VIA E-MAIL: rule-comments@sec.gov

July 16, 2001

Mr. Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549

RE: File No. S7-12-01; Definition of Terms in and Specific Exemptions for Banks, Savings Associations, and Savings Banks under Section 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934.

Dear Mr. Katz:

The Association of Corporate Credit Unions (ACCU) appreciates the opportunity to comment on the Securities and Exchange Commission's (SEC's) interim final rules which address functional exceptions for banks from the definitions of "broker" and "dealer" that were added to the Exchange Act by the Gramm-Leach-Bliley Act of 1999 (GLB Act).

By way of background, ACCU serves as the primary trade association for the thirty-four corporate credit unions (corporates) located around the country. Corporates are wholesale credit unions that provide liquidity, investment products, payments settlement and other financial services to their members, the nation's 10,600 federal and state-chartered credit unions. In order to qualify as a corporate credit union, the credit union must be operated primarily for the purpose of serving other credit unions [see 12 C.F.R. 704.2]. In addition, membership of natural persons in a corporate is limited only to those individuals such as directors or incorporators as may be required by applicable law.

ACCU supports the SEC's decision to extend the exemption granted from the definitions of "broker" and "dealer" to savings associations and savings banks on the same terms and conditions that banks are excepted or exempted from broker-dealer registration. In the interim final rules, the SEC specifically noted that thrifts should be entitled to the same exceptions as banks because both types of institutions are subject to similar regulatory frameworks and examinations standards, which are sufficient to protect the interests of investors. ACCU believes that this rationale appropriately balances the public policy of protecting investors without creating unnecessary regulatory intrusion in the operations and activity of a financial institution.

The SEC requests comment on whether the exemption from broker-dealer registration should be extended to any other entities. While ACCU believes that it is appropriate for the exemptions to be extended to credit unions generally, and while much of the same rationale for exemption may also apply to credit unions generally, our comments are directed more particularly to the applicability for exemption from the definition of "broker" and "dealer" for corporate