WASHINGTON — This year marked a significant push for expanded bank broker-dealer activities, setting the stage for granting credit unions similar exemptions.
After eight years of tweaks, feedback and revamping, in September, the Securities and Exchange Commission and the Board of Governors of the Federal Reserve System voted to finally implement the bank broker provisions of the Gramm-Leach-Bliley Act of 1999.
The rules in question define the scope of securities activities that banks may conduct without registering with SEC as a securities broker and implement the most important "broker" exceptions for banks the GBL act requires. Specifically, they implement the statutory exceptions that allow a bank to continue to conduct securities transactions for its customers as part of the bank's trust and fiduciary, custodial and deposit "sweep" functions, and to refer customers to a securities broker-dealer pursuant to a networking arrangement with the broker-dealer.
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NCUA is currently working with SEC to develop a proposal that would address credit unions. Credit unions were included in a 2004 SEC proposal but left out of the latest one. Meanwhile, credit unions can still follow the 1993 SEC letter from Catherine McGuire, Chief Counsel, SEC Division of Market Regulation, to Chubb Securities Corp. NCUA has used the letter as a guide as well as its own Letter 150 which specifically recognized that CUSOs may participate with a credit union and a broker in networking arrangements.
In other investment news, trust services continued on a slow and steady path this year. One of the biggest mergers in the trust services area occurred this year between Members Trust of Colorado and MEMBERS Trust Company, the nationally-chartered trust services firm. The alliance brought in $400 million in assets under management. Alaska USA Trust launched a campaign to build out-of-state alliances taking advantage of that state's trust-friendly laws.
Clearly, the industry can count on strong demand for trust and other investment services next year, said Neil Archibald, corporate counsel and chief compliance officer for MEMBERS Trust.
"The United States and many other countries are at the cusp of the biggest wealth transfer in history due to the aging baby boomer generation with early retiree's already in the midst of their retirement years and the large bulk of the estimated 76 million baby boomers retiring in the next several years," Archibald said. "Combine the wealth transfer wave with credit unions' efforts to diversify their income streams in various non-interest income revenue sources like trust services and you have a strong outlook for trust services in 2008."
In other news:
- The $3.58 billion Southeast Corporate launched Accolade Investment Advisory, LLC, in October. The new CUSO will provide a range of services including portfolio management, asset liability management, bond accounting and investment reporting services.
- ShareBuilder Corp., which counts a number of credit unions among its clientele, partnered with Wal-Mart Stores Inc. to bring online brokerage services to the retail giant's customers and employees.
- The $178 million Continental Federal Credit Union moved beyond the Wings Financial merger fray and partnered with XCU Capital Corp. to bring an expanded investment and insurance program to its members. The investment program officially launched on April 16 and introductory roll-outs were completed at Continental's locations in El Segundo, Calif., Tempe, Ariz. and Houston. Finally:
- Members took to $15 billion N.C.-based State Employees' Credit Union's new Bridge Account opening more than 1,174 accounts and generating nearly $1.7 million in deposits during the product's initial launch. The account is based on the quarterly change in the S&P 500 Index.
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