CU Trade Groups Press SEC To Expand Broker/Dealer Plan

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While offering a few suggested changes they'd like to see, two credit union trade groups have given a general endorsement to a proposal by the Securities & Exchange Commission related to broker-dealers.

The proposal would implement provisions of the Gramm-Leach-Bliley Act regarding exemptions for commercial banks from broker requirements under the Securities and Exchange Act of 1934. The proposal provides limited exemptions for credit unions, among other provisions.

"If the SEC does not adopt this regulatory approach, inequities will arise among different types of financial institutions offering brokerage services, and the regulatory burden for broker-dealers working with banks and credit unions will increase," CUNA said in a letter to the SEC.

The letter supported the proposal's exemptions for credit unions regarding three securities activities: networking arrangements with broker-dealers; sweep accounts; and investments undertaken for the credit union's own account or as a trustee or fiduciary. CUNA said it opposes any additional limitation on credit unions entering into such activities that do not also apply to banks.

In a separate letter, the California and Nevada Credit Union Leagues also urged the SEC to provide its proposed broker-dealer exemption to all credit unions, regardless of charter or type of share insurance.

In its letter, the Rancho Cucamonga, Calif.-based leagues also suggested that, like banks, credit unions should be given additional authority to perform safekeeping and custody services without meeting the "broker" requirements.

"Credit unions are emerging as major locally controlled financial institutions in many California and Nevada communities," David L. Chatfield, president and CEO of the leagues, said in the comment letter. "They will be called upon in a short period of time to provide these services as the local community banks are sold to non-local large banks."

The leagues support proposed changes relating to networking, sweep accounts, investment, trustee, and fiduciary transactions, and also encouraged the commission to expand authorities under SEC's Regulation B "to the greatest extent possible within applicable law."

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