FCUs May Not be Equipped to Oversee Broker Investment Choices
NACUSO said an NCUA letter on the third party brokerage arrangements for the sale of nondeposit investment products contains duties that credit unions may not have the expertise to perform.
The CUSO association took that position in a Jan. 7 comment letter to the regulator on NCUA Letter No. 10-FCU-03. The agency said this letter supersedes and replaces NCUA's Letter No. 150-December 1993, which contains previous guidance to credit unions on the sale of nondeposit investments.
"The letter asks credit unions to perform duties outside of the scope of their expertise and to interpose themselves in broker/dealer compliance issues," read a letter provided by NACUSO's legislative and regulatory advocacy committee to Credit Union Times today.
The NCUA said in selecting an appropriate broker before entering into a third party brokerage arrangement for the sale of nondeposit investment products, FCUs should perform a "qualitative analysis of the level of complexity and volatility in the investments that the credit union will permit the broker to offer members."
"Does NCUA really expect the credit unions they regulate to engage in analyzing and authorizing the investment product that will be offered to their members?" wrote Jack Antonini, president/CEO of NACUSO. "Credit unions have no experience doing that, no expertise and are not registered."
Antonini said NACUSO is concerned that the Financial Industry Regulatory Authority will consider this an improper act by an unregistered entity.
The NCUA said it would also require a program that includes "a system that monitors member complaints and periodically reviews and randomly samples member account activity to look for evidence of abuse." By doing this, NACUSO said credit unions would take on the role of a registered Office of Supervisory Jurisdiction principal and broker dealer compliance officer.
"Through this letter, NCUA will unintentionally cause credit unions to assume an unnecessary and substantial risk; therefore, we are respectfully requesting that NCUA reconsider this approach," Antonini wrote.