
Indemnification in actions brought by the agency are covered by the 
indemnification rule \19\; other indemnification is covered by the 
agency's corporate governance rule and the applicable corporate law to 
which that rule points.
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    \19\ See generally, 81 FR 64357 (Sept. 20, 2016) (FHFA Notice of 
Proposed Rulemaking on indemnification payments).
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    FHFA is addressing this interpretation in the preamble rather than 
the rule to avoid suggesting that indemnification payments are ``golden 
parachute payments.'' Specifically, FHFA believes that amending the 
rule to exempt or permit indemnification payments and agreements would 
imply such payments are ``golden parachute payments,'' which is not 
what FHFA intends. FHFA requests comment on this interpretation, and on 
the decision to address it in the preamble as an interpretation, 
instead of through a rule amendment.
    Beyond that interpretation, FHFA proposes to amend exemptions 
currently set forth in the rule. FHFA proposes amendments to exemptions 
for any ``bona fide deferred compensation plan or arrangement,'' 
certain tax qualified retirement or pension plans, and ``benefit 
plans.'' FHFA also proposes to remove an exemption for 
nondiscriminatory severance pay plans or arrangements and to make a 
minor change to a separate exemption for other severance or similar 
payments. Finally, FHFA proposes to retain without change an exemption 
for payments made because of the affiliated party's death, or 
termination caused by disability.
    ``Bona fide deferred compensation plans or arrangements.'' Section 
4518(e) exempts ``any payment made pursuant to a bona fide deferred 
compensation plan or arrangement'' that the Director determines, by 
regulation or order, to be ``permissible.'' \20\ The current rule 
implements this provision with an exemption for deferred compensation 
plans or arrangements that meet certain conditions.\21\ One condition--
that the

[[Page 43806]]

plan or arrangement was in effect for at least one year prior to the 
regulated entity's becoming a troubled institution--was intended to 
avoid exempting instances where a regulated entity acted to enrich its 
executives officers or other high ranking employees when it was in 
deteriorating condition (thereby potentially rewarding those who were 
best positioned to have avoided the financial problems, or draining 
resources that could be used to improve condition or be made available 
to creditors if necessary).\22\
---------------------------------------------------------------------------

    \20\ 12 U.S.C. 4518(e)(4)(C)(ii).
    \21\ 12 CFR 1231.2.
    \22\ Id.
---------------------------------------------------------------------------

    In practice, failure to meet this condition has had the effect of 
eliminating the exemption for any otherwise ``bona fide'' deferred 
compensation plan that is established or amended by the regulated 
entity within the year prior to its becoming, or at any time when it 
is, a troubled institution, even if the plan or any amendment would not 
be objectionable to FHFA. Eliminating the exemption means that FHFA 
must review the revised plan and, even if FHFA determines the plan to 
be permissible, must also review all subsequent payments pursuant to 
it.\23\ This imposes administrative and compliance burdens on FHFA and 
a regulated entity that could be avoided by amending the exemption so 
that it would cover any plan that meets all of the exemption's 
conditions other than the timing requirement, and that FHFA has 
reviewed and determined to be permissible. FHFA is now proposing that 
amendment, and requests comments on it.
---------------------------------------------------------------------------

    \23\ On an ad hoc basis, under the current rule FHFA has 
consented to subsequent payments at the same time as it consented to 
a plan or agreement.
---------------------------------------------------------------------------

    FHFA also notes that it has a separate statutory obligation to 
prohibit a regulated entity from providing compensation to an executive 
officer, including compensation in connection with termination of 
employment that is not reasonable and comparable with compensation for 
employment in other similar businesses involving similar duties and 
responsibilities.\24\ FHFA implements this obligation through its 
Executive Compensation rule, which requires a regulated entity to 
provide advance notice to FHFA prior to entering into certain deferred 
compensation agreements with, or making certain deferred compensation 
payments to, executive officers.\25\ Because FHFA is statutorily 
required to prohibit a regulated entity from providing compensation to 
an executive officer if it is not reasonable and comparable, FHFA 
review and approval of (or non-objection to) a deferred compensation 
plan covering executive officers is an effective pre-condition to 
application of the Golden Parachute Payments rule exemption. In other 
words, for executive officers, only those plans or other agreements 
that FHFA determines are reasonable and comparable could be exempt from 
the Golden Parachute Payments rule; plans or agreements that FHFA 
determines are not reasonable and comparable must be prohibited, 
without regard to any exemption from the Golden Parachute Payments 
rule.
---------------------------------------------------------------------------

    \24\ See 12 U.S.C. 1452(h)(2), 1723a(d)(3)(B), and 4518(a). 
Indeed, for the Enterprises, an agreement to make a payment or 
provide benefits to an executive officer in connection with 
termination of employment is statutorily prohibited unless FHFA 
approves it in advance, after making a determination that the 
payments and benefits are comparable to those for officers of other 
public and private entities involved in financial services and 
housing interests with comparable duties and responsibilities. Id. 
sec. 1452(h)(2) and 1723a(d)(3)(B).
    \25\ See generally, 12 CFR part 1230.
---------------------------------------------------------------------------

    Certain tax qualified retirement or pension plans. Section 4518(e) 
includes a statutory exemption for ``any payment made pursuant to a 
retirement plan which is qualified (or intended to be qualified) under 
[section 401 of the Internal Revenue Code (IRC)].'' \26\ The rule 
includes this exemption and expands on it, to include any payment made 
``pursuant to a pension or other retirement plan that is governed by 
the laws of any foreign country.'' \27\ FHFA is not aware of any 
pension or retirement plan of any regulated entity that is or would be 
governed by the laws of any foreign country. Further, were FHFA to 
determine that a pension or retirement plan of any of its regulated 
entities is ``governed by the laws of any foreign country,'' FHFA would 
like to better understand the requirements of the governing law when 
considering the application of the Golden Parachute Payment rule to 
such a plan (understanding that, in the event a foreign law applied and 
required a payment, it may not be feasible to prohibit a troubled 
institution from making it). For these reasons, FHFA proposes to remove 
the rule's exemption for such payments. FHFA requests comments on the 
impact, if any, to the regulated entities of removing this exemption.
---------------------------------------------------------------------------

    \26\ 12 U.S.C. 4518(e)(4)(C).
    \27\ 12 CFR 1231.2.
---------------------------------------------------------------------------

    Benefit plans. Section 4518(e)'s exemption related to qualified 
retirement plans continues, stating that it also applies to payments 
made pursuant to ``other nondiscriminatory benefit plan[s].'' On its 
face, this provision is a statutory exemption for ``nondiscriminatory 
benefit plans'' other than the tax qualified plans already expressly 
exempted. Beyond that, however, Section 4518(e) does not address the 
types of benefit plans intended to be outside the scope of a ``golden 
parachute payment.''
    FHFA's current rule exempts any ``benefit plan'' and, separately, 
any ``severance pay plan'' that meets certain conditions and is 
``nondiscriminatory.'' \28\ To inform its understanding of the 
statutory exemption, FHFA has researched relevant legislative history 
and statutory provisions, including provisions of the IRC on the 
specified tax qualified plans. While that review did not reveal any 
generally accepted definitions of ``nondiscriminatory'' and ``benefit 
plan,'' it did suggest an interpretive approach that would look, in 
part, to whether a plan or program is a ``nondiscriminatory employee 
plan or program'' for purposes of IRC provisions on excess parachute 
payments.
---------------------------------------------------------------------------

    \28\ Id.
---------------------------------------------------------------------------

    Specifically, FHFA is proposing to exempt from the ``golden 
parachute payment'' definition any employee plan or program that is a 
``nondiscriminatory employee plan or program'' in accordance with 
Internal Revenue Service (IRS) rules and published guidance 
interpreting 26 U.S.C. 280G.\29\ Similar to Section 4518(e), IRC 
section 280G addresses parachute (termination) payments: It generally 
prohibits corporations from deducting as compensation that portion of a 
parachute payment due to change in control that is ``excess,'' and 
establishes rules for determining any such ``excess'' portion. Those 
rules permit a corporation to exclude from the ``parachute payment'' 
calculation any amounts that the corporation establishes by clear and 
convincing evidence are (1) ``reasonable'' compensation for services 
that were rendered on or after the date of the change in control and 
(2) compensation that was not contingent on the change in control. IRS 
regulations interpreting Section 280G state that the fact that payments 
were received pursuant to a ``nondiscriminatory employee plan or 
program'' is clear and convincing

[[Page 43807]]

evidence that the compensation was reasonable and not contingent on 
change in control, and list those employee plans and programs that are 
``nondiscriminatory.'' \30\ FHFA now proposes to exempt any employee 
plan or program that is ``nondiscriminatory'' for purposes of IRC 
Section 280G from the definition of ``golden parachute payment.'' FHFA 
believes that this proposal will clarify those plans and programs that 
are exempt because they are ``nondiscriminatory'' and is consistent 
with the intention of Section 4518(e).
---------------------------------------------------------------------------

    \29\ See 26 U.S.C. 280G; see also 26 CFR 1.280G-1. Legislative 
history of the FDI Act provision on which Section 4518(e) was 
modeled indicates that the FDI Act definition of ``golden parachute 
payment'' was informed by an IRC provision on ``excess parachute 
payments'' at 26 U.S.C. 280G, where a ``parachute payment'' is 
defined in part as ``any payment in the nature of compensation . . . 
if such payment is contingent on'' a change in the ownership or 
effective control of the corporation. See H.R. 4268 (unenacted) 101 
Cong. (2nd Sess. 1990) and 136 Cong. Rec. H783 (daily ed. March 14, 
1990).
    \30\ 26 CFR 1.280G-1, Q/A26(c).
---------------------------------------------------------------------------

    In conjunction with this amendment, FHFA is proposing to remove an 
exemption for ``usual and customary [benefit] plans such as dependent 
care, tuition reimbursement, group legal services or cafeteria plans'' 
and to add whether a benefit plan is ``usual and customary'' to the 
factors for the Director's consideration when reviewing requests for 
consent to a plan. Thus, a regulated entity would be required to seek 
FHFA's consent for a benefit plan that is not otherwise exempt from the 
rule, and FHFA could determine the plan to be permissible after 
considering, among other factors, whether the plan is ``usual and 
customary.'' FHFA believes this change will not materially affect the 
operation of the rule regarding such plans for two reasons. First, 
because the rule's current exemption relies on the characterization of 
a plan as ``usual and customary,'' troubled institutions have sought 
FHFA's concurrence that specific plans are considered ``usual and 
customary,'' which has resulted in a de facto review and consent 
process.\31\ Similarly, under the proposal, a regulated entity could 
request FHFA's review of and consent to a plan that is ``usual and 
customary.'' Second, most of the plans listed in the current rule as 
examples of ``usual and customary plans'' are included within the list 
of ``nondiscriminatory employee plans and programs'' for purposes of 
IRC Section 280G. If a benefit plan that would previously have been 
exempt as a ``usual and customary'' plan meets the IRC standard for 
``nondiscriminatory,'' then that plan would now be exempt on the basis 
that it is ``nondiscriminatory.''
---------------------------------------------------------------------------

    \31\ In that regard, if FHFA has previously reviewed a specific 
plan and determined it to be ``usual and customary'' under the 
current rule, then that plan is exempt under the current rule and 
that exemption will be grandfathered under the rule if amended, 
unless the plan is materially amended. If a plan is materially 
amended, it will be viewed as if the regulated entity is 
discontinuing the exempt plan and establishing a new one, which 
would then be subject to the requirements and procedures of the rule 
as amended.
---------------------------------------------------------------------------

    Distinguishing between exempt ``nondiscriminatory employee plans 
and programs'' and plans that FHFA may permit as a matter of discretion 
because they are usual and customary (among other considerations) 
appears to align more closely with the language of Section 4518(e). 
Under this approach, a ``nondiscriminatory employee plan or program'' 
will be exempt even if it is not ``usual and customary.''
    FHFA also recognizes that there may be benefit plans that are 
nondiscriminatory, but are not included within the IRS list of 
``nondiscriminatory employee plans and programs.'' Because Section 
4518(e) exempts all ``nondiscriminatory benefit plans'' from the 
``golden parachute payment'' definition, FHFA is proposing to amend its 
process for requests for review to expressly address a request for an 
exemption for any other ``benefit plan'' that the regulated entity 
believes is ``nondiscriminatory.'' In that case, the regulated entity 
would be permitted to submit a single request that includes a request 
for exemption, in which the regulated entity must address the basis for 
its assertion that the plan is ``nondiscriminatory,'' and a request for 
consent. Based on the information in that submission, FHFA would 
determine if the plan is ``nondiscriminatory;'' if so, it would be 
exempt, and if not, FHFA would then determine whether it should 
nonetheless be a permissible golden parachute agreement. FHFA proposes 
this approach to better implement Section 4518(e)'s express exemption 
for ``other nondiscriminatory benefit plans'' and to reduce burdens on 
the regulated entity.
    A regulated entity could request an exemption for any benefit plan 
it believes is ``nondiscriminatory.'' FHFA is proposing to remove the 
rule's current definition of ``nondiscriminatory'' and is not proposing 
to establish a new definition. The current definition is applicable 
only to ``severance pay plans'' as defined in the rule, and it is not 
clear that any single ``nondiscriminatory'' definition would be 
appropriate for all types of plans. Having one definition for all plans 
may mistakenly result in some plans being treated as if they are 
subject to the rule, where in fact they should be exempt because they 
are ``nondiscriminatory.'' FHFA also believes that considering whether 
a particular plan is nondiscriminatory in conjunction with the plan's 
design and purpose would aid FHFA in carrying out the purposes of 
Section 4518(e).
    Nonetheless, FHFA believes that the rule's current definition of 
``nondiscriminatory'' identifies appropriate criteria for assessing 
discrimination, such as length of service, salary, total compensation, 
job grade, or classification. These criteria are similar to some used 
for IRS ``nondiscriminatory employee plans and programs.'' \32\ When a 
regulated entity requests an exemption for a ``nondiscriminatory'' 
benefit plan, it will be required to demonstrate how the plan operates 
to achieve a nondiscriminatory outcome, where the discrimination of 
concern is between groups or classes of employees, and higher level or 
more highly compensated employees are disproportionately advantaged 
over lower level or less highly compensated employees. In particular, a 
plan that provides disproportionately greater benefits to some 
employees based solely or primarily on level or position within a 
regulated entity (or any proxy for level or position such as total 
salary or total compensation, job grade, or classification) would not 
likely be determined ``nondiscriminatory'' by FHFA. Differences in the 
level of benefits provided based on other objective criteria such as 
length of service, or on level or position in combination with such 
other criteria, may be nondiscriminatory.
---------------------------------------------------------------------------

    \32\ See, e.g., 26 U.S.C. 79(d), where the nondiscrimination 
test considers, among other factors, provision of the benefit to 
``key'' employees, defined with reference to title and level of 
compensation; and sec. 129, where the test considers the relative 
compensation of eligible participants (highly compensated employees 
and non-highly compensated employees) and average level of benefits 
provided to highly compensated employees relative to non-highly 
compensated employees.
---------------------------------------------------------------------------

