LASTOWKA & MESSICK P.C.
ATTORNEYS AND COUNSELLORS AT LAW
|JOSEPH E. LASTOWKA, JR.
GUY A. MESSICK*
JOHN B. WHALEN, JR.
| THE MADISON BUILDING
108 CHESLEY DRIVE
MEDIA, PA 19063-1712
FAX: (610) 565-9363
July 16, 2002
Jonathan G. Katz
U.S. Securities and Exchange Commission
450 5th Street, NW
Washington, D.C. 20549-0609
Re: File No. S7-12-01
Evangelical Christian Credit Union Request for Sweep Account Registration Exemption
Dear Mr. Katz:
Kindly be advised that I am submitting this letter on behalf of myself, an attorney that primarily represents credit unions and credit union service organizations, as well as General Counsel of the National Association of Credit Union Service Organizations. The purpose of this letter is in response to the SEC's request for comments upon the application of Evangelical Christian Credit Union to offer sweep accounts without registration as a broker-dealer. It is my experience there is a rising demand in credit unions for sweep accounts tied to both consumer accounts and business accounts. While credit unions have not traditionally served the business community, there is a great demand for credit unions to do so. This is partially due to the fact that many banks made a decision that they will not serve businesses under a certain asset size. Some of the credit union business demand has come from members who have retired or have been laid off by their employer and have started businesses as a second career. These businesses typically start out small but as they grow, the demand for services becomes more sophisticated. Unless credit unions are permitted to have sweep accounts, they will be at a severe disadvantage to other financial and non-financial service providers that serve businesses. Likewise, credit unions will be at a disadvantage if they cannot provide sweep accounts tied to consumer accounts.
I submit the following in response to your questions:
(a) I urge the Commission to approve the application of Evangelical Christian Credit Union. I also urge the Commission to approve the sweep account exemption to all credit unions. I do not believe any additional experience is required in order to determine the appropriateness of the exemption.
(b) I urge the Commission to grant the exemption to all credit unions, regardless of whether they are federally or privately insured. I do not see a basis to discriminate between federally insured credit unions and privately insured credit unions for the purpose of receiving a registration exemption for sweep accounts. Regardless of insurance, all credit unions are regulated financial institutions, supervised by either the NCUA or a state credit union regulator.
(c) I do not know of any basis why certain members should benefit from a sweep account and not others. If a sweep account exemption is available, it should be available to all members, e.g. individuals, non-profit entities and for-profit entities. There is no investor safety and soundness issue that would be different from one type of member versus another.
(d) By permitting sweep accounts at credit unions, the SEC would enable credit union members seeking such accounts to have a choice of financial institutions. Credit unions currently have the power to serve their business members. However, credit union members and credit unions would be unduly restricted without the ability to offer sweep accounts under a registration exemption.
(e) There are no investor protection concerns that I am aware of that would cause the credit unions to be distinguished from the banks. While banks and thrifts do not pass up a chance to restrict credit union competition by regulation, there is no actual investor safety issue that would be at risk by extending the sweep account registration exemption to credit unions. People are able to decide on their own whether their needs would best be served at a credit union or a bank.
(f) Extension of the registration exemption to credit unions would not unfairly disadvantage banks and thrifts, broker/dealers, or other financial institutions. On the contrary, all would be on equal footing.
I would hope that the sweep registration exemption would be included in the pending comprehensive credit union registration exemption action. Thank you for your consideration.
Guy A. Messick
cc: Catherine McGuire, Chief Counsel
Lourdes Gonzalez, Assistant Chief Counsel
Robert N. Dorsa, President, NACUSO