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WASHINGTON – NCUA was not the only one defending its charter change regulations. CUNA and NAFCU joined in as well. In a 27-page “friend of the court” brief, lawyers for the two trade associations defended NCUA’s mandated boxed disclosure statements point by point, and explained why each one should be included in disclosures credit unions seeking to change their charters must provide their members. For example, the trades defended NCUA’s first mandated statement, that credit unions operate on a one member one vote standard that mutual banks often do not, by noting that the credit union rule is absolute in Federally chartered credit unions. “There is no such absolute, statutory right with respect to ownership and control of mutual savings banks,” the trades noted. “Voting by proxies – which are typically held by the mutual savings bank’s board of directors – is permitted by the applicable regulations and is in fact common practice in such institutions. In addition, OTS regulations specifically permit federal mutual institutions to apportion voting rights based on the amount each member has on deposit at the institution.” The brief also strongly defended NCUA’s disclosure statement about the possibility that credit union board members and executives as well as insiders can profit by “obtaining stock far in excess of that available to institution’s members.” After detailing the different ways that banks’ board members and executives can benefit from a stock offering (purchasing shares – theoretically available to all members – also an employee stock ownership plan (ESOP) and restricted stock plan) the brief pointed out that proponents of credit union conversions had been open about promoting these benefits to credit unions as an inducement to convert. “CCU insiders presumably had access to this information when they made their decision to move forward with the conversion process,” the brief pointed out. “Moreover, it is not unreasonable to assume that this information may have had an effect on their decision. Full disclosure of this potential for insider profit – and the mechanism by which it occurs – is essential to allow credit union members to assess the pros and cons of conversion and to weigh the motivations of their institution’s leadership.” [email protected]

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