NASCUS backs Evangelical Christian Credit Union's request for SEC broker-dealer exemption but seeks broader relief

ARLINGTON, Va. – The National Association of State Credit Union Supervisors (NASCUS) is the latest industry group to support Evangelical Christian Credit Union’s (ECCU) request for exemption from the Securities Exchange Commission’s rules that require credit unions to register with broker-dealers to offer sweep accounts and other investment options. In a comment letter to the SEC, NASCUS President/CEO Doug Duerr said the association “fully supports” the credit union’s request for exemption relief and urges the regulator to consider granting “substantially broader exemption relief on these broker-dealer registration and reporting issues to all state-chartered credit unions.” NASCUS’s take on this issue began last July when the association sent a letter to the SEC stating that credit unions be granted “parity of treatment” on the same terms and conditions that other “banks” are excepted or exempted from broker-dealer registration under the Securities Exchange Act, as amended by the Gramm-Leach-Bliley Act. Under current state law, state chartered credit unions are permitted to offer a variety of broker-related services such as third party brokerage arrangements, sweep accounts safekeeping and custodial arrangements, Duerr wrote. “Competitive pressures and changes in the marketplace will encourage state-chartered credit unions to continue to offer additional broker-dealer related services to their members in the future,” Duerr wrote. “Subject to appropriate state supervision and regulation, they would like to be able to offer such new services in an efficient and cost effective manner.” Duerr explained that unless broad exemption relief is provided by the SEC for broker-dealer registration and related activities, “credit unions will be dissuaded from offering these services or placed at a substantial cost disadvantage in offering these services.” “State chartered credit unions would become less competitive in the marketplace and that would be contrary to the intent of state legislatures and state regulators that granted these powers to these institutions,” Duerr wrote. “Moreover, it would be contrary to the spirit of the Gramm-Leach-Bliley Act that specified eleven broker-dealer activity exceptions from SEC requirements for all “banks,” a term that the SEC has already indicated would include savings institutions. “The term `bank’ was not clearly defined so last year’s request sought to include credit unions,” said Jonathan Lindley, NASCUS vice president of advocacy. “This type of request may not affect a large number of credit unions but for those offering non-deposit, non-share accounts, those wanting to offer a wider spectrum of products to their members, it certainly would affect the larger, growth-oriented credit unions.” NASCUS acknowledged the SEC’s concerns about “sufficient regulatory expertise reside” needed in the state agencies charged with overseeing broker-dealer activities of state-chartered credit unions but offered that it is confident that the “requisite expertise for these purposes resides in the offices of the state regulator who regulates state-chartered credit unions or in a related state regulatory agency.” In many cases, NASCUS said member state agencies regulate both credit unions and securities activities. “In our view, the requisite competence to regulate these activities is available within their state regulatory agencies as it is for other banks,” Duerr wrote. Meanwhile, ECCU said it would offer two external sweep account to its faith-based member organizations through Federated Investors, Inc. Should the SEC rule in its favor, the credit union plans to transition from a broker-dealer relationship and offer the service directly. [email protected]