    Finally, the current rule's definition of ``benefit plan'' includes 
(and thus exempts from the ``golden parachute payments'' definition) 
those ``employee welfare benefit plans'' as defined by section 3(1) of 
the Employee Retirement Income Security Act of 1974 (ERISA), at 29 
U.S.C. 1002(1). FHFA is not proposing to amend this exemption, though 
it would be relocated.
    FHFA understands that some ERISA employee welfare benefit plans 
must meet statutory nondiscrimination tests, and thus are exempt from 
the ``golden parachute payment'' definition by the express terms of 
Section 4518(e). FHFA also believes that many such plans are simply not 
covered by the statutory ``golden parachute payment'' definition. 
Specifically, though the benefit provided to the employee--the 
opportunity to participate in such a plan--is ``in the nature of 
compensation,'' FHFA believes it is unlikely that benefit is 
``contingent on

[[Page 43808]]

the [employee's] termination of . . . affiliation with the regulated 
entity.'' Instead, FHFA believes it is more likely that such benefits 
are provided based on the condition of employment (affiliation) but may 
continue after termination, either through the terms of the actual 
employee welfare benefit plan, or through the terms of a severance 
agreement. In the latter instance, FHFA would construe the benefit as 
contingent on termination. Because severance pay plans or agreements 
are not exempt from the golden parachute payment definition, however, 
FHFA would have the opportunity to review those agreements or plans, 
including any extended employee welfare benefits they provide.
    FHFA requests comment on all aspects of its proposed amendments to 
the rule's current treatment of ``benefit plans''; the proposed process 
for requesting either an exemption, for a plan believed to be 
``nondiscriminatory,'' or consent, if FHFA determines that a plan is 
not ``nondiscriminatory''; removal of the rule's current definition of 
``nondiscriminatory''; and its treatment of employee welfare benefit 
plans.
    Nondiscriminatory severance pay plans or arrangements. FHFA is also 
proposing to remove from the rule an exemption for severance pay plans 
that meet the rule definition of ``nondiscriminatory'' and other 
conditions. Implementing the current rule resulted in FHFA's reviewing 
the severance pay plans of troubled institutions and, based on that 
experience, FHFA has determined as a matter of supervisory policy that 
severance pay plans should be subject to review.
    FHFA review of troubled institution severance pay plans was 
required because these plans did not meet the current rule's 
``nondiscriminatory'' definition and thus were not exempt. Instead, 
troubled institutions requested FHFA's consent to such plans, and FHFA 
made decisions applying the rule's consideration factors. FHFA has 
determined this review is very useful for assessing the potential or 
intended impact of the plan on the troubled institution, given its 
specific circumstances. Where the plan covers a described event, e.g., 
involuntary termination not for cause, that entitles employees to 
severance pay and that could occur for many employees at the same time 
or close in time, the troubled institution may be subject to making a 
higher, aggregated payout. That same event--numerous involuntary 
terminations not for cause, happening close in time--may be appropriate 
to address a financial weakness, however. Likewise, an appropriately 
structured severance pay plan could have a retentive effect on 
employees that could be stabilizing as a troubled institution works to 
improve its financial condition. Because the circumstances and 
strategies of each troubled institution would likely be different, 
severance pay plans with different terms and structures could be 
appropriate.
    For these reasons, FHFA believes that these plans should be 
reviewed, as a result of which they may be permitted--or even deemed 
exempt, if determined to be nondiscriminatory based on a request for 
exemption by the troubled institution. FHFA notes that severance pay 
plans are not currently included in the IRS list of ``nondiscriminatory 
employee plans and programs,'' but also that it is possible for the 
list to evolve to include them through amendments to the IRC or IRS 
interpretation. In that case, severance pay plans that meet 
specifically applicable IRC or IRS ``nondiscrimination'' requirements 
would be exempt from the FHFA rule without the need for an exemption 
request. This treatment is consistent with FHFA's proposed approach to 
applying Section 4518(e)'s statutory exemption for ``other 
nondiscriminatory benefit plans.''
    FHFA requests comment on the proposed removal of the current rule's 
exemption for severance pay plans that are ``nondiscriminatory'' and 
meet other conditions.
    Other severance or similar payments required by state or foreign 
law. The current rule also includes an exemption for certain severance 
or similar payments that are required to be made by state statute or 
foreign law.\33\ As with the rule's exemption for payments made 
pursuant to pension or other retirement plans ``governed by the laws of 
any foreign country,'' described above, FHFA is not aware of any 
severance or similar payments that any regulated entity would be 
required to make by foreign law. Were FHFA to determine a severance or 
similar payment was required by a foreign law, FHFA would like to 
better understand the requirements of that law when considering the 
application of the Golden Parachute Payments rule to such a payment 
(again, understanding that if a foreign law applied and required a 
payment, that it may not be feasible to prohibit a troubled institution 
from making it). For these reasons, FHFA proposes to remove the rule's 
exemption for such payments, and requests comments on the impact to the 
regulated entities of removing it.
---------------------------------------------------------------------------

    \33\ 12 CFR 1231.2.
---------------------------------------------------------------------------

D. ``Executive Officers'' and Other ``Affiliated Parties''

    Under the current rule, agreements and payments that are within the 
definition of ``golden parachute payment'' may be permitted, either by 
operation of the rule or after review and consent by FHFA.\34\ Although 
that approach would continue if the rule is amended as proposed, 
whether an agreement or payment is permitted by operation of the rule 
(meaning, without review and consent by FHFA) could now turn on whether 
it is provided to an ``executive officer'' or another type of 
``affiliated party.'' Proposals related to those definitions are 
addressed below. As a technical matter, however, FHFA is first 
proposing a change to the rule's terminology, specifically, to change 
the term ``entity-affiliated party'' to ``affiliated party.''
---------------------------------------------------------------------------

    \34\ Id. Sec.  1231.3(b).
---------------------------------------------------------------------------

    Section 4518(e) defines a ``golden parachute payment'' in part as a 
payment, including an agreement to make a payment, to an ``affiliated 
party.'' ``Affiliated party'' is not defined by statute, though a 
similar statutory term, ``entity-affiliated party,'' used primarily in 
the context of FHFA's enforcement authority, is defined.\35\ FHFA 
considered the statutory definition of ``entity-affiliated party'' when 
interpreting ``affiliated party'' and uses the term ``entity-affiliated 
party'' in the current rule, although the rule definition of ``entity-
affiliated party'' is different from the statutory definition.\36\ 
``Entity-affiliated party'' is also used and defined in FHFA's rules of 
practice and procedure, at 12 CFR part 1209. To avoid confusion and 
because Section 4518(e) uses the term ``affiliated party,'' FHFA is 
proposing to change the term ``entity-affiliated party'' to 
``affiliated party'' throughout part 1231.
---------------------------------------------------------------------------

    \35\ 12 U.S.C. 4518(e)(4); see also id. sec. 4502(11).
    \36\ Compare 12 U.S.C. 4502(11) and 12 CFR 1231.2.
---------------------------------------------------------------------------

    FHFA is also proposing substantive changes to the definition of 
``affiliated party'' for purposes of rule provisions related to 
``golden parachute payments.'' \37\ For the most part, the current rule 
does not establish different treatments or outcomes based on the

[[Page 43809]]

party to whom a golden parachute payment could be made, but applies in 
kind to each defined ``entity-affiliated party.'' One provision--an 
exemption for payments made pursuant to nondiscriminatory severance pay 
plans (which FHFA has proposed to remove for other reasons, set forth 
above)--does not apply to any ``executive officer'' whose annual base 
salary exceeds a stated amount. Within that provision, ``executive 
officer'' is defined by reference to FHFA's Executive Compensation 
Rule. Because FHFA now proposes to amend the rule to more broadly 
distinguish the treatment of executive officers from the treatment of 
other ``entity-affiliated parties,'' FHFA is also proposing to more 
generally incorporate in this rule the definition of ``executive 
officer'' from FHFA's Executive Compensation rule.
---------------------------------------------------------------------------

    \37\ Section 4518(e) and 12 CFR part 1231 also address 
``indemnification payments,'' the statutory definition of which also 
uses the term ``affiliated party.'' See 12 U.S.C. 4518(e)(5)(A); see 
also 81 FR 64357 (Sept. 20, 2016). If part 1231 is amended as 
proposed, the term ``affiliated party'' would be used throughout the 
rule, but it would be defined differently depending on whether the 
payment is an indemnification payment or a golden parachute payment.
---------------------------------------------------------------------------

    FHFA has also identified other issues with the rule definition of 
``entity-affiliated party'' that it proposes to address. Specifically, 
for the regulated entities, the current rule includes parties to whom 
it is unlikely that excessive or abusive termination payments would be 
made. For OF, the current rule defines ``entity-affiliated party'' more 
narrowly than for FHFA's regulated entities.
    If amended as proposed, the definition of ``affiliated party'' for 
purposes of golden parachute payments would cover all employees, 
officers, and directors of a regulated entity or OF, and any other 
party the Director, by regulation or on a case-by-case basis, 
determines to be participating in the conduct of the affairs of a 
regulated entity or OF. For the regulated entities, as applied to 
golden parachute payments, the ``affiliated party'' definition would be 
narrower on its face but its potential scope would not change, as it 
would retain the ``catch-all'' that permits FHFA to deem parties other 
than directors, officers and employees to be ``affiliated parties.'' 
For OF, the amended definition would be broader. Each of these proposed 
changes is described below.
    ``Affiliated parties'' of the regulated entities. The statutory 
definition of ``entity-affiliated party''--any controlling stockholder 
for, or agent of, any regulated entity; any shareholder, affiliate, 
consultant, or joint venture partner of a regulated entity; any 
independent contractor (including an attorney, appraiser or accountant) 
who meets certain conditions; and any not-for-profit corporation that 
receives its principal funding from a regulated entity--is largely 
incorporated into the current rule definition of ``entity-affiliated 
party.'' While it could be appropriate in some instances to treat any 
listed party as an ``affiliated party,'' FHFA does not believe it is 
likely that these parties would receive payments that are contingent on 
their termination or that are abusive or excessive, and thus does not 
believe it is necessary to treat each of them as an ``affiliated 
party'' as a matter of course. This is particularly true since the 
rule, like the statute, includes a ``catch-all'' provision for ``any 
other person that the Director determines, by regulation or on a case-
by-case basis, to be participating in the conduct of the affairs of the 
regulated entity.'' \38\ That provision is a more flexible and targeted 
tool for ensuring that FHFA appropriately reviews payments by a 
troubled regulated entity that are contingent on the termination of the 
affiliation of a party who is not a director, an officer, or an 
employee.
---------------------------------------------------------------------------

    \38\ 12 CFR 1231.2.
---------------------------------------------------------------------------

    For these reasons, FHFA proposes to remove listed parties other 
than directors, officers, and employees from the rule's definition. The 
``catch-all'' provision would be retained, though it would be slightly 
amended to incorporate a provision of the current rule that states a 
member of a Bank shall not be deemed an ``affiliated party'' solely 
because it is a shareholder of, or obtains advances from, a Bank.
    ``Affiliated parties'' of OF. The Safety and Soundness Act 
definition of ``entity-affiliated party'' includes the Office of 
Finance.\39\ For purposes of the Golden Parachute Payments rule, 
however, FHFA determined that OF should be treated as if it were a 
``regulated entity'' (meaning, as if it were the paying party, instead 
of the party receiving payment).\40\ This decision required FHFA to 
develop a rule definition of OF's ``entity-affiliated parties,'' which 
currently covers any director, officer or manager of OF. It does not 
cover other OF employees or include the ``catch-all'' for parties 
participating in the conduct of OF's affairs.
---------------------------------------------------------------------------

    \39\ 12 U.S.C. 4502(11).
    \40\ See 74 FR at 30976 and 78 FR at 28456.
---------------------------------------------------------------------------

    FHFA continues to believe that OF should be treated as a 
``regulated entity'' for purposes of golden parachute payments and 
agreements. FHFA does not believe OF employees should be outside the 
rule's scope, however. There is no supervisory policy that supports 
excluding any OF employees and, further, no supervisory policy that 
supports a different definition of ``affiliated party'' for OF than for 
the regulated entities. Thus, to ensure that OF is treated similarly to 
any ``regulated entity'' for purposes of the rule, FHFA proposes to 
remove the rule's separate definition of ``entity-affiliated party'' 
for OF and to apply the same ``affiliated party'' definition, amended 
as described above, to any regulated entity and OF. This change expands 
the scope of the rule with regard to OF, as it would now cover OF 
employees and any other person the Director determines, by regulation 
or on a case-by-case basis, to be participating in the conduct of the 
affairs of OF. FHFA requests comment on these proposed changes.
    Definition of ``executive officer.'' To implement FHFA's decision 
to distinguish some agreements or payments that are provided to an 
``executive officer'' from those that are provided to other 
``affiliated parties,'' it is necessary to define ``executive 
officer.'' FHFA proposes to incorporate the definition of ``executive 
officer'' for purposes of its Executive Compensation rule, because the 
regulated entities and OF are familiar with that definition and FHFA 
intends that ``executive officer'' be defined consistently for the two 
rules.\41\
---------------------------------------------------------------------------

    \41\ See 12 CFR 1230.2.
---------------------------------------------------------------------------

    For the Enterprises and the Banks, the Executive Compensation 
rule's definition of ``executive officer'' includes ``any individual 
who performs functions similar to such positions, whether or not the 
individual has an official title'' and, for any regulated entity and 
the OF, ``any other officer as identified by the Director.'' \42\ Any 
individual or other officer who is considered an ``executive officer'' 
for purposes of the Executive Compensation rule would also be treated 
as an ``executive officer'' for the Golden Parachute Payments rule.
---------------------------------------------------------------------------

    \42\ Id.
---------------------------------------------------------------------------

    FHFA further notes that the Executive Compensation rule establishes 
different ``executive officer'' definitions for the Enterprises, the 
Banks, and OF.\43\ For the Enterprises, the rule definition is based on 
a Safety and Soundness Act definition that applies only to the 
Enterprises and includes two Enterprise directors: The chairman and 
vice

[[Page 43810]]

chairman of the board of directors.\44\ Because these Enterprise 
directors are treated as ``executive officers'' for purposes of the 
Safety and Soundness Act and the Executive Compensation rule, FHFA also 
proposes to treat them as ``executive officers'' for this rule. Other 
Enterprise directors, all directors of any Bank, and all directors of 
the OF would be treated as other affiliated parties, unless FHFA 
determines any such other director should also be treated as an 
``executive officer.'' In practice, this means that, under the 
proposal, more agreements with and payments to directors (other than 
the Enterprises' chairmen and vice chairmen) would be permitted by 
operation of the rule and thus could be made without FHFA prior review 
and consent (assuming certain conditions, which are discussed below, 
are met).
---------------------------------------------------------------------------

    \43\ Id. Enterprise executive officers are the chairman and vice 
chairman of the board of directors, the chief executive officer, 
chief financial officer, chief operating officer, president, any 
executive vice president, any senior vice president, any individual 
in charge of a principal business unit, division, or function, and 
any individual who performs functions similar to such positions 
whether or not the individual has an official title. Bank executive 
officers are the president, the chief financial officer, and the 
three other most highly compensated officers. OF executive officers 
are the chief executive officer, chief financial officer, and chief 
operating officer. In all cases, ``executive officer'' includes any 
other officer identified by the Director.
    \44\ 12 U.S.C. 4502(12).
---------------------------------------------------------------------------

    FHFA also believes that it could be appropriate for any affiliated 
party to be treated as an ``executive officer'' for purposes of the 
Golden Parachute Payments rule, based on the affiliated party's degree 
of influence or level of responsibility. For that reason, the proposal 
would allow the Director to designate any affiliated party as an 
``executive officer'' for purposes of the Golden Parachute Payments 
rule. FHFA anticipates basing such decisions on consideration of 
whether the affiliated party's participation in the conduct of the 
affairs of the regulated entity is of such influence or responsibility 
that the party could materially affect decisions about termination 
payments or the financial condition of the regulated entity, or could 
engage in certain types of financial crimes (identified in the rule).
    FHFA expects to address whether a party who becomes an ``affiliated 
party'' as a result of the ``catch-all'' provision should be treated as 
an ``executive officer'' at the same time it determines to apply the 
``catch-all.'' However, FHFA reserves the right to make a determination 
that an affiliated party should be treated as an ``executive officer'' 
for purposes of the rule at any time (in that case, the determination 
would not be applied retroactively, such that agreements or payments 
previously entered into or made could be in violation of the rule. 
Instead, FHFA would review future payments, including any agreement 
pursuant to which payment is made, as payments arise).
    FHFA requests comments on all aspects of its proposed definition of 
``executive officer.''

