July 18, 2002

BY ELECTRONIC AND HAND DELIVERY

Mr. Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

Re: File No. S7-12-01

Dear Mr. Katz:

The undersigned organizations submit this comment letter on the exemptive relief the Securities and Exchange Commission (the "Commission") has proposed to grant to Evangelical Christian Credit Union ("ECCU") under Sections 15 and 36 of the Securities Exchange Act of 1934 (the "Exchange Act").¹ The proposed exemptive relief would allow ECCU (and perhaps other credit unions) to offer "sweep accounts" without registering as a broker under the Exchange Act. We represent banks and other financial services companies and have an interest in the bank exceptions from the definitions of "broker" and "dealer" under Sections 3(a)(4) and 3(a)(5) of the Exchange Act (the "Bank Exceptions"), as added by the Gramm-Leach-Bliley Act. The Commission noted in its release proposing the exemption that "ECCU's application relates to" the Commission's interim final rules implementing the Bank Exceptions.

This letter takes no position on whether ECCU, or credit unions generally, should be granted an exemption permitting it or them to offer sweep accounts without broker-dealer registration, provided, at a minimum, that it or they comply with the conditions to the statutory Bank Exception that allows banks to offer sweep accounts without broker-dealer registration (the "Bank Sweep Account Exception").

We submit this comment letter, however, because we are concerned about the possible implications regarding the Bank Sweep Account Exception that may be raised by the Commission's proposed exemptive relief to ECCU. As noted above, the Commission indicated that ECCU's application "relates to" the interim final rules implementing the Bank Exceptions. In addition, the Commission requested comment regarding whether an exemption permitting credit unions to offer sweep accounts "on the same terms and conditions available to banks and thrifts" should be subject to certain additional limitations or conditions.

We believe that the statutory Bank Sweep Account Exception is available whenever a bank sweeps deposit accounts into a money market fund that does not charge a front-end or back-end load. This is consistent with the Commission's long-standing use of the term "load", including in its Form N-1A. We are therefore concerned that the implication of the Commission's statements in the release may be that the Commission would attempt to condition the availability of the statutory Bank Sweep Account Exception on the same terms and conditions as are contained in any exemptive relief granted to ECCU. The undersigned organizations would strongly object to any such result.

The exemptive relief proposed to be granted to ECCU appears to be based upon facts and representations, and may be subject to conditions, not applicable to the statutory Bank Sweep Account Exception. These representations and possible conditions are:

(i) ECCU represented that the sweep accounts would not be made available to individuals.

(ii) ECCU represented that the funds into which ECCU would sweep pay the fund sponsor an annual management fee of 0.20% of fund net asset value and annually reimburse expenses estimated at 0.10% of net asset value.

(iii) ECCU represented that it would not receive any portion of the fund sponsor's management fees or expense reimbursements.

(iv) ECCU represented that it would receive annual administrative fees not in excess of 0.25% of the net asset value of shares purchased through ECCU's account.

(v) ECCU represented that any fees it charged its members on balances contained in funds through sweep accounts would not exceed 1.00% annually.

(vi) ECCU represented that fund sponsors would provide "written confirmation" that the funds into which it sweeps qualify as no-load money market funds under the definitions of "money market fund" and "no-load" in Rules 3b-17(e) and 3b-17(f) under the Exchange Act.

The foregoing representations/conditions are not conditions to the availability of the statutory Bank Sweep Account Exception. We object strongly to any implication that the Commission would attempt to make compliance with any of these conditions a condition to the availability of the Bank Sweep Account Exception. There is simply no basis for imposing any further conditions on the clear and simple exception contained in the Exchange Act for bank sweep accounts. We take no position on whether the Commission should grant an exemption to ECCU on the conditions proposed in the Commission's release. We would object strongly, however, to any implication that any of these conditions should be imposed on banks seeking to rely upon the Bank Sweep Account Exception.

Our organizations believe the definition of the term "no load" contained in interim final Rule 3b-17(f) conflicts with the language and legislative history of the statutory Bank Sweep Account Exception, and we take this opportunity to reiterate our opposition to the idea that the term "no load" in the Bank Sweep Account Exception should be interpreted as imposing a 25 basis points limit.

In conclusion, we appreciate the opportunity to comment on the proposed ECCU exemption. We appreciate the time and effort the Commission and its staff have expended to resolve many of the issues arising under the Bank Exceptions.

Sincerely yours,

ABA Securities Association
American Bankers Association
America's Community Bankers
Bank Securities Association
The Financial Services Roundtable
Independent Community Bankers of America
The New York Clearing House Association L.L.C.

cc: Annette Nazareth
Robert L.D. Colby
Catherine McGuire

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¹ Release No. 34-46069, 67 Fed. Reg. 41,545 (June 18, 2002).