Feedback Sought on Nondeposit Investment Sales

NEWPORT BEACH, Calif. – NACUSO is inviting credit unions to share their feedback on a proposed rule involving the sales of nondeposit investments The NCUA proposed Interpretive Ruling and Policy Statement No. 05-1: Sales of Nondeposit Investments covers the following: establishes required investment disclosures and separation of investment services from depository services; requires the credit union to oversee the broker/dealer’s securities sales compliance; and limits nonmember investment income and expenses to 5%. This is a proposed IRPS issued by NCUA that will replace Letter to Credit Unions Number 150. NACUSO said it does not see any “substantive disagreements” on the required investment disclosures and separation issue. “There have been no substantive changes from Letter Number 150 and some flexibility has been built in to use the shortened disclosures permitted by NASD Rules,” NACUSO said. The association does have a concern with requiring CUs to oversee the broker/dealer’s securities sales compliance because “it imposes a duty that they are not able to do without hiring expensive registered experts to perform the duties.” The section also “imposes” costs that will render the investment services less competitive and unnecessary duplication of supervision and compliance that already exists in the securities business. This part of the NCUA proposal is also not possible to do under some state privacy laws, NACUSO said. NACUSO is also concerned with the 5% limit on nonmembers because clarity is needed on when the percentage is measured and how. “A better solution is to track nonmember business and make sure that there is a means to insure that only costs are being recovered for the nonmember business,” NACUSO said. “The nonmember services are being done by the broker/dealer and not the credit union. If the credit union is only a conduit for expenses, there is no incentive to grow the nonmember business.” Comments are due by July 25 and can be sent directly to NCUA or NACUSO General Counsel, Guy Messick at [email protected] or by fax at 610-891-9008.