(a) Agents. Agents of System institutions must maintain high standards of honesty, integrity, and impartiality in order to ensure the proper performance of System business and continued public confidence in the System and all its institutions. The avoidance of misconduct and conflicts of interest is indispensable to the maintenance of these standards.

(b) Institutions. Each institution must use safe and sound business practices in the engagement, utilization, and retention of agents. These practices shall provide for the selection of qualified and reputable agents. The institution is responsible for the administration of relationships with its agents and must take appropriate investigative and corrective action in the case of a breach of fiduciary duties by an agent or failure of an agent to carry out other duties as required by contract, FCA regulations in this chapter, or law.

(c) Control. System institutions are responsible for exercising special diligence and control, through good business practices, to avoid or control situations that have inherent potential for sensitivity, either real or perceived. These areas include:

(1) The employment of agents who are related to directors or employees of the institutions;

(2) The solicitation and acceptance of gifts, contributions, or special considerations by agents; and

(3) The use of System and borrower information obtained in the course of the agent’s work with the institution.

(d) Enforcement. Agents of System institutions are “institution-affiliated parties” as that term is defined in the Act and therefore subject to certain FCA enforcement authorities contained in part C of title V of the Act. An “institution-affiliated party” is:

(1) A director, officer, employee, shareholder, or agent of a System institution;

(2) An independent contractor (including an attorney, appraiser, or accountant) who knowingly or recklessly participates in:

(i) A violation of law (including regulations) that is associated with the operations and activities of one or more System institutions;

(ii) A breach of fiduciary duty; or

(iii) An unsafe practice that causes or is likely to cause more than a minimum financial loss to, or a significant adverse effect on, a System institution; or

(3) Any other person, as determined by the Farm Credit Administration (by regulation or on a case-by-case basis) who participates in the conduct of the affairs of a System institution.