Pub. 9 2014-2015 Issue 5

January | February 2015 23 Extraordinary Service for Extraordinary Members. Dakota, and Iowa. Frontier’s territory encompasses eastern Kansas. Why FCSA did not simply acquire Frontier, through an outright merger, continues to be a mystery. Interestingly, the Farm Credit Act did not mandate FCA approval of this alliance while a merger of the two associations would have. On Dec. 1, 2014, Leland Strom, one of the FCA’s three board members, issued a “Statement Regarding Strategic Alliances.” Strom’s statement was issued independent of any FCA boardmeeting or speech; speeches are how boardmem- bers usually express their position on FCS issues. As Strom noted, in a strategic alliance, “the corporate charters of both associations will remain intact under the governance of each individual board, but the institutions will have joint manage- ment and a common business model and platform.” He then observed that “the anticipated advantages the associations have identified may provide the planned efficiencies, but this alliance is the first of its kind and we do not know for certain that it will produce these benefits. Therefore, it is important for the boards of these associations to remain vigilant and responsive to the needs of themember-borrowers who elected them and whom they serve.” Of course, how Frontier’s direc- tors will be able to be vigilant when they have no employees reporting to them is an open question; time will tell. Strom went on to state that, “I believe it is important to ensure that any alliance structure does not interfere with a board’s ability to serve its members in any way. . . . Each as- sociation’s board of directors remains responsible for ensur- ing that its association operates in a safe and sound manner, complies with all laws and regulations, and serves as an inde- pendent board to meet the needs of its member-borrowers. . . . In my opinion, FCA should continue to expect each board of directors to remain autonomous and to provide independent leadership for its association.” It is extremely difficult, though, to believe that Frontier’s board will pass Strom’s test given that it has essentially delegated, in all regards, the manage- ment of its association to FCSA. Just 11 days after Strom issued his statement, the FCA Board adopted a proposed rule on mergers and consolida- tions; it will be open for a 90-day comment period once it is published in the Federal Register. Based on an FCA news release, “the purpose of the proposed rule is to clarify the merger consideration process and to incorporate existing practices in the regulations.” Based on the news release, the specific features of the proposed rule do not seem very substantive, but important changes in the manner in which mergers are executedmay be revealed once the proposed rule is published. Perhaps the real intent of this proposed rule is to head off future strategic alliances. Contact: Tennyson W. Grebenar, Stephen T. Johnson, or Karen L. Witt 303.623.9000 · www.LRRLaw.com With a national reputation for our financial institutions practice, our goal is to assist clients in structuring and operating their institutions to meet business objectives and regulatory requirements. Our Financial Services Group will help your business run smoothly. Experience works. Albuquerque | Casper | Colorado Springs | Denver | Las Vegas | Phoenix | Reno | Silicon Valley | Tucson  Bert Ely — continued on page 24