E. Permitted Agreements

    As previously noted, the approach of the current rule--that 
agreements and payments not exempted from the definition of ``golden 
parachute payment'' are prohibited unless they are permitted, either by 
operation of the rule or after review and consent by FHFA-would 
continue in the rule as proposed to be amended. To implement FHFA's 
intention to distinguish the treatment of agreements from the treatment 
of payments in some cases, the rule would be amended to address 
agreements and payments separately.
    In addition, FHFA proposes to add three types of agreements that 
would be permitted by operation of the rule--(1) compensation 
arrangements (including plans or agreements) that are directed by FHFA 
exercising authority conferred by 12 U.S.C. 4617, which covers FHFA's 
conservatorship and receivership authorities and authorities with 
regard to any limited life regulated entity (``LLRE'')), (2) 
individually negotiated settlement agreements with affiliated parties 
who are not executive officers, where certain conditions are met, and 
(3) agreements to make payments to affiliated parties other than 
executive officers, where the amount of the payment is de minimis. FHFA 
also proposes to remove the current rule's provisions for permissible 
agreements with persons hired to prevent a regulated entity from 
imminently becoming a troubled institution or materially improve the 
financial condition of a troubled institution and change in control 
agreements, which FHFA now proposes to address in conjunction with 
other severance agreements. These proposed amendments are addressed 
below.
    Plans directed by the Director. A regulated entity becomes a 
troubled institution for purposes of the Golden Parachute Payments rule 
if FHFA is appointed as its conservator or receiver (among other 
reasons). That appointment confers additional powers on FHFA: By 
operation of law, as conservator or receiver FHFA succeeds to the 
powers of the regulated entity's board of directors and may operate the 
regulated entity, including establishing or directing the regulated 
entity to establish compensation plans and arrangements and to make 
provisions for payments on termination of employees.\45\
---------------------------------------------------------------------------

    \45\ Id. sec. 4617(b)(2)(A) through (D).
---------------------------------------------------------------------------

    Appointment as receiver also authorizes or requires FHFA to 
organize an LLRE for the regulated entity in receivership.\46\ Although 
an LLRE is not in conservatorship or receivership, the Director has 
statutory discretion to use the agency's conservatorship and 
receivership authority with respect to the LLRE to establish or direct 
the establishment of employee compensation plans and provide for 
termination payments.\47\
---------------------------------------------------------------------------

    \46\ Id. sec. 4617(i).
    \47\ Id. sec. 4617(i)(2)(C), providing that FHFA, in its 
discretion, may treat a limited-life regulated entity as a regulated 
entity in default at such times and for such purposes as FHFA 
determines.
---------------------------------------------------------------------------

    Where FHFA, exercising authority conferred by 12 U.S.C. 4617, acts 
to direct the establishment of a compensation arrangement by a 
regulated entity, including an LLRE, the Director's consent to that 
arrangement is conveyed by the direction to establish it. For that 
reason, FHFA proposes to amend the Golden Parachute Payments rule to 
permit troubled institutions to make compensation plans or agreements 
that provide for termination payments to affiliated parties of a 
regulated entity without FHFA review, when such arrangements are 
established or directed by FHFA pursuant to authority conferred by 12 
U.S.C. 4617. FHFA requests comments on this amendment.
    Individually negotiated settlement agreements. FHFA proposes to 
amend the rule to permit troubled institutions to enter into 
individually negotiated settlement agreements with affiliated parties 
other than executive officers without FHFA prior review and consent, 
where (1) the agreement resolves a claim by the affiliated party or 
avoids a claim that the troubled institution has a reasonable belief 
would be brought by the party, and involves payment to the affiliated 
party and the party's termination; and (2) at the time the agreement is 
entered into, the regulated entity is reasonably assured, following due 
diligence appropriate to the level and responsibilities of the 
affiliated party, that the party has not engaged in certain types of 
wrongdoing. Individually negotiated settlement agreements with 
executive officers and other types of individually negotiated 
agreements with any affiliated party (such as, for example, an 
agreement with an employee to accelerate a retention award) would 
continue to require FHFA's prior review and consent.
    This proposed amendment reflects FHFA's interpretation, addressed 
above, that the ``golden parachute payment'' definition covers a 
settlement agreement involving payment to and termination of an 
employee of a troubled institution, as an agreement to make a payment 
``in the nature'' of compensation. It also recognizes that such 
agreements with

[[Page 43811]]

lower ranking employees are not likely to involve payments that are 
excessive or abusive. Specifically, where a claim has been brought or a 
troubled institution reasonably believes one may be brought, the 
employee and the regulated entity have interests that are opposed. That 
opposition and the negotiation involved in reaching the settlement 
agreement provide some assurance that the agreement's terms, including 
any negotiated payment, are not excessive or abusive but instead 
reflect a cost to the troubled institution that it reasonably believes 
is lower than would likely be incurred if the claim were litigated.
    Conversely, there is a somewhat higher supervisory concern that 
executive officers, who are better positioned to influence negotiations 
and decision-making and who could have built relationships with those 
in charge of negotiating or approving settlements, could receive 
payments through individually negotiated settlement agreements that do 
not fairly reflect an assessment of risk, potential damages, and 
associated costs, and thus that are excessive or abusive. On that 
basis, individually negotiated settlement agreements with executive 
officers would continue to be subject to review by FHFA.
    Limiting application of the amendment to ``individually negotiated 
settlement agreements'' requires defining that term. Consistent with 
the foregoing discussion, FHFA is proposing a definition that seeks to 
capture only those individually negotiated agreements that (1) settle a 
claim that an affiliated party has brought or avoid a claim the 
regulated entity reasonably believes the affiliated party would bring 
and (2) involve a settlement payment to the affiliated party, a release 
of claims by the party (and possibly the regulated entity), and the 
termination of the party's affiliation with the regulated entity. As 
payment and termination are already included in the ``golden parachute 
payment'' definition, FHFA is not repeating them in its proposed 
definition of an ``individually negotiated settlement agreement.'' FHFA 
intends the definition to cover those agreements where obtaining a 
settlement and release of claims significantly motivates negotiation 
between the regulated entity and the affiliated party, as distinguished 
from other individual agreements where a release of claims is an 
important but more incidental feature. FHFA requests comment on the 
proposed definition of ``individually negotiated settlement 
agreement.''
    In order for an individually negotiated settlement agreement to be 
permissible without FHFA prior review and consent, the regulated entity 
must be reasonably assured, at the time the agreement is entered into, 
that the affiliated party has not engaged in certain types of 
wrongdoing. The types of wrongdoing that a regulated entity must 
consider are set forth in the current rule and are not changing.\48\ To 
implement this condition, FHFA proposes to amend a certification 
requirement in the current rule that would otherwise apply. FHFA has 
identified issues with that requirement which it now proposes to 
address.
---------------------------------------------------------------------------

    \48\ 12 CFR 1231.3(b)(1)(iv)(A) through (D).
---------------------------------------------------------------------------

    Specifically, under the current rule a regulated entity submitting 
a request for FHFA review of a proposed golden parachute payment or 
agreement must ``demonstrate that it does not possess and is not aware 
of any information, evidence, documents, or other materials that would 
indicate that there is a reasonable basis to believe'' that the person 
to whom payment would be made has engaged in any of the types of 
wrongdoing listed. This standard could imply that the regulated entity 
must have a high degree of certainty about the person's actions, gained 
through considerable investigation, which may not be reasonable or, in 
some cases, even possible. For example, the current rule requires the 
regulated entity to provide certification when requesting review of an 
agreement, even where the parties to whom payment could ultimately be 
made are not known and would be expected to change over time (i.e., 
employees covered by a broad-based severance pay plan). In addition, 
because the current rule states that each request must include a 
certification that a regulated entity is not aware of information that 
would reasonably indicate the party has engaged in wrongdoing, it could 
imply that a regulated entity that is not able to make the 
certification may not request FHFA's review and thus may not enter into 
the agreement or make the payment. This outcome was not intended, as 
the preamble that accompanied the current rule made clear.\49\ Indeed, 
a regulated entity may have concerns about wrongdoing that it desires 
to address through an individually negotiated settlement agreement to 
avoid litigation, and the rule is not intended to prevent this.
---------------------------------------------------------------------------

    \49\ 79 FR at 4397.
---------------------------------------------------------------------------

    To address these issues, FHFA proposes to amend the current rule's 
certification requirement. First, FHFA is clarifying the standard that 
a requesting regulated entity must meet: It must be reasonably assured 
that the affiliated party has not engaged in wrongdoing listed in the 
rule, following appropriate due diligence. FHFA expects that the nature 
of the due diligence performed by a regulated entity will vary based on 
the opportunity of the affiliated party to engage in the types of 
wrongdoing listed, when considering the party's affiliation, duties, 
functions, and privileges. It is possible that some affiliated parties 
would have no opportunity to engage in any listed wrongdoing, and in 
that case, simply noting an assessment of ``no opportunity'' could be 
sufficient. A regulated entity may make an affirmation or similar 
statement by the terminating affiliated party a component of its due 
diligence process. When an appropriate due diligence process does not 
give cause for concern that the affiliated party may have engaged in 
the rule's listed types of wrongdoing, the ``reasonably assured'' 
standard is met. The standard does not require a regulated entity to 
demonstrate or prove that the affiliated party has not engaged in 
wrongdoing.
    If the regulated entity determines that the ``reasonably assured'' 
standard is met, it may enter into an individually negotiated 
settlement agreement with an affiliated party other than an executive 
officer without FHFA's review and consent. The regulated entity should 
retain records necessary to support its application of the standard in 
accordance with 12 CFR part 1235. If the regulated entity cannot meet 
the ``reasonably assured'' standard, it must obtain FHFA's consent to 
enter into the agreement. FHFA is also proposing to require any 
regulated entity that concludes, after appropriate due diligence, that 
it is not ``reasonably assured'' the affiliated party has not engaged 
in the listed types of wrongdoing to provide notice of its concerns to 
FHFA, even if the regulated entity does not enter into the individually 
negotiated settlement agreement. This requirement is intended to 
balance FHFA's supervisory concern about the occurrence of wrongdoing 
listed in the rule with the desire of the regulated entity to resolve 
claims (or potential claims) by affiliated parties.
    FHFA requests comments on all aspects of its proposed amendments 
related to individually negotiated settlement agreements with 
affiliated parties who are not executive officers.
    Agreements to make de minimis golden parachute payments. FHFA is 
also proposing to amend the rule to permit a troubled institution to 
enter into an agreement to make a de minimis

[[Page 43812]]

golden parachute payment to an affiliated party other than an executive 
officer without FHFA review and consent, and without conducting due 
diligence that the rule would otherwise require. The current rule does 
not distinguish agreements (or payments) based on amount, which has 
required troubled institutions to request FHFA review and consent even 
for agreements to make small golden parachute payments. Based on that 
experience, FHFA has determined that the burden of administration and 
compliance is not warranted, where the agreement would provide for a 
payment that is small and subject to a regulatory cap (thereby avoiding 
excessive or abusive payments or payments that would threaten the 
financial condition of the regulated entity) and is to be made to an 
affiliated party who is not an executive officer. In combination, FHFA 
believes these conditions support a reasonable presumption that the 
affiliated party either (1) was not in position to materially affect 
the financial condition of the regulated entity or engage in certain 
types of wrongdoing listed in the rule or (2) if the affiliated party 
was in such a position, that the payment does not settle a claim 
involving such wrongdoing.
    This amendment would apply to individually negotiated agreements as 
well as plans that cover multiple employees, including broad-based 
plans, if the agreement or plan provides for payment that does not 
exceed the de minimis amount. FHFA intends this treatment to control 
even where the agreement is of a type that is specifically addressed in 
the rule. For example, a troubled institution would be permitted to 
enter into an individually negotiated settlement agreement to make a de 
minimis settlement payment to an affiliated party who is not an 
executive officer without FHFA's prior review and consent and without 
conducting due diligence related wrongdoing that is otherwise required 
by the rule. As the actual amount that a particular employee could 
receive may not be known until a payment obligation arises, agreements 
or plans that could result in an affiliated party receiving more than 
the de minimis amount would require FHFA's prior review and consent.
    FHFA proposes $2,500 as the cap for a golden parachute payment that 
a troubled institution could agree to make without FHFA review and 
consent. While it is possible that a higher or lower amount could be 
supported, FHFA's past experience indicates there is a significant 
likelihood that payments of $2,500 or less would permitted after 
review.
    The de minimis cap applies to all golden parachute payments in the 
aggregate to the same affiliated party. Therefore, if an individual 
affiliated party will or could receive more than one golden parachute 
payment and, in the aggregate, those payments could exceed the de 
minimis amount, then each of the payments would require FHFA review. 
For example, if a departing employee is to receive severance of $2,000, 
and the regulated entity also chooses to waive repayment of a small 
debt in the amount of $1,500, the troubled institution would be 
required to submit both agreements to FHFA for review. On the other 
hand, if a departing employee is receiving a severance payment of 
$1,500 and waiver of a debt repayment of $750, neither payment would 
require FHFA review because the total amount of $2,225 falls under the 
de minimis cap of $2,500.
    To ensure the specific de minimis amount remains appropriate over 
time, considering changes in the economy, FHFA is also proposing that 
the amount be increased for inflation in accordance with the formula 
and methodology used for the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015.\50\ For consistency with that 
Act, FHFA proposes to base the annual adjustment on the increase in the 
percentage, if any, by which the Consumer Price Index for all urban 
consumers (CPI-U) as published by the Department of Labor for the month 
of December exceeds the CPI-U for the month prior to the month of the 
final rule's publication in the Federal Register, which would then be 
rounded to the nearest whole dollar.\51\ Thus, if the rule were 
published in June 2018, the CPI-U for the month prior to publication, 
May 2018, would be 251.588.\52\ If a troubled institution were applying 
the rule's $2,500 de minimis amount in June 2020, it would look to the 
monthly CPI-U published for December 2019. If the CPI-U index had risen 
to 257.119 in December 2019,\53\ the troubled institution would divide 
257.119 by 251.588 for a result of 1.021984355. This means there has 
been a percentage increase of 2.1984355 percent.\54\ The troubled 
institution would then increase the $2,500 de minimis amount by 
2.1984355 percent (which is to multiply 2,500 by 1.021984355) for a 
result of $2,554.96. This amount rounded to the nearest dollar would be 
$2,555. The de minimis amount in the entire calendar year of 2020 would 
be $2,555.
---------------------------------------------------------------------------

