WASHINGTON – Nearly three weeks remains before the SEC poursthrough the hundreds of comment letters it has received on itsproposal that would extend a number of exemptions to credit unionswithout them having to register as broker/dealer. A number ofcredit unions and trade groups as well as NCUA have expressed theirsupport for the proposal, which if adopted, would include theability to provide onsite or electronic registered broker servicesfor members and earn a percentage of the resulting commissions; setup arrangements to sweep funds in member share accounts into andout of no-load money market mutual funds; and buy and sellsecurities for their own accounts and as fiduciaries for theirmembers. Most recently, $3.2 billion Security Service FederalCredit Union has thrown its support behind the proposed RegulationB saying “(it) facilitate(s) activities that are of benefit tocredit union members” and commending the SEC for even considering“this regulatory revision that allows activities that areappropriate for financial service cooperatives,” wrote HowardBaker, SSFCU senior vice president and chief of staff. AmericanShare Insurance also recently submitted a letter to SEC, zeroing inon the supervision of credit unions without federal insurance, saidDennis Adams, ASI president. “Our counsel has met with the SEC andquite frankly, they admitted they didn't understand how privateinsurance works at a credit union,” Adams said, adding that ASI isurging credit unions to weigh in on that component and the effectRegulation B could have here. While the $1.5 billion VisionsFederal Credit Union supports the key exemptions, it agrees withthe SEC in not extending the safekeeping and custody exemption tocredit unions. The SEC said it based its decision on the fact thatcredit unions do not engage in activities necessitating the needfor this service. “There was no real objection here,” said FrankBerrish, Visions FCU president/CEO. “It might be different forother credit unions,” but the credit union saw something with thesafekeeping exemption that could affect the cost of operations inthe long run. Berrish also wrote while the credit union does notcurrently act as a trustee and/or custodian of pension andretirement plans for any of its members, “we should retain thisright as currently permitted by NCUA regulations.” The Credit UnionAssociation of Oregon is among those that support the safekeepingexemption saying since credit unions engage in buying and sellingsecurities for their members “it would make sense that they wouldalso serve to hold those in safekeeping, should their member wish,”wrote Janet Josselyn, CUAO director of compliance services.Josselyn also wrote that credit unions currently meet SECrequirements of safekeeping agents in that they are supervised orregulated by federal or state regulators. The Missouri BankersAssociation (MBA) also recently took advantage of an extendedcomment period that several banking groups had asked for andreceived from the SEC. In an Aug. 2 letter, the trade groupdescribed the proposal as “one of the most complicated regulationson record with far reaching impact on banks.” “Many banks areconcerned that they will not fit within the very confiningframework of the proposed regulation,” wrote Wade Nash, MBA generalcounsel. “If so, then the banks will be required to qualify as abroker, push out the trust business tied to the unlawful conduct,or perhaps so rearrange the trust business that for the size trustbusiness involved it simply is not worth the trouble.” Nash saidone exemption – mutual fund transaction orders for certain employeebenefit plans – would be exempt completely from the broker push-outprovision under proposed Rule 770. Banks that serve as trustees orin a fiduciary capacity with respect to covered plans would nothave to comply with the requirement of the trust and fiduciaryexceptions, including the “chiefly compensated” calculations, hewrote. Similarly, banks serving in a custodial capacity withrespect to the covered plans need not satisfy the requirements ofthe proposed custodial exceptions. Only bank activity with respectto qualified plans and 403(b) and 457 plans would be exempted underRule 770, Nash wrote. Other bank employee benefit fiduciary plansinvolving individual retirement accounts, Simple IRA's, SEPs andother non-qualified deferred compensation plans would not beexempted and instead need to fit within another exemption. “Inorder to take advantage of the exemption, a bank would be requiredto offset or credit any compensation that it receives from a fundcomplex against fees and expenses that the plan owes to the bank,”Nash wrote. “The SEC proposed this condition under the mistakenbelief that most banks followed ERISA Advisory Opinion 97-15A,when, most banks are not investment fiduciaries and thus followERISA Advisory Opinion 97-16A.” Nash pointed out that “theexemption's references to compensation appear to include not only12b-1 fees but also shareholders administration fees and eveninvestment management fees received when a plan invests inproprietary mutual funds.” “Bankers have already been through thefirst SEC proposal to push out broker activity and they wereoutraged,” Nash wrote. “These current exemptions in ProposedRegulation B are incredibly complex. Even if the banks could meetsuch exemptions, documenting them is paper work intensive and tootime consuming.” The SEC will continue to take comments onRegulation B until Sept. 1. [email protected]