Keeping brokerage services intact, exploring CUSO contracting options, focus of CUNA meeting with SEC, NCUA

WASHINGTON – In an effort to preserve brokerage service options for credit unions, CUNA met with SEC and NCUA officials Nov. 21 to come up to speed on issues related to contracting with CUSOs for brokerage arrangements and explore other outlets. CUNA’s Brokerage Activities Task (BAT) Force met with Catherine McGuire, chief counsel of the Market Division of the SEC and members of her staff to discuss issues relating to brokerage services. Previously that day, they met with NCUA General Counsel Robert Fenner and Senior Attorney Paul Petersen. “Our goal is to work with SEC and NCUA to help preserve options for credit unions to provide brokerage services directly in a networking arrangement with a broker-dealer, as well as to create options for contracting with a CUSO to support the credit union’s activities,” said BAT Chairman John Franklin, president, South Carolina CU League. “Our session was highly productive and has furthered our dialogue with these agencies, which have both indicated their willingness to continue working with us to address key issues.” CUNA Governmental Affairs Committee Chairman Dick Ensweiler appointed the BAT Force last summer to help ensure that credit unions and CUSOs offering brokerage services receive fair regulatory governing. The seven-member BAT Force is comprised of Franklin Mark Allen, CEO, XCU Capital Corp., Carlsbad, Calif.; Larry Blanchard, senior vice president, CUNA Mutual Group; John Fritsche, senior vice president, Texans Credit Union, Richardson, Texas; Charles Grossklaus, president, Royal Credit Union, Eau Claire, Wis.; Guy Messick, general counsel, National Association of CUSOs (NACUSO) and Juri Valdov, president and CEO, Northwest Federal Credit Union, Herndon, Va. In October, the SEC proposed rules to implement provisions in the Gramm-Leach Bliley Act designed to facilitate the ability of banks to engage in certain broker activities without ardent SEC oversight. The current SEC exemption from the definition of “dealer” for banks, savings associations, and savings banks expired on Nov. 12. The SEC will extend the exemption from the definition of “dealer” until Feb. 10, 2003, to permit time for public comment, analysis of the comments received, and adoption of final rules. Comments on the proposal are due within 30 days of publication. While the rule does not directly impact credit unions and credit union service organizations, the SEC is reviewing how their broker activities should be treated. In June, SEC issued a proposal regarding the treatment of sweep accounts for credit unions. Comments on the proposal closed July 18 and the issue remains pending, along with broader issues concerning the regulation of broker activities for credit unions and CUSOs. Others attending the BAT meeting were Mary Dunn, CUNA senior vice president and associate general counsel, Kevin Thompson, CUNA Mutual deputy general counsel and Jeffrey Bloch, CUNA assistant general counsel. CUNA, CUNA Mutual, NACUSO and other organizations continue to have ongoing meeting with the regulatory agencies on brokerage activity issues. BAT has “already set in motion” additional discussions with the SEC and NCUA and will keep credit unions and CUSOs informed about their efforts concerning brokerage activities in the coming weeks. -