    \50\ 28 U.S.C. 2461 note. This Act requires FHFA, among other 
agencies, annually to adjust the civil monetary penalties it may 
impose for inflation, in accordance with the Act's requirements.
    \51\ Consumer Price Index, Economic News Release, Bureau of 
Labor Statistics, United States Department of Labor, https://www.bls.gov/news.release/cpi.toc.htm (last visited August 20, 2018). 
The index levels can also be found in monthly press releases. See, 
e.g., Consumer Price Index Summary, United States Department of 
Labor, Bureau of Labor and Statistics, https://www.bls.gov/news.release/cpi.nr0.htm.
    \52\ See, Consumer Price Index Summary, United States Department 
of Labor, Bureau of Labor and Statistics (June 12, 2018), https://www.bls.gov/news.release/archives/cpi_06122018.htm.
    \53\ This number was created for purposes of the example.
    \54\ For the avoidance of doubt, the calculations used for the 
example are as follows: (1) 257.119/251.588 = 1.021984355. (2) 2500 
* 1.02198355 = 2554.960888. (3) Rounding of 2554.960888 to the 
nearest dollar produces $2,555.
---------------------------------------------------------------------------

    To facilitate use of the adjustment by troubled institutions, FHFA 
also proposes to permit troubled institutions to calculate it 
themselves and apply it accordingly. Thus, no action by FHFA would be 
required in order for a troubled institution to use an inflation-
adjusted dollar value.
    FHFA requests comment on all aspects of its proposed treatment of 
agreements to make de minimis golden parachute payments, including the 
aggregation of payments for purposes of calculating the de minimis 
amount and the proposed inflation adjustment.
    Employment agreements with turnaround specialists. FHFA identified 
issues with the scope and application of rule provisions on employment 
agreements with persons hired to help a regulated entity address its 
problems (``turnaround specialists''). Currently, the rule provides 
that an agreement made in order to hire a person to become an 
affiliated party either at a time when the regulated entity is, or in 
order to prevent it imminently from becoming, a troubled institution, 
is permissible provided that the Director consents to the terms and 
amount of the golden parachute payment.
    In addition, the current rule is not clear as to whether the 
Director's consent to the terms and amount of payment is required when 
the agreement is entered into or could be provided later, at the time 
the payment is made. The reason for treating these employment 
agreements differently from other types of agreements is to facilitate 
the hiring of a turnaround specialist to address the regulated entity's 
problems, when the regulated entity's condition could be a disincentive 
to joining the company. In that light, FHFA believes review and consent 
at the time of agreement would provide greater assurance to the

[[Page 43813]]

regulated entity and the prospective hire that payments in connection 
with termination provided for in the agreement will be permitted. 
Review at the time of agreement also aligns with FHFA's higher 
supervisory concern for agreements, relative to subsequent payments 
made pursuant to an agreement to which FHFA has consented. FHFA also 
observes that such agreements often anticipate the departure of the 
turnaround specialist when particular tasks are completed or benchmarks 
are met, and in that case, for a turnaround specialist hired as an 
executive officer, review of the agreement is consistent with statutory 
obligations that require FHFA to prohibit a regulated entity from 
providing compensation to an executive officer that is not reasonable 
and comparable and the Enterprises to obtain FHFA approval prior to 
entering into agreements that provide for payment in connection with 
the termination of an executive officer.
    Finally, the current rule does not make it clear how consent 
obtained at the time an agreement is entered into operates to trigger 
provisions of the rule if the regulated entity is not then a troubled 
institution. By statute, an agreement or payment is a ``golden 
parachute payment'' if it is made by a regulated entity when it is, or 
is in contemplation of becoming, a troubled institution. However, as 
noted above, the current rule does not address FHFA's interpretation of 
``in contemplation of.''
    Several proposed revisions to the rule will address these issues. 
To clarify that FHFA intends to review any employment agreement with a 
turnaround specialist, FHFA is removing the rule's current provision 
that permit such agreements. Within the rule's general construct, 
agreements that are not permitted by operation of the rule cannot be 
entered into without FHFA's review and consent; by removing the rule 
provision that makes such agreements permissible, FHFA is thus making 
them subject to its prior review.
    That change will operate in conjunction with other amendments 
related to payments that are described below. If those proposed 
amendments are adopted, a troubled institution will be required to 
obtain FHFA's consent to the employment agreement, but could be 
permitted to make payment to a turnaround specialist without further 
review or consent, provided (1) the payment is in accordance with the 
agreement, (2) the Director provided consent to the subsequent payment 
when providing consent to the agreement, and (3) the troubled 
institution meets any other condition that the Director imposed when 
providing consent. This proposed treatment of payments could apply to 
any employee who is hired as a turnaround specialist, including an 
executive officer.\55\
---------------------------------------------------------------------------

    \55\ FHFA also notes that termination payments to executive 
officers would be deemed ``compensation'' for purposes of the 
Executive Compensation rule. FHFA intends to coordinate its review 
of agreements to make such payments as required under each rule.
---------------------------------------------------------------------------

    In FHFA's view, a regulated entity that hires a turnaround 
specialist to prevent it from imminently becoming a troubled 
institution could meet the ``in contemplation of'' criteria and, if so, 
would become subject to all of the rule's provisions. It is also 
plausible that a regulated entity experiencing problems would seek 
FHFA's consent to a proposed employment agreement as though it were a 
troubled institution, to reassure a prospective employee that the 
agreement would not be prohibited should the regulated entity's 
condition deteriorate further. Nothing in the rule prevents this; where 
the rule requires a troubled institution to request FHFA's consent to 
an agreement, it does not preclude a regulated entity that is not a 
troubled institution from doing so. FHFA notes, however, that consent 
to an agreement is contextual, and it may not be feasible to consent to 
an agreement as though it were a golden parachute agreement, if there 
appears little likelihood that the regulated entity would become a 
troubled institution in the reasonably near term. FHFA requests comment 
on this proposed approach, and on all aspects of its proposed treatment 
of employment agreement with turnaround specialists.
    Change in control agreements. FHFA is also proposing to remove from 
the rule a provision that addresses change in control agreements. Under 
the current rule, a troubled institution may enter into a change in 
control agreement that provides for a reasonable severance payment 
capped at the amount of the base salary paid to the employee in the 
previous 12 months without FHFA's prior review and consent. A change in 
control agreement that provides for payment on termination in excess of 
the cap requires FHFA's prior approval. Further, any change in control 
agreement that results from a regulated entity being placed into 
conservatorship or receivership also requires FHFA's prior review and 
consent.
    The approach of the current rule, permitting some change in control 
agreements to be entered into without FHFA review, is not consistent 
with FHFA's supervisory concern for agreements to make golden parachute 
payments, especially agreements to make payments to executive officers, 
or with FHFA's interest in reviewing agreements that provide severance 
pay. For those reasons, FHFA proposes to treat a change in control 
agreement as it would any other agreement under the rule as proposed to 
be amended. Thus, for example, any individually negotiated change in 
control agreement (whether with an executive officer or another 
affiliated party) would require FHFA's prior review and consent, as 
would any plan that included executive officers and provided for 
severance pay on a change in control. If a change in control agreement 
or plan provided for only a de minimis payment to an affiliated party 
other than an executive officer, then FHFA's prior review and consent 
to the agreement would not be required.
    FHFA recognizes that a regulated entity may enter into agreements 
or establish severance pay plans that provide for payments on a change 
in control prior to the regulated entity becoming a troubled 
institution. A regulated entity does not violate the rule simply 
because FHFA has not provided consent to an agreement or plan that is 
in place at the time the entity becomes a troubled institution. FHFA 
anticipates that it would review such agreements or plans either at the 
time a regulated entity becomes a troubled institution or at the time a 
payment is proposed to be made. Since FHFA could then determine that 
the agreement or plan to make a golden parachute payment is not 
permissible, however, the regulated entities should address that 
contingency--possible future application of the rule--in their plans 
and agreements to avoid later contractual disputes.
    FHFA requests comments on its proposed amendment to remove the 
rule's provision on change in control agreements and thereby require 
FHFA's prior review and consent to change in control agreements and 
plans providing for golden parachute payments (other than a de minimis 
payment).

F. Permitted Payments

    As is the case with golden parachute agreements, under the current 
rule a troubled institution may not make a golden parachute payment 
unless it is permitted by the rule or because the Director has 
consented to the payment after review. FHFA does not propose to change 
this general approach, but has identified some instances where it would 
be appropriate to permit payments to be made by operation of the

[[Page 43814]]

rule. These instances reflect the supervisory policies previously 
stated, that FHFA has a higher supervisory concern for agreements than 
for a subsequent payment made pursuant to a permitted agreement, and a 
higher concern for payments to executive officers than it does for 
similar types of payments when provided to lower ranking employees.
    To implement these policies, FHFA is proposing to permit a troubled 
institution to make a payment pursuant to a permitted individually 
negotiated settlement agreement to any affiliated party, including an 
executive officer, without further review and consent. This proposal 
acknowledges that the payment could be construed as essential 
consideration for the agreement, such that consent to the payment would 
be incorporated in the determination to permit an individually 
negotiated settlement agreement.
    FHFA is also proposing to clarify the Director's authority to 
consent to any future payment to any affiliated party that would 
otherwise be subject to prior review, at the same time or after the 
Director consents to the plan or agreement pursuant to which the 
payment would be made, provided the payment is made in accordance with 
a permitted agreement (whether by operation of the rule or after FHFA 
review and consent) and meets any other conditions that the Director 
may establish. This authority has been implicit in the rule, and would 
now be explicit.
    FHFA is proposing to permit a troubled institution to make two 
other types of payments to affiliated parties who are not executive 
officers without FHFA review and consent. These are (1) de minimis 
payments and (2) payments above the de minimis amount that are made in 
accordance with a permitted agreement, where the troubled institution 
is reasonably assured, following appropriate due diligence, that the 
affiliated party has not engaged in wrongdoing of the types listed in 
the rule.
    Finally, FHFA is proposing to permit a troubled institution to 
provide small value gifts to executive officers to recognize 
significant, nonrecurring, life events (such as retirement) without 
FHFA's review and consent.
    All golden parachute payments other than those permitted by 
operation of the rule would be subject to FHFA review and consent.\56\ 
As a result of the proposed amendments, which are discussed in more 
detail below, FHFA believes most payments to employees who are not 
executive officers would not require FHFA review and consent, while 
many payments to employees who are executive officers would. FHFA 
review and consent would be required for any payment to any affiliated 
party where there is a basis for concern that the party has engaged in 
wrongdoing of a type listed in the rule.
---------------------------------------------------------------------------

    \56\ A recent case rejected a claim that a taking for purposes 
of the Tucker Act, 28 U.S.C. 1491, can occur when FHFA prohibits a 
golden parachute payment, including one made pursuant to an 
agreement entered into before the enactment of Section 4518(e) in 
2008. In Piszel v. U.S., 833 F.3d 1366 (Fed. Cir. 2016), the Court 
of Appeals for the Federal Circuit held that FHFA's prohibition did 
not result in a taking because the affiliated party retained the 
ability to pursue a claim for damages from the regulated entity for 
breach of contract.
    FHFA agrees with the ruling that there was no taking, but 
observes that awarding damages in an action for breach of contract 
by an affiliated party against a regulated entity, where FHFA 
prohibits the regulated entity from making a golden parachute 
payment in accordance with its rule, would clearly defeat the 
purpose of Section 4518(e), which is to prevent the affiliated party 
from receiving such a payment.
    In contrast, the Court of Federal Claims had held in that case 
that no taking occurred (see Piszel v. U.S., 121 Fed. Cl. 793 
(2015)) based on the lack of a sufficiently cognizable property 
interest in the context of the regulatory scheme (``a heavily 
regulated environment'') and the regulator's express statutory 
authority (the Safety and Soundness Act in effect at the time of 
contract formation authorized FHFA's predecessor agency to prohibit 
compensation it deemed to be unreasonable at any time, and nothing 
in the Act ``guaranteed that the government could not later change 
its mind'' after approving the compensation). That conclusion would, 
of course, be even stronger with respect to a payment made subject 
to an agreement entered into after Section 4518(e)'s enactment, a 
proposition with which the Federal Circuit may have agreed, see 833 
F.3d at 1374.
---------------------------------------------------------------------------

    Payments pursuant to permitted individually negotiated settlement 
agreements. FHFA proposes to permit any payment pursuant to a permitted 
individually negotiated settlement agreement, to be made without 
further FHFA review. FHFA has previously described permitted 
individually negotiated settlement agreements, whether by operation of 
the rule (in the case of an agreement with an affiliated party other 
than an executive officer, where the troubled institution is reasonably 
assured, after appropriate due diligence, that the party has not 
engaged in certain types of wrongdoing) or after FHFA review and 
consent (in the case of an agreement with any executive officer, or 
with an affiliated party where the troubled institution is not 
reasonably assured that the party had not engaged in certain types of 
wrongdoing). FHFA understands that the settlement payment could be 
essential consideration for the agreement, and that the agreement could 
be viewed as nonbinding if there were a question as to whether the 
payment would be allowed or could be prohibited.
    FHFA also recognizes that some timing issues could present 
interpretive questions. For example, an individually negotiated 
settlement agreement entered into before the regulated entity becomes a 
troubled institution, and when the regulated entity is not ``in 
contemplation of'' becoming troubled, could provide for future payments 
that may ultimately be made after the regulated entity becomes a 
troubled institution. In that case, FHFA would view the agreement as 
permitted for purposes of the rule, because at the time it was entered 
into, the rule did not apply to the agreement and thus it could not be 
``impermissible'' in the rule's context. Because the agreement would be 
deemed permitted, payments pursuant to it would also be permitted.
    Payments where consent was provided with consent to an agreement. 
With this provision, FHFA is making explicit authority that has been 
implied in the rule, that the Director can permit any golden parachute 
payment and thus can, as circumstances warrant, undertake the review 
process for a payment, or a set of payments, at the same time as review 
of an agreement. FHFA believes that there are instances where such 
consent could be appropriate as a matter of administrative efficiency 
and to reduce burden. For example, the Director may consent to a golden 
parachute payment when consenting to the agreement where the actual 
payment is expected to be made in a short timeframe. A regulated entity 
may request FHFA to consent to future payments, and FHFA may also 
determine that such consent is appropriate on its own initiative.
    Because other proposed amendments would permit a troubled 
institution to make most payments to affiliated parties other than 
executive officers without FHFA review, FHFA expects this provision 
would most often be used with regard to payments to executive officers. 
FHFA also expects that consent in such instances would impose the 
condition that the troubled institution make the payment only if, after 
appropriate due diligence, it is reasonably assured that the executive 
officer has not engaged in wrongdoing of the types listed in the rule. 
Other conditions could also be imposed, such as the condition that 
payment be made within a certain time period. A troubled institution 
should establish an appropriate compliance process to ensure any 
conditions imposed on making the payment are met. If the troubled 
institution is not able to meet the conditions, it may submit the

