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ROSEVILLE, Calif. – Deciding whether to obtain its own broker/dealer license is only one item on Addison Ave. Financial Partners’ agenda for 2003. At press time, Addison Ave. President Pete Snyder had initiated a formal investigation in to whether it was feasible for the CUSO to become a licensed broker/dealer. Addison Ave. currently has a dual licensing agreement with CUSO Financial Services. The CUSO’s 16 employees are managed by CFS. Addison Ave. functions as an Office of Supervisory Jurisdiction (OSJ), handles the supervision of the reps, and signs off on all trade transactions. If the CUSO becomes a licensed broker/dealer, Snyder said it would continue to retain CFS’ services as a third party clearing firm. But the more he examines the ramifications and weighs the advantages and disadvantages, Snyder said he’s leaning towards recommending that the CUSO not obtain its broker/dealer license. That wasn’t Snyder’s original plan. “Our original objective was not to have to change our delivery structure through the CUSO. Becoming a licensed broker/dealer would have allowed us to do that,” he said. Now that he’s had the opportunity to study the issues more closely, Snyder said, “The price tag of getting our own broker/dealer license isn’t practical. Since we’d have to find our own clearing firm, we wouldn’t receive 100% of the concession fee, so the advantage of being a broker/dealer is lost.” Snyder said he’s looking at two issues. First, he said, becoming a broker/dealer wouldn’t provide Addison Ave. Financial Services with any more revenue since it would still be using CFS’ services. If anything, he said, there would be the additional expenses from on-going licensing fees, the initial license expense, and added registrations for staff. “The cost/benefit analysis shows that the benefits may be offset by the increased cost of becoming a broker/dealer,” said Snyder. The second issue Snyder is considering involves liability and risk. “It’s always been assumed that a side benefit for a credit union in offering investments services through a CUSO was that the CUSO would absorb the risk. But if Addison Ave. gets its own broker/dealer license, the CUSO would also be subject to regulatory and supervision liability, and the NASD would audit us as a broker/dealer,” said Snyder. The type of transactions the CUSO is involved with determines the complexity of ongoing liability, said Snyder. Since Addison Ave. offers individual securities as well as mutual funds and annuities, it would carry more liability and scrutiny. “There’s a whole food chain of liability when you’re in this business,” he said. Snyder said, “The issue that’s becoming apparent to me is the liability you take on as a broker/dealer could be construed as being as great or greater than what the liability would be if the investment services were moved back to Addison Ave. FCU.” Snyder said at this point in his investigation he’s “leaning” towards recommending the CUSO’s investment services be moved to the credit union “unless we can find some solution.” If that happens, he said Addison Ave. Financial Services’ insurance services would remain inside the CUSO, as would some of its staff that provides administrative services to the credit union. In related news, Addison Ave. Financial Partners is currently developing the infrastructure and plans to launch a consulting services division for other credit unions in April. Snyder said the CUSO has already provided consulting to credit unions such as Forum CU, Fishers, Ind. And SELCO CU, Eugene, Ore. on a case-by-case basis, concerning the realignment and overhauling of their CUSOs.

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