[[Page 43815]]

proposed payment to FHFA for review and consent.
    FHFA requests comment on its proposal addressing concurrent review 
of and consent to any agreement to make a golden parachute payment to 
an affiliated party and any subsequent payment and conditions that must 
be met for a troubled institution to make such a payment without 
further FHFA review and consent.
    De minimis payments to affiliated parties other than executive 
officers. Consistent with the foregoing proposal on permitted 
agreements, FHFA is proposing to permit a troubled institution to make 
a de minimis golden parachute payment to any affiliated party other 
than an executive officer, without FHFA review and consent and without 
the due diligence otherwise required by the rule. If the de minimis 
payment is pursuant to a permitted agreement, this provision confirms 
that making the payment does not trigger any required action on the 
part of the troubled institution or FHFA. If a de minimis payment is 
made without any agreement between the parties--which FHFA views as 
unlikely--then this provision also serves to clarify that an agreement 
is not required in order to make it; rather, it is the de minimis 
amount of the payment that establishes its permissibility.
    FHFA's proposal related to de minimis payments does not apply to 
payments to executive officers. Considering the purposes of Section 
4518(e), FHFA believes that the majority of golden parachute payments 
to executive officers, even payments of relatively low amounts, should 
be subject to review. On the other hand, a proposed provision for small 
value gifts discussed below would apply to executive officers. As a 
result, a troubled institution would be permitted to provide a 
retirement gift to an executive officer without FHFA review, provided 
its value does not exceed the proposed small value cap.
    FHFA also notes that, while the rule would not require any due 
diligence prior to making a de minimis payment, other governing 
documents may condition payment on employee behavior. For example, a 
plan that provides for a modest termination payment to employees whose 
length of service does not qualify them for severance pay may establish 
the condition that the employee not be terminated for cause. FHFA's 
proposal to relieve de minimis golden parachute payments from due 
diligence otherwise required by the rule does not impact conditions 
that are imposed by the terms of a plan or agreement.
    FHFA requests comment on its proposal to permit troubled 
institutions to make de minimis golden parachute payments to affiliated 
parties other than executive officers, without conducting due diligence 
otherwise required by the rule and without FHFA review.
    Payments pursuant to other permitted agreements, to affiliated 
parties other than executive officers. FHFA is proposing that payments 
made pursuant to permitted agreements other than individually 
negotiated settlement agreements, to an affiliated party other than an 
executive officer, and that exceed the de minimis amount, be permitted 
without further FHFA review provided the troubled institution is 
reasonably assured, following appropriate due diligence, that the 
affiliated party has not engaged in the types of wrongdoing listed in 
the rule. A payment in excess of the de minimis amount that is not 
pursuant to a permitted agreement, or where the troubled institution is 
not able to meet the ``reasonably assured'' standard, would require 
FHFA's review and consent.
    Permitted agreements, the standard of ``reasonably assured,'' and 
the standard of appropriate due diligence have been addressed above. 
Thus, the nature of due diligence performed will vary (based on the 
opportunity of the affiliated party to engage in the types of 
wrongdoing listed, considering the party's affiliation, duties, 
functions, and privileges), and a regulated entity may make an 
affirmation or a similar statement by the affiliated party part of its 
due diligence process. When an appropriate due diligence process does 
not indicate a concern that the affiliated party may have engaged in 
the rule's listed types of wrongdoing, the ``reasonably assured'' 
standard is met, and the payment would be in accordance with a 
permitted agreement, then the troubled institution may make a golden 
parachute payment without FHFA review. The regulated entity should 
retain records necessary to support its decision in accordance with 12 
CFR part 1235. If the troubled institution cannot meet the ``reasonably 
assured'' standard, it must obtain FHFA's consent to make the golden 
parachute payment. If the troubled institution concludes that the 
``reasonably assured'' standard is not met and elects not to make the 
payment, it would be required to provide notice of its concerns to 
FHFA.
    FHFA requests comment on all aspects of its proposed treatment of 
permitted payments to affiliated parties other than executive officers.
    Small value gifts to executive officers. With some limited 
exceptions, the current rule operates to require FHFA review of all 
golden parachute payments to executive officers. The proposed rule 
would generally take a similar approach, as it would establish only 
three instances where a golden parachute payment to an executive 
officer would not require FHFA review and consent: Payments pursuant to 
an individually negotiated settlement agreement, payments to which the 
Director consented when consenting to the agreement that provides for 
the payment (both discussed above), and small value gifts on the 
occurrence of a significant life event such as retirement.
    Specifically, FHFA is proposing to permit a troubled institution to 
provide a small value gift to an executive officer without FHFA review, 
where the gift is provided in recognition of a nonrecurring life event 
such as retirement. This proposal reflects FHFA's balancing of the 
administrative and compliance burdens of reviewing such payments, and 
its determination that reviewing such payments, even when made to an 
executive officer, exceeds FHFA's level of supervisory concern where 
the payment is in an amount that does not suggest an evasion of the 
rule. For that reason, FHFA proposes to cap permissible gifts at $500 
or less. A gift exceeding $500 would be subject to review.
    To ensure that the small value gift provision remains at a relevant 
dollar amount FHFA is proposing an annual inflation adjustment in the 
same manner as proposed for de minimis payments. Thus, continuing the 
example previously set forth, if a troubled institution were applying 
the rule's $500 small gift provision in June 2020, the $500 amount 
would be increased by 2.1984355 percent for a result of $510.99 (which 
rounded to the nearest dollar would be $511) and the small gift cap for 
the entire calendar year of 2020 would be $511.
    FHFA requests comments on all aspects of the proposed treatment of 
small value gifts, including whether the provision should expressly 
cover any types of gifts, and if so, what types. FHFA also requests 
comment on the proposed inflation adjustment formula.

G. Procedure for Requesting Consent

    The rule currently sets forth instructions for filing requests for 
consent, including the contents of a filing and to whom requests should 
be sent. In general, FHFA proposes to retain without change filing 
requirements related to the reason the troubled institution seeks to 
enter into

[[Page 43816]]

the agreement or payment; a requirement that the troubled institution 
provide a copy of any agreement regarding the subject matter of the 
request; the cost to the troubled institution of the proposed payment 
or payments and their impact on capital and earnings; and the reasons 
why FHFA should provide consent. FHFA is proposing a minor change to 
the content requirement related to the identity of the affiliated party 
to whom payment would be made, to clarify that a description of the 
class or group eligible for payment is required where the actual 
affiliated parties are not known or may change (as may be the case with 
a broad-based severance plan, for example). More substantive changes to 
the content of filing requirements, addressed below, generally align 
with other substantive proposed changes to the rule.
    For example, to align with proposed changes related to 
``nondiscriminatory benefit plans,'' FHFA proposes to add a requirement 
related to any benefit plan that the regulated entity believes is 
``nondiscriminatory'' even though it is not listed among the IRS 
``nondiscriminatory employee plans and programs'' explicitly exempted 
from the ``golden parachute payment'' definition. The regulated entity 
should support its assertion that the benefit plan is nondiscriminatory 
with a description of how it operates (or will operate) with regard to 
eligible participants at different levels of employment. If FHFA agrees 
that the plan is nondiscriminatory, then it will be exempt as a matter 
of law.
    It is possible that FHFA would disagree with the regulated entity's 
suggested characterization of an agreement (i.e., that the agreement is 
a bona fide deferred compensation plan or arrangement, or is 
nondiscriminatory). In those instances, FHFA expects that it would then 
consider the request as if it had been submitted for FHFA's general 
review and would notify the regulated entity both that FHFA disagreed 
with the proposed characterization and whether the proposed agreement 
was permitted, nonetheless. The regulated entity could then determine 
either to implement the plan as originally submitted to FHFA (subject 
to meeting other rule requirements related to payments) or to revise 
the plan to address issues with the regulated entity's intended 
characterization (e.g., that the plan is ``nondiscriminatory'') and re-
submit it to FHFA.
    FHFA is also proposing changes to a filing requirement related to a 
troubled institution's certification and documentation of factors 
related to wrongdoing. Under the current rule, a troubled institution 
is required to ``demonstrate that it does not possess and it not aware 
of any information, evidence, documents or other materials that would 
indicate that there is a reasonable basis to believe'' that the party 
to receive payment has engaged in four listed types of wrongdoing.
    Because the rule does not distinguish golden parachute payments 
from agreements, certification is required for any request to FHFA, 
including a request for FHFA review of a broad-based plan covering a 
large and fluid number of employees. FHFA believes that approach as 
applied to plans and agreements is unnecessarily burdensome (and may be 
infeasible) if it requires the troubled institution to make a 
certification with regard to a class of affiliated parties, 
particularly considering that a similar analysis and certification is 
required prior to actually providing the golden parachute payment. For 
that reason, FHFA is proposing to require troubled institutions to 
undertake the rule's due diligence review only when entering into a 
golden parachute payment agreement with an individual affiliated party 
and when making any payment. In those cases, the affiliated party to 
whom payment would be made can be readily identified, making the review 
more meaningful and manageable.
    FHFA has previously addressed amendments to clarify the applicable 
standard and the expected level of due diligence review by a troubled 
institution. For purposes of making a request for FHFA consent to an 
individual agreement or any payment, however, a troubled institution 
would now be required to state either that it is reasonably assured 
that any affiliated party identified in the request has not engaged in 
the listed types of wrongdoing or, if it is not reasonably assured, the 
results of its due diligence and, in light of those results, why the 
troubled institution believes FHFA should nonetheless provide consent. 
These changes are intended to clarify that a troubled institution may 
request FHFA's review and consent even if the ``reasonably assured'' 
standard is not met.
    FHFA is also proposing minor changes to update the rule. For 
example, the rule currently refers to requests as ``letter 
applications.'' FHFA now proposes to require simply that the request be 
in writing. FHFA also proposes to state expressly that it may waive or 
modify any form or content requirement. Thus, it could be appropriate 
for a troubled institution to make an oral request. Though the current 
rule does not prevent this, an express waiver provision would clarify 
that FHFA intends to be flexible where warranted by the circumstances 
of an agreement or payment.
    Finally, nothing prevents a troubled institution from providing any 
other information it believes is relevant to its request, including 
information relevant to factors for FHFA's consideration that are set 
forth in the rule (and discussed further below). For example, a 
troubled institution may wish to note, and provide support for, its 
conclusion that a benefit plan is ``usual and customary.''

H. FHFA Review of Requests

    Review Factors. Section 4518(e) requires FHFA to set forth by 
regulation factors to be considered when acting to prohibit or limit a 
golden parachute payment or agreement, and suggests some factors that 
FHFA may consider.\57\ In that context, the rule's prohibition of 
golden parachute payments is a procedural construct to ensure that 
agreements and payments that are not permitted by operation of the rule 
are subject to FHFA review and consent. In its review, FHFA applies the 
factors as appropriate to the facts and circumstances of a particular 
request, to determine whether an agreement or payment should be 
permitted or prohibited.
---------------------------------------------------------------------------

    \57\ 12 U.S.C. 4518(e)(2).
---------------------------------------------------------------------------

    Review factors suggested by statute include whether there is a 
reasonable basis to believe that the affiliated party (1) has committed 
any fraudulent act or omission, breach of trust or fiduciary duty, or 
insider abuse, or has violated any provision of federal or state law, 
that has had a material effect on the troubled institution's financial 
condition, or (2) is substantially responsible for the troubled 
condition or insolvency of, or the appointment of a conservator or 
receiver for, the troubled institution. The current rule requires the 
regulated entities to consider these factors and an additional factor 
related to committing or conspiring to commit certain federal crimes, 
prior to submitting a request for consent. The rule also sets forth 
additional factors for the Director's consideration when reviewing 
requests (including two factors suggested by Section 4518(e) that 
address the affiliated party's position and length of affiliation with 
the regulated entity) and states that FHFA may consider any other 
factor that is relevant to the facts and circumstances, including any 
fraudulent act or omission, breach of fiduciary duty, violation of law, 
rule, regulation, order or written agreement, and the level of willful 
misconduct, breach of fiduciary

[[Page 43817]]

duty, and malfeasance by the affiliated party.
    FHFA is not proposing any changes to the rule factors that a 
troubled institution would be required to consider prior to submitting 
a request for FHFA's consent. FHFA is proposing to add three new 
factors for the Director's consideration, to reflect FHFA's 
understanding of the purpose of Section 4518(e) and other proposed 
changes to the rule.
    As noted above, the legislative history and language of Section 
4518(e) indicate it was intended to permit FHFA to prohibit or limit 
golden parachute payments that are excessive or abusive, or that would 
materially adversely affect the financial condition of the regulated 
entity. FHFA has always been guided by the purposes of Section 4518(e) 
in administering the rule, but proposes to add these factors now for 
transparency.
    FHFA is also proposing to add as a review factor whether an 
agreement (including a plan) is usual and customary. FHFA believes this 
can be an important factor given that the regulated entities hire 
employees with special expertise and must compete in the market for 
such talent. While the fact that the requesting regulated entity 
considers a benefit to be usual and customary would not, alone, 
determine permissibility, it is a factor that would inform FHFA's 
review.
    Also for transparency, FHFA is proposing to add a review factor for 
any other information submitted by a regulated entity. This factor has 
been implicit in the current rule, as FHFA routinely considers all 
information submitted with a request for consent, but it would now be 
explicit.
    FHFA Review Process. Though FHFA is proposing relatively few 
changes to the rule's review factors, other proposed rule changes will 
affect when and how review occurs. Specifically, if the rule is amended 
as proposed, it should result in a greater number of golden parachute 
payments being permitted by operation of the rule. As FHFA will not be 
reviewing these payments, it will not be applying the review factors to 
them. However, FHFA expects most payments that are permitted by 
operation of the rule to be those that are made in accordance with an 
agreement that is permitted, when the troubled institution is 
reasonably assured that the affiliated party to whom payment would be 
made has not engaged in the rule's listed types of wrongdoing. Under 
the rule as amended, most agreements would require FHFA's review to 
determine their permissibility (as they do now) and, when determining 
whether to permit the agreement, FHFA will consider the review factors 
as appropriate.
    If amended as proposed, the rule would permit a troubled 
institution to enter into two types of agreements to make golden 
parachute payments without FHFA review: Individually negotiated 
settlement agreements and agreements to make de minimis golden 
parachute payments, limited in each case to affiliated parties who are 
not executive officers. FHFA has considered whether application of the 
review factors would result in a determination that these agreements 
should be prohibited, and has determined it is unlikely.
    For individually negotiated settlement agreements, FHFA believes 
the risk that the rule as proposed to be amended would permit an 
agreement that would be prohibited if subject to FHFA review is small 
because of the type of agreement, and because, to be permitted, the 
agreement must be with an affiliated party who is not an executive 
officer, where the troubled institution is reasonably assured that the 
affiliated party has not engaged in listed types of wrongdoing. FHFA's 
experience generally is that individually negotiated settlement 
agreements reflect the unique facts and circumstances that gave rise to 
the dispute, as considered and weighed by parties with opposing 
interests in achieving the agreed-upon settlement. This may include 
consideration of factors similar to those set forth in the rule (such 
as type of wrongdoing suspected and position, duties, or 
responsibilities of the affiliated party) in addition to factors that 
are not generally applicable, such as the anticipated cost of 
litigating a dispute and the potential benefit of avoiding future, 
similar, actions by other affiliated parties. Where the affiliated 
party is not in a position to influence an unduly favorable settlement 
offer--as an executive officer may be, based on prior relationships 
with higher ranking employees authorized to negotiate or approve 
settlement offers--the fact that the parties are opposed also supports 
the conclusion that the agreed-to settlement payment is not abusive or 
excessive. If, in addition, the troubled institution is reasonably 
assured that the affiliated party has not engaged in the listed types 
of wrongdoing, then there is relatively little risk that it is settling 
a claim as to which FHFA would have such a significant supervisory 
interest as to prohibit the agreement.
    For agreements to make de minimis golden parachute payments (and 
subsequent payments), the risk that the amended rule would permit an 
agreement that would be prohibited if subject to FHFA review is 
significantly minimized by limiting permissible agreements to 
affiliated parties who are not executive officers and capping the 
amount of the permissible payment. On past experience, FHFA has not had 
reason to prohibit such small payments on the basis that they were 
excessive or abusive, or that they would or could detrimentally impact 
the financial condition of the troubled institution. In contrast, FHFA 
has permitted small golden parachute payments to avoid imposing an 
excessive hardship on terminating employees, such as small payments to 
employees terminated involuntarily but not for cause whose performance 
was excellent but whose length of service did not qualify them for 
participation in a severance pay plan, or forgiveness of a small 
indebtedness to the troubled institution of an employee who terminated 
voluntarily to care for a family member with a disability.
    FHFA has also considered the likelihood that the rule as proposed 
to be amended would operate to permit payments that FHFA would 
prohibit, if subject to FHFA review. Where FHFA has determined to 
permit an agreement and the rule as amended would permit the troubled 
institution to make payments in accordance with that agreement only 
after it is reasonably assured that the affiliated party has not 
engaged in certain types of wrongdoing, then FHFA believes additional 
review at the time of payment is not warranted because, if review were 
required, FHFA would most likely allow the payment. Under the current 
rule, which does require review at the time of payment, FHFA has 
consistently permitted proposed payments to employees who are not 
executive officers, where the payment is in accordance with an 
agreement to which FHFA has consented and as to which the requesting 
regulated entity has submitted the rule's required certification about 
employee wrongdoing. FHFA has done so based on, among other things, the 
possible negative consequences of prohibiting such payments on the 
condition of the requesting regulated entity--in particular, its 
ability to retain a stable workforce, replace employees based on more 
usual attrition rates, and recruit employees without paying a wage 
premium. FHFA's experience is reflected in the rule amendments now 
proposed.\58\
---------------------------------------------------------------------------

    \58\ The current rule's process of review of agreements and 
subsequent payments has been called a ``double approval'' process. 
When commenters previously objected to it, FHFA noted that it was 
appropriate because the condition of a regulated entity could change 
between the time an agreement was consented to and a payment is 
made. See, e.g., 79 FR 4394, 4396 (Jan. 28, 2014). This is still the 
case. However, FHFA's experience administering the rule suggests 
that ``double approval'' should not be required as a matter of 
course for all payments because the burden imposed on the regulated 
entity and FHFA outweighs the supervisory benefit to FHFA of 
reviewing some types of payments or some payments in some 
circumstances.

---------------------------------------------------------------------------

[[Page 43818]]

    If amended as proposed, the rule would permit payments to be made 
without review of employee conduct related to the rule's listed types 
of wrongdoing at the time of payment, by either FHFA or the regulated 
entity, in three instances: Settlement payments pursuant to permissible 
individually negotiated settlement agreements to any affiliated party, 
small value gifts to an executive officer, and de minimis payments to 
an affiliated party who is not an executive officer. For settlement 
payments, review of employee conduct would be required at the time the 
agreement is entered into and thus would occur in conjunction with 
FHFA's determining whether to permit the agreement. For small value 
gifts and de minimis payments, FHFA has determined that review should 
not be required based on the small size of the gift for executive 
officers and, though larger, the size of the de minimis payment in 
combination with the limitation of this provision to non-executive-
officer affiliated parties, and the facts that such payments are 
usually infrequent and made to avoid undue hardship.
    In sum, FHFA believes the rule as proposed to be amended 
appropriately identifies those golden parachute payments and agreements 
where FHFA review should occur, balancing FHFA's supervisory concerns 
with the burdens of administration and compliance. FHFA also recognizes 
the possibility that, in some few cases, the amended rule could operate 
to permit an agreement or payment that FHFA may have prohibited if it 
had been reviewed, however. Apart from prohibiting golden parachute 
payments and agreements through the rule, FHFA has other supervisory, 
remedial and enforcement authority that it may use to address improper 
payments or agreements and prevent them in the future. For example, if 
FHFA determined that a regulated entity did not have an appropriate 
process for entering into and administering agreements to make golden 
parachute payments to affiliated parties, FHFA could require the 
regulated entity to take corrective action, or FHFA could initiate an 
enforcement action. If an affiliated party obtained a golden parachute 
payment on the basis of a false representation about their actions 
while affiliated with the regulated entity, the regulated entity or 
FHFA could bring an action seeking restitution or reimbursement, or 
another legal remedy.

IV. Section-by-Section Analysis

A. Sec.  1231.1--Purpose

    FHFA is proposing conforming changes to this section.

B. Sec.  1231.2--Definitions

    Affiliated party. FHFA is proposing to change the defined term 
``entity-affiliated party'' to ``affiliated party'' throughout the 
rule, to avoid confusion with other, different, statutory and 
regulatory uses of the term ``entity-affiliated party.'' FHFA is also 
proposing to amend the definition for purposes of golden parachute 
payments and agreements. For all regulated entities and OF, 
``affiliated party'' would include all officers, directors, and 
employees, and any other person who the Director determined, by 
regulation or order, was participating in the conduct of the affairs of 
the regulated entity or OF.
    For the Enterprises and the Banks, fewer parties would be covered 
by type of affiliation (e.g., shareholders). FHFA believes it is 
unlikely that some of the named ``affiliated parties'' would receive 
payments contingent on termination, and the ``catch-all'' for any 
person determined to be participating in the conduct of the affairs of 
the regulated entity makes including parties by type unnecessary.
    For OF, the scope of the amended ``affiliated party'' definition 
would be broader than the current definition, which covers OF managers 
and officers but does not cover other OF employees, and which does not 
have a ``catch-all'' for OF. FHFA has determined that, with regard to 
OF, the ``affiliated party'' definition is unnecessarily narrow and 
should be aligned with the definition applied to the Enterprises and 
the Banks.
    FHFA is not amending the substance of the existing ``entity-
affiliated party'' definition for purposes of provisions of part 1231 
that address indemnification payments. For that reason, FHFA is adding 
language to distinguish which portion of the ``affiliated party'' 
definition applies to which type of payment (golden parachute payments 
and indemnification payments).
    Agreement. FHFA is proposing to add a new definition of the term 
``agreement,'' to implement its intention to distinguish the rule as 
applied to agreements to make golden parachute payments from its 
application to golden parachute payments. The statutory ``golden 
parachute payment'' definition covers both agreements and payments, and 
FHFA's rule covered, and will continue to cover, both agreements and 
payments.
    Benefit plan. FHFA is proposing to remove the definition of 
``benefit plan.'' The purpose of this definition was to list two types 
of plans that were exempt from the definition of ``golden parachute 
payment:'' ``employee welfare benefit plans'' as defined in section 
3(1) of ERISA, and other ``usual and customary plans.'' The exemption 
for ERISA ``employee welfare benefit plans'' is being retained and 
relocated. FHFA proposes to remove the exemption for ``usual and 
customary plans'' because the exemption was not self-executing in 
practice (i.e., regulated entities submitted plans that they thought 
were ``usual and customary'' and thus exempt to FHFA for review and 
concurrence) and FHFA believes most ``usual and customary plans'' will 
now be covered by other proposed exemptions. If a plan that a regulated 
entity considers to be ``usual and customary'' is not covered by 
another exemption, the regulated entity could request FHFA's consent to 
the plan in accordance with the rule.
    Bona fide deferred compensation plan or arrangement. FHFA is 
proposing to amend the definition of ``bona fide deferred compensation 
plan or arrangement'' to remove duplicative material and relocate a 
timing requirement that, if met, makes the plan or arrangement exempt 
from the ``golden parachute payment'' definition. The timing 
requirement would now appear with rule provisions related to 
exemptions.
    Entity-affiliated party. As addressed above, FHFA is proposing to 
replace the term ``entity-affiliated party'' with ``affiliated party'' 
throughout the rule, to avoid confusion with other, different, 
statutory and regulatory uses of the term ``entity-affiliated party''.
    Executive officer. FHFA is proposing to add a definition of 
``executive officer,'' to implement an approach to golden parachute 
payments and agreements that, in some cases, distinguishes the 
treatment of an agreement with or payment to an executive officer from 
those to another affiliated party, particularly lower-ranking 
employees. For purposes of the rule, ``executive officer'' would be 
defined as it is in FHFA's separate rule on executive compensation, at 
12 CFR part 1230. Any person who is an

[[Page 43819]]

``executive officer'' for purposes of that rule, including any person 
deemed to be an ``executive officer'' by the Director, would be treated 
as an ``executive officer'' for the Golden Parachute Payments rule. In 
addition, when applying the ``catch-all'' in the ``affiliated party'' 
definition, the Director could determine that a person participates to 
such a degree in the conduct of the affairs of the regulated entity as 
to warrant treating the person as an ``executive officer'' for purposes 
of the Golden Parachute Payments rule.
    Golden parachute payment. FHFA is proposing to remove reference to 
an ``agreement'' from the rule's definition of ``golden parachute 
payment,'' to implement FHFA's intention to distinguish, in some cases, 
the treatment of an agreement to make a golden parachute payment from 
the treatment of the payment. FHFA is also proposing to remove the 
phrase ``pursuant to an obligation of such regulated entity or the 
Office of Finance,'' to clarify FHFA's authority to prohibit (or limit) 
gifts or contributions that a regulated entity or OF is not obligated 
to make, but are nonetheless ``in the nature of compensation.'' 
Further, FHFA proposes to remove a list of triggering events, the 
occurrence of which would cause payments by a regulated entity to a 
terminating affiliated party to be ``golden parachute payments,'' from 
the ``golden parachute payment'' definition. The listed events would be 
replaced with the reference term ``troubled institution'' (which would 
be defined in the rule). This change is intended to improve the 
readability of the rule and is not substantive.
    Finally, FHFA is proposing to change the placement, within the 
rule, of exemptions from the ``golden parachute payment'' definition. 
Following the structure of Section 4518(e), exemptions have been listed 
in the definitional section. As a legal matter, the effect of an 
exemption is that an agreement or payment that could otherwise be 
construed as a ``golden parachute payment'' is permitted without FHFA 
review and consent and cannot be prohibited using authority conferred 
by Section 4518(e). Since the practical effect of an exemption is the 
same as if the agreement or payment were permitted by the rule, FHFA 
believes the rule will be easier to understand and apply if all 
permissible agreements and payments--whether they are permitted to 
implement a statutory exemption from the ``golden parachute payment'' 
definition or by operation of the rule--are located together. To 
accomplish this, FHFA is proposing to relocate exemptions to the rule's 
substantive section.
    Individually negotiated settlement agreement. FHFA is proposing to 
add a definition of an ``individually negotiated settlement agreement'' 
for agreements entered into to settle a claim, or avoid a claim 
reasonably anticipated, against a regulated entity by an affiliated 
party, which involve a payment and a release of claims. This definition 
is used in provisions of the rule permitting such agreements, and 
payments pursuant to them, provided certain conditions are met.
    Nondiscriminatory. FHFA is proposing to remove the definition of 
``nondiscriminatory'' from the rule. In the current rule, this 
definition applies only in the context of an exemption from the 
``golden parachute payment'' definition for certain severance pay 
plans. Severance pay plans that did not meet that condition were 
subject to FHFA's review, and, based on its experience conducting such 
reviews, FHFA has determined that severance pay plans should be subject 
to review. FHFA has also determined that the current definition of 
``nondiscriminatory'' may not be appropriate if applied to other types 
of benefit plans, and thus that the definition should be removed.
    Payment. FHFA is not proposing any changes to the rule's definition 
of ``payment.''
    Permitted. FHFA is proposing to add a definition of ``permitted'' 
when used in the context of a golden parachute payment agreement, to 
describe those agreements that may be the basis for a payment that does 
not require FHFA review and consent. A ``permitted'' agreement is an 
agreement that is permitted by operation of the rule or to which the 
Director has consented after review.
    Troubled condition. FHFA is proposing to remove the definition of 
``troubled condition'' but would include that triggering event, and the 
factors that would cause a regulated entity to be in ``troubled 
condition,'' within a new definition of ``troubled institution.''
    Troubled institution. FHFA proposes to add a new defined term, 
``troubled institution,'' to improve the readability of the ``golden 
parachute payment'' definition. The definition of ``troubled 
institution'' will include all of the events the occurrence of which at 
a regulated entity would cause agreements with or payments to 
terminating affiliated parties to be ``golden parachute payments,'' and 
will include all events that the current rule lists as defining 
``troubled condition.''
    FHFA also proposes to add an interpretation of the phrase ``or is 
made in contemplation of'' to the ``troubled institution'' definition. 
That phrase is used in Section 4518(e) to refer to agreements or 
payments that are made before a regulated entity becomes a ``troubled 
institution'' but which would be ``golden parachute payments'' if they 
had occurred after the triggering event. This interpretation would 
establish a rebuttable presumption that an agreement or payment made in 
the 90 days prior to the regulated entity's becoming a troubled 
institution is ``made in contemplation of'' becoming a ``troubled 
institution'' and thus is a golden parachute payment or agreement.

C. Sec.  1231.3--Golden Parachute Payments

    FHFA is proposing several changes to Sec.  1231.3, which currently 
prohibits golden parachute payments unless they are permissible by 
operation of the rule or are consented to by the Director of FHFA. To 
reflect the proposed rule's distinctions between agreements and 
payments, the phrase ``and agreements'' would be added to titles, as 
appropriate.
    Prohibited golden parachute payments. FHFA does not propose any 
changes to Sec.  1231.3(a) other than to its title, which will now 
state ``In general, FHFA consent required.'' This subsection 
establishes the rule's overall approach of prohibiting any golden 
parachute payment or agreement unless it is exempt from the rule, 
permitted by operation of the rule, or permitted by FHFA after review. 
FHFA believes the title as proposed to be amended is a more appropriate 
reflection of FHFA's process.
    Permissible golden parachute payments. FHFA proposes extensive 
revisions to Sec.  1231.3(b), effectively replacing it. Section 
1231.3(b) currently addresses permissible golden parachute payments and 
agreements. As amended, Sec.  1231.3(b) would set forth those 
agreements and payments that do not require FHFA consent because they 
are statutorily exempted from the ``golden parachute payment'' 
definition. To reflect that substantive change, Sec.  1231.3(b) would 
be renamed ``Exempt agreements and payments.''
    Exempt agreements and payments. Exemptions to be set forth in Sec.  
1231.3(b) are being relocated from Sec.  1231.2, which now presents 
them in conjunction with the ``golden parachute payment'' definition. 
FHFA is also proposing to amend some exemptions, however. First, FHFA 
is removing references to foreign law, which FHFA does not believe 
would be applicable to its

[[Page 43820]]

regulated entities, from exemptions related to qualified pensions or 
retirement plans and for certain severance or similar payments. FHFA is 
also removing an exemption for any ``benefit plan,'' consistent with 
its proposal to remove ``benefit plan'' as a defined term. ERISA 
``employee welfare benefit plans'' currently within the ``benefit 
plan'' definition, and thus exempt, would now be included as a stand-
alone exemption from the ``golden parachute payment'' definition. An 
exemption for ``bona fide deferred compensation plans or arrangements'' 
would be expanded, to include plans or arrangements that meet all 
definitional requirements other than one related to the timing of the 
plan's establishment or material amendment, but to which FHFA consents 
after review. An exemption for severance pay plans that are 
``nondiscriminatory'' and meet other conditions would be removed, as 
FHFA has found that the exemption is not realistically available for 
the market-based severance pay plans of its troubled institutions and, 
based on experience gained from reviewing such plans, FHFA believes 
most severance pay plans should be reviewed as a matter of supervisory 
policy.
    FHFA is also proposing to add new exemptions for any 
``nondiscriminatory employee plan or program'' as defined for purposes 
of an IRC provision on parachute payments, at 26 U.S.C. 280G, and for 
any other benefit plan that the Director determines to be 
nondiscriminatory. The statutory golden parachute payment definition 
includes an exemption for ``nondiscriminatory benefit plans,'' but that 
term is not defined. Incorporation of the IRC ``nondiscriminatory 
employee plans and programs'' provides FHFA and its regulated entities 
a common reference and aligns FHFA and IRC treatment for purposes of 
parachute payments. Because there could be other benefit plans that are 
``nondiscriminatory'' but that are not included among the IRC 
``nondiscriminatory employee plans and programs,'' however, the rule 
would also exempt those benefit plans that the Director determines are 
nondiscriminatory, on request for review by a regulated entity.
    Golden parachute payment agreements for which FHFA consent is not 
required. To distinguish between agreements and payments, FHFA proposes 
to add subsections that separately address permitted agreements and 
permitted payments. Within the construct of the rule, an agreement or 
payment that is not exempt from the definition of ``golden parachute 
payment'' or permitted by operation of the rule must be submitted to 
FHFA for review and is prohibited without consent.
    New Sec.  1231.3(c) would address only agreements, and would 
establish three types of agreements that are permitted by operation of 
the rule. Proposed new Sec.  1231.3(c)(1) would permit agreements with 
or plans covering any affiliated party, where the plan or agreement is 
directed or established by the Director exercising authority conferred 
by 12 U.S.C. 4617. Proposed new Sec.  1231.3(c)(2)(i) and (ii) would 
address agreements that are permitted provided they are with an 
affiliated party other than an executive officer--individually 
negotiated settlement agreements that meet certain conditions, and 
agreements to make de minimis payments.
    Provisions of the current rule at Sec.  1231.3(b)(1)(ii) and (iii), 
on permitted agreements made to hire a person when the regulated entity 
is, or to prevent it from imminently becoming, a troubled institution, 
and permitted changed in control agreements, would be removed. These 
provisions are subsumed in the other proposed amendments.
    Golden parachute payments for which FHFA consent is not required. 
Proposed new Sec.  1231.3(d) would set forth the types of payments that 
are permitted by the rule. Proposed new Sec.  1231.3(d)(1)(i) and (ii) 
would address two types of permitted payments to any affiliated party, 
including an executive officer: Payments pursuant to an individually 
negotiated settlement agreement, and payments pursuant to a permitted 
agreement, where the Director provided consent to the payment in 
conjunction with reviewing the agreement and any conditions established 
by the Director when consenting to the payment have been met. Proposed 
new Sec.  1231.3(d)(2) addresses one other permissible payment to any 
executive officer, a gift valued at $500 or less that recognizes a 
significant life event such as retirement.
    Proposed new Sec.  1231.3(d)(3) would address two other types of 
payments that could be made to affiliated parties other than executive 
officers without FHFA review. Section 1231.3(d)(3)(i) would permit 
payments above a de minimis amount to be made to any affiliated party 
other than an executive officer, where the payment is in accordance 
with a permitted agreement and the troubled institution is reasonably 
assured, after conducting appropriate due diligence, that the 
affiliated party has not engaged in certain types of wrongdoing listed 
in the rule. Section 1231.3(d)(3)(ii) would permit payments at or below 
the de minimis amount to be made to an affiliated party other than an 
executive officer without FHFA review.
    FHFA is also proposing to clarify the standard that a regulated 
entity must meet when, in conjunction with a request for FHFA's consent 
to an agreement or a payment, it considers the behavior of the 
affiliated party to whom payment would be made. The rule's current 
standard could imply that a regulated entity may not request FHFA 
consent if it is not able to certify, with a high degree of certainty, 
that the affiliated party has not engaged in certain types of 
wrongdoing listed in the rule. FHFA is not proposing any change to the 
types of wrongdoing listed, which are currently set forth at Sec.  
1231.3(b)(1)(iv)(A) through (D) and would appear in the rule if amended 
as proposed at Sec.  1231.3(e)(1)(i) through (iv). However, FHFA is 
proposing new Sec.  1231.3(e)(1) to clarify that the due diligence 
required of a troubled institution, when assessing whether the 
affiliated party engaged in the listed types of wrongdoing, should be 
appropriate to the level and responsibilities of the affiliated party.
    Proposed new Sec.  1231.3(e)(2) would set forth the standard that a 
troubled institution must meet with regard to its assessment and 
understanding of the affiliated party's behavior, and would operate in 
conjunction with other proposed provisions that would permit a troubled 
institution to enter into an agreement to make a golden parachute 
payment, or to make such a payment without requesting FHFA review. 
Specifically, Sec.  1231.3(e)(2) would provide that a troubled 
institution must be ``reasonably assured'' that the affiliated party 
has not engaged in the listed types of wrongdoing.
    Proposed new Sec.  1231.3(e)(3) would require notice to FHFA if a 
troubled institution intended to enter into a golden parachute payment 
agreement or make a payment that would be permitted by the rule without 
FHFA review but was not able to do so because it cannot meet the 
``reasonably assured'' standard, and thereafter determines not to 
submit a request for review. Such notice is intended to ensure that 
FHFA is informed of concerns about wrongdoing that rise to a level 
where the troubled institution is not ``reasonably assured'' so that 
FHFA may follow up with appropriate supervisory action, and would be 
required to be provided to FHFA within 15 business days after the 
troubled institution determined that it could not meet the required 
standard.
    Proposed new Sec.  1231.3(f) would set forth factors the Director 
would consider when reviewing requests for

[[Page 43821]]

consent to make a golden parachute payment, or enter into an agreement. 
All of the factors in the current rule, at Sec.  1231.3(b)(2)(i) 
through (iii), would be retained but would be re-numbered. In addition, 
two new factors would be added, to consider whether the golden 
parachute payment would be made in accordance with an employee benefit 
plan that is usual and customary and whether the golden parachute 
payment or agreement is excessive or abusive, or would threaten the 
financial condition of the regulated entity.
    Proposed new Sec.  1231.3(g) would permit, but not require, the 
regulated entities to increase the regulatory caps for permitted small 
value gifts and agreements and payments that do not exceed a de minimis 
amount. It would also set forth the formula that must be used, if a 
regulated entity elects to apply the inflation adjustment to increase 
the cap.

D. Sec.  1231.4--Indemnification Payments

    Section 1231.4 of the current rule is reserved.

E. Sec.  1231.5--Applicability in the Event of Receivership

    FHFA is proposing conforming changes to Sec.  1231.5 of the current 
rule, which addresses the effect of the appointment of a receiver for a 
regulated entity on any consent or approval provided pursuant to the 
rule.

F. Sec.  1231.6--Filing Instructions

    Section 1231.6 of the current rule sets forth instructions for 
filing requests for consent, including where such requests must be 
filed and their content. Minor amendments to Sec.  1231.6(a), on the 
scope of the filing instructions, would conform to substantive changes 
proposed to the rule. Likewise, Sec.  1231.6(b), which addresses where 
to file a request, would be updated and amended to cover any required 
notice to FHFA.
    Content requirements currently set forth in the rule at Sec.  
1231.6(c)(1) through (5) would be retained, but would be re-numbered 
(c)(2) through (6) because of the addition of a requirement that the 
request be in writing (this was previously implied by reference to a 
``letter request''; FHFA wishes to clarify that other forms of writing, 
such as email, would meet the requirement). Two new requirements would 
also be added to proposed Sec.  1231.6(c)(7) and (8), to address 
specific types of agreements or payments (i.e., an agreement that the 
troubled institution believes is a ``nondiscriminatory benefit plan'' 
exempt as a matter of law; and a ``bona fide deferred compensation plan 
or arrangement'' for which the troubled institution seeks re-
application of the exemption). Whether a request should include 
information responsive to content requirements at Sec.  1231.6(c)(7) 
and (8) will depend on the type of agreement that is being submitted 
for review.
    A content-of-request requirement currently set forth at Sec.  
1231.6(c)(6), which addresses certification that a regulated entity 
must make when submitting a request, would be removed. A new 
requirement would be added at Sec.  1231.6(c)(9), that the troubled 
institution requesting review of an agreement with an individual 
affiliated party or any payment state in the request either that the 
troubled institution meets the ``reasonably assured'' standard or, if 
it does not, the reasons why it does not and the further reasons why 
the troubled institution believes FHFA should nonetheless consent to 
the golden parachute payment or agreement.
    Section 1231.6(e), which addresses FHFA's response to a request, 
will be relocated to Sec.  1231.6(d), to follow the content-of-request 
requirements. New subsection (e) will address the content of the notice 
that must be provided to FHFA when a troubled institution is not 
``reasonably assured'' that an affiliated party has not engaged in the 
rule's listed types of wrongdoing but elects not to submit a request 
for consent to a golden parachute payment or agreement to FHFA for 
review. These requirements are intended to ensure that the notice 
informs FHFA of the results of the troubled institution's due diligence 
and the basis for its concern that the affiliated party may have 
engaged in wrongdoing of a type listed in the rule in detail sufficient 
for an appropriate supervisory response, while not being overly 
burdensome on the troubled institution.
    Section 1231.6 would also be amended to include a new subsection 
(f), to clarify that FHFA may waive any filing requirement set forth in 
the rule. FHFA recognizes that in some cases, for example, an oral 
request may be appropriate.
    Finally, notice that FHFA may request additional information during 
the processing of a request would be re-located to new Sec.  1231.3(g) 
and expanded to cover notices to FHFA, in addition to requests.

V. Differences Between Banks and Enterprises

    Section 1313(f) of the Safety and Soundness Act (12 U.S.C. 
4513(f)), as amended by section 1201 of HERA, requires the Director, 
when promulgating regulations relating to the Banks, to consider the 
differences between the Banks and the Enterprises with respect to the 
Banks' cooperative ownership structure; mission of providing liquidity 
to members; affordable housing and community development mission; 
capital structure; and joint and several liability. The Director may 
also consider any other differences that are deemed appropriate.
    In preparing this proposed rule, the Director considered the 
differences between the Banks and the Enterprises as they relate to the 
above factors. The Director requests comments from the public about 
whether differences related to these factors should result in a 
revision of the proposed rule as it relates to the Banks.

VI. Paperwork Reduction Act

    The proposed rule would not contain any information collection 
requirement that would require the approval of the Office of Management 
and Budget (OMB) under the Paperwork Reduction Act (44 U.S.C. 3501 et 
seq.). Therefore, FHFA has not submitted any information to OMB for 
review.

VII. 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). FHFA has considered the impact of this 
proposed rule under the Regulatory Flexibility Act. The General Counsel 
of FHFA certifies that this proposed rule, if adopted as a final rule, 
is not likely to have a significant economic impact on a substantial 
number of small entities because the regulation applies only to the 
regulated entities, which are not small entities for purposes of the 
Regulatory Flexibility Act.

List of Subjects in 12 CFR Part 1231

    Golden parachutes, Government sponsored enterprises, 
Indemnification.

Authority and Issuance

    For the reasons stated in the Supplementary Information, under the 
authority of 12 U.S.C. 4511, 4513, 4518, 4518a, and 4526, FHFA proposes 
to amend part 1231 of Title 12 of the Code of Federal Regulations as 
follows:

[[Page 43822]]

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER B--ENTITY REGULATIONS

PART 1231--GOLDEN PARACHUTE AND INDEMNIFICATION PAYMENTS

0
1. The authority citation for part 1231 is revised to read as follows:

    Authority: 12 U.S.C. 12 U.S.C. 4511, 4513, 4518, 4518a, 4526, 
and 4617.
0
2. Revise Sec.  1231.1 to read as follows:


Sec.  1231.1   Purpose.

    The purpose of this part is to implement section 1318(e) of the 
Safety and Soundness Act (12 U.S.C. 4518(e)) by setting forth the 
factors that the Director will take into consideration in determining 
whether to limit or prohibit golden parachute payments and agreements 
and by setting forth prohibited and permissible indemnification 
payments that regulated entities and the Office of Finance may make to 
affiliated parties.
0
3. Revise Sec.  1231.2 to read as follows:


Sec.  1231.2  Definitions.

    The following definitions apply to the terms used in this part:
    Affiliated party means:
    (1) With respect to a golden parachute payment:
    (i) Any director, officer, or employee of a regulated entity or the 
Office of Finance; and
    (ii) Any other person as determined by the Director (by regulation 
or on a case-by-case basis) who participates or participated in the 
conduct of the affairs of the regulated entity or the Office of 
Finance, provided that a member of a Federal Home Loan Bank shall not 
be deemed to have participated in the affairs of that Federal Home Loan 
Bank solely by virtue of being a shareholder of, and obtaining advances 
from, that Federal Home Loan Bank; and
    (2) With respect to an indemnification payment:
    (i) By the Office of Finance, any director, officer, or manager of 
the Office of Finance; and
    (ii) By a regulated entity:
    (A) Any director, officer, employee, or controlling stockholder of, 
or agent for, a regulated entity;
    (B) Any shareholder, affiliate, consultant, or joint venture 
partner of a regulated entity, and any other person as determined by 
the Director (by regulation or on a case-by-case basis) that 
participates in the conduct of the affairs of a regulated entity, 
provided that a member of a Federal Home Loan Bank shall not be deemed 
to have participated in the affairs of that Federal Home Loan Bank 
solely by virtue of being a shareholder of, and obtaining advances 
from, that Federal Home Loan Bank;
    (C) Any independent contractor for a regulated entity (including 
any attorney, appraiser, or accountant) if:
    (1) The independent contractor knowingly or recklessly participates 
in any violation of any law or regulation, any breach of fiduciary 
duty, or any unsafe or unsound practice; and
    (2) Such violation, breach, or practice caused, or is likely to 
cause, more than a minimal financial loss to, or a significant adverse 
effect on, the regulated entity; or
    (D) Any not-for-profit corporation that receives its principal 
funding, on an ongoing basis, from any regulated entity.
    Agreement means, with respect to a golden parachute payment, any 
plan, contract, arrangement or other statement setting forth conditions 
for any payment by a regulated entity or the Office of Finance to an 
affiliated party.
    Bona fide deferred compensation plan or arrangement means any plan, 
contract, agreement, or other arrangement:
    (1) Whereby an affiliated party voluntarily elects to defer all or 
a portion of the reasonable compensation, wages, or fees paid for 
services rendered which otherwise would have been paid to such party at 
the time the services were rendered (including a plan that provides for 
the crediting of a reasonable investment return on such elective 
deferrals); or
    (2) That is established as a nonqualified deferred compensation or 
supplemental retirement plan, other than an elective deferral plan 
described in paragraph (1) of this definition:
    (i) Primarily for the purpose of providing benefits for certain 
affiliated parties in excess of the limitations on contributions and 
benefits imposed by sections 401(a)(17), 402(g), 415, or any other 
applicable provision of the Internal Revenue Code of 1986 (26 U.S.C. 
401(a)(17), 402(g), 415); or
    (ii) Primarily for the purpose of providing supplemental retirement 
benefits or other deferred compensation for a select group of 
directors, management, or highly compensated employees; and
    (3) In the case of any plans as described in paragraphs (1) and (2) 
of this definition, the following requirements shall apply:
    (i) The affiliated party has a vested right, as defined under the 
applicable plan document, at the time of termination of employment to 
payments under such plan;
    (ii) Benefits under such plan are accrued each period only for 
current or prior service rendered to the employer (except that an 
allowance may be made for service with a predecessor employer);
    (iii) Any payment made pursuant to such plan is not based on any 
discretionary acceleration of vesting or accrual of benefits which 
occurs at any time later than one year prior to the regulated entity or 
the Office of Finance becoming a troubled institution;
    (iv) The regulated entity or Office of Finance has previously 
recognized compensation expense and accrued a liability for the benefit 
payments according to GAAP, or segregated or otherwise set aside assets 
in a trust which may only be used to pay plan benefits and related 
expenses, except that the assets of such trust may be available to 
satisfy claims of the troubled institution's creditors in the case of 
insolvency; and
    (v) Payments pursuant to such plans shall not be in excess of the 
accrued liability computed in accordance with GAAP.
    Executive officer means an ``executive officer'' as defined in 12 
CFR 1230.2, and includes any director, officer, employee or other 
affiliated party whose participation in the conduct of the business of 
the regulated entity or the Office of Finance has been determined by 
the Director to be so substantial as to justify treatment as an 
``executive officer.''
    Golden parachute payment means any payment in the nature of 
compensation made by a troubled institution for the benefit of any 
current or former affiliated party that is contingent on or provided in 
connection with the termination of such party's primary employment or 
affiliation with the troubled institution.
    Individually negotiated settlement agreement means an agreement 
that settles a claim, or avoids a claim reasonably anticipated to be 
brought, against a troubled institution by an affiliated party and 
involves a payment in association with termination to, and a release of 
claims by, the affiliated party.
    Payment means:
    (1) Any direct or indirect transfer of any funds or any asset;
    (2) Any forgiveness of any debt or other obligation;
    (3) The conferring of any benefit, including but not limited to 
stock options and stock appreciation rights; and
    (4) Any segregation of any funds or assets, the establishment or 
funding of any trust or the purchase of or arrangement for any letter 
of credit or other instrument, for the purpose of

[[Page 43823]]

making, or pursuant to any agreement to make, any payment on or after 
the date on which such funds or assets are segregated, or at the time 
of or after such trust is established or letter of credit or other 
instrument is made available, without regard to whether the obligation 
to make such payment is contingent on:
    (i) The determination, after such date, of the liability for the 
payment of such amount; or
    (ii) The liquidation, after such date, of the amount of such 
payment.
    Permitted means, with regard to any agreement, that the agreement 
either does not require the Director's consent under this part or has 
received the Director's consent in accordance with this part.
    Troubled institution means a regulated entity or the Office of 
Finance that is:
    (1) Insolvent;
    (2) In conservatorship or receivership;
    (3) Subject to a cease-and-desist order or written agreement issued 
by FHFA that requires action to improve its financial condition or is 
subject to a proceeding initiated by the Director, which contemplates 
the issuance of an order that requires action to improve its financial 
condition, unless otherwise informed in writing by FHFA;
    (4) Assigned a composite rating of 4 or 5 by FHFA under its CAMELSO 
examination rating system as it may be revised from time to time;
    (5) Informed in writing by the Director that it is a troubled 
institution for purposes of the requirements of this part on the basis 
of the most recent report of examination or other information available 
to FHFA, on account of its financial condition, risk profile, or 
management deficiencies; or
    (6) In contemplation of the occurrence of an event described in 
paragraphs (1) through (5) of this definition. A regulated entity or 
the Office of Finance is subject to a rebuttable presumption that it is 
in contemplation of the occurrence of such an event during the 90 day 
period preceding such occurrence.

0
4. Revise Sec.  1231.3 to read as follows:


Sec.  1231.3   Golden parachute payments and agreements.

    (a) In general, FHFA consent is required. No troubled institution 
shall make or agree to make any golden parachute payment without the 
Director's consent, except as provided in this part.
    (b) Exempt agreements and payments. The following agreements and 
payments, including payments associated with an agreement, are not 
golden parachute agreements or payments for purposes of this part and, 
for that reason, may be made without the Director's consent:
    (1) Any pension or retirement plan that is qualified (or is 
intended within a reasonable period of time to be qualified) under 
section 401 of the Internal Revenue Code of 1986 (26 U.S.C. 401);
    (2) Any ``employee welfare benefit plan'' as that term is defined 
in section 3(1) of the Employee Retirement Income Security Act of 1974, 
as amended (29 U.S.C. 1002(1)), other than:
    (i) Any deferred compensation plan or arrangement; and
    (ii) Any severance pay plan or agreement;
    (3) Any benefit plan that:
    (i) Is a ``nondiscriminatory employee plan or program'' for the 
purposes of section 280G of the Internal Revenue Code of 1986 (26 
U.S.C. 280G) and applicable regulations; or
    (ii) Has been submitted to the Director for review in accordance 
with this part and that the Director has determined to be 
nondiscriminatory, unless such a plan is otherwise specifically 
addressed by this part;
    (4) Any ``bona fide deferred compensation plan or arrangement'' as 
defined in this part provided that the plan:
    (i) Was in effect for, and not materially amended to increase 
benefits payable thereunder (except for changes required by law) 
within, the one-year period prior to the regulated entity or Office of 
Finance becoming a troubled institution; or
    (ii) Has been determined to be permissible by the Director;
    (5) Any payment made by reason of:
    (i) Death; or
    (ii) Termination caused by disability of the affiliated party; and
    (6) Any severance or similar payment that is required to be made 
pursuant to a state statute that is applicable to all employers within 
the appropriate jurisdiction (with the exception of employers that are 
exempt due to their small number of employees or other similar 
criteria).
    (c) Golden parachute payment agreements for which FHFA consent is 
not required. A troubled institution may enter into the following 
agreements to make a golden parachute payment without the Director's 
consent:
    (1) With any affiliated party where the agreement is directed or 
established by the Director exercising authority conferred by 12 U.S.C. 
4617.
    (2) With an affiliated party who is not an executive officer where 
the agreement:
    (i) Is an individually negotiated settlement agreement, and the 
conditions of paragraph (e)(2) of this section are met; or
    (ii) Provides for a golden parachute payment that, when aggregated 
with all other golden parachute payments to the affiliated party, does 
not exceed $2500 (subject to any adjustment for inflation pursuant to 
paragraph (g) of this section).
    (d) Golden parachute payments for which FHFA consent is not 
required. A troubled institution may make the following golden 
parachute payments without the Director's consent:
    (1) To any affiliated party where:
    (i) The payment is required to be made pursuant to a permitted 
individually negotiated settlement agreement; or
    (ii) The Director previously consented to such payment in a written 
notice to the troubled institution (which may be included in the 
Director's consent to the agreement), the payment is made in accordance 
with a permitted agreement, and the troubled institution has met any 
conditions established by the Director for making the payment.
    (2) To an executive officer where the payment recognizes a 
significant life event and does not exceed $500 in value (subject to 
any adjustment for inflation pursuant to paragraph (g) of this 
section).
    (3) Other payments to an affiliated party who is not an executive 
officer. A troubled institution may make a golden parachute payment to 
an affiliated party who is not an executive officer without the 
Director's consent in accordance with this part, where:
    (i) The payment is made in accordance with a permitted agreement 
and the conditions of paragraph (e)(2) of this section are met; or
    (ii) The payment when aggregated with other golden parachute 
payments to the affiliated party does not exceed $2500 (subject to any 
adjustment for inflation pursuant to paragraph (g) of this section).
    (e) Required due diligence review; due diligence standard. (1) 
Agreements and payments where consent is requested. A troubled 
institution making a request for consent to enter into a golden 
parachute payment agreement with, or to make a golden parachute payment 
to, an individual affiliated party shall conduct due diligence 
appropriate to the level and responsibility of the affiliated party 
covered by the agreement or to whom payment would be made, to determine 
whether there is information, evidence, documents, or other materials 
that indicate there is a reasonable basis to believe, at the time the 
request is submitted, that the affiliated party:

[[Page 43824]]

    (i) Has committed any fraudulent act or omission, breach of trust 
or fiduciary duty, or insider abuse with regard to the regulated entity 
or Office of Finance that is likely to have a material adverse effect 
on the regulated entity or the Office of Finance;
    (ii) Is substantially responsible for the regulated entity or the 
Office of Finance being a troubled institution;
    (iii) Has materially violated any applicable Federal or State law 
or regulation that has had or is likely to have a material effect on 
the regulated entity or Office of Finance; or
    (iv) Has violated or conspired to violate sections 215, 657, 1006, 
1014, or 1344 of title 18 of the United States Code, or section 1341 or 
1343 of such title affecting a ``financial institution'' as the term is 
defined in title 18 of the United States Code (18 U.S.C. 20).
    (2) Agreements and payments permitted without the Director's 
consent. No troubled institution shall enter into an agreement pursuant 
to paragraph (c)(2)(i) of this section or make a payment pursuant to 
paragraph (d)(3)(i) of this section unless it is reasonably assured, 
following due diligence in accordance with paragraph (e)(1) of this 
section, that the affiliated party to whom payment would be made has 
not engaged in any of the actions listed in paragraphs (e)(1)(i) 
through (iv) of this section.
    (3) Required notice to FHFA. If a troubled institution determines 
it is unable to enter into an agreement pursuant to paragraph (c)(2)(i) 
of this section or make a payment pursuant to paragraph (d)(3)(i) of 
this section without the Director's consent because it cannot meet the 
standard set forth in paragraph (e)(2) of this section, and thereafter 
does not request the Director's consent to make the payment, then the 
troubled institution shall provide notice to FHFA of each reason for 
which it cannot meet the standard set forth in paragraph (e)(2) of this 
section, within 15 business days of its determination.
    (f) Factors for Director Consideration. In making a determination 
under this section, the Director may consider:
    (1) Whether, and to what degree, the affiliated party was in a 
position of managerial or fiduciary responsibility;
    (2) The length of time the affiliated party was affiliated with the 
regulated entity or the Office of Finance, and the degree to which the 
proposed payment represents a reasonable payment for services rendered 
over the period of affiliation;
    (3) Whether the golden parachute payment would be made pursuant to 
an employee benefit plan that is usual and customary;
    (4) Whether the golden parachute payment or agreement is excessive 
or abusive or threatens the financial condition of the troubled 
institution; and
    (5) Any other factor the Director determines relevant to the facts 
and circumstances surrounding the golden parachute payment or 
agreement, including any fraudulent act or omission, breach of 
fiduciary duty, violation of law, rule, regulation, order, or written 
agreement, and the level of willful misconduct, breach of fiduciary 
duty, and malfeasance on the part of the affiliated party.
    (g) Adjustment for inflation. Monetary amounts set forth in this 
part may be adjusted for inflation, by increasing the dollar amount set 
forth in this part by the percentage, if any, by which the Consumer 
Price Index for all-urban consumers published by the Department of 
Labor (``CPI-U'') for December of the calendar year preceding payment 
exceeds the CPI-U for the month of [month prior to the month of 
publication in the Federal Register] 2018, with the resulting sum 
rounded up to the nearest whole dollar.
0
5. Revise Sec.  1231.5 to read as follows:


Sec.  1231.5   Applicability in the event of receivership.

    The provisions of this part, or any consent or approval granted 
under the provisions of this part by FHFA, shall not in any way bind 
any receiver of a regulated entity. Any consent or approval granted 
under the provisions of this part by FHFA shall not in any way obligate 
FHFA as receiver to pay any claim or obligation pursuant to any golden 
parachute, severance, indemnification, or other agreement. Nothing in 
this part may be construed to permit the payment of salary or any 
liability or legal expense of an affiliated party contrary to section 
1318(e)(3) of the Safety and Soundness Act (12 U.S.C. 4518(e)(3)).
0
6. Revise Sec.  1231.6 to read as follows:


Sec.  1231.6   Filing instructions.

    (a) Scope. This section contains procedures for requesting the 
consent of the Director and for filing any notice, where consent or 
notice is required by Sec.  1231.3.
    (b) Where to file. A troubled institution must submit any request 
for consent or notice required by Sec.  1231.3 to the Manager, 
Executive Compensation Branch, or to such other person as FHFA may 
direct.
    (c) Content of a request for FHFA consent. A request pursuant to 
Sec.  1231.3 must:
    (1) Be in writing;
    (2) State the reasons why the troubled institution seeks to enter 
into the agreement or make the payment;
    (3) Identify the affiliated party or describe of the class or group 
of affiliated parties who would receive or be eligible to receive 
payment;
    (4) Include a copy of any agreement, including any plan document, 
contract, other agreement or policy regarding the subject matter of the 
request;
    (5) State the cost of the proposed payment or payments, and the 
impact on the capital and earnings of the troubled institution;
    (6) State the reasons why consent to the agreement or payment, or 
to both the agreement and payment, should be granted;
    (7) For any plan that the troubled institution believes is a 
nondiscriminatory benefit plan, other than a plan covered by Sec.  
1231.3(b)(3)(i), state the basis for the conclusion that the plan is 
nondiscriminatory;
    (8) For any bona fide deferred compensation plan or arrangement, 
state whether the plan would be exempt under this part but for the fact 
that it was either established or materially amended to increase 
benefits payable thereunder (except for changes required by law) within 
the one-year period prior to the regulated entity or Office of Finance 
becoming a troubled institution;
    (9) For any agreement with an individual affiliated party, or for 
any payment, either:
    (i) State that the troubled institution is reasonably assured that 
the affiliated party has not engaged in any of the actions listed in 
Sec.  1231.3(e)(1)(i) through (iv), or,
    (ii) If the troubled institution is not reasonably assured that the 
affiliated party has not engaged in any of the actions listed in Sec.  
1231.3(e)(1)(i) through (iv) but nonetheless wishes to request consent, 
describe the results of its due diligence and, in light of those 
results, the reason why consent to the agreement or payment should be 
granted.
    (d) FHFA decision on a request. FHFA shall provide the troubled 
institution with written notice of the decision on a request as soon as 
practicable after it is rendered.
    (e) Content of notice to FHFA. A notice pursuant to Sec.  
1231.3(e)(3) must:
    (1) Be in writing;
    (2) Identify the affiliated party who would receive or be eligible 
to receive payment;
    (3) Include a copy of any agreement or policy regarding the subject 
matter of the request; and

[[Page 43825]]

    (4) State each reason why the troubled institution cannot meet the 
standard set forth in Sec.  1231.3(e)(2).
    (f) Waiver of form or content requirements. FHFA may waive or 
modify any requirement related to the form or content of a request or 
notice, in circumstances deemed appropriate by FHFA.
    (g) Additional information. FHFA may request additional information 
at any time during the processing of the request or after receiving a 
notice.

    Dated: August 20, 2018.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2018-18511 Filed 8-27-18; 8:45 am]
 BILLING CODE 8070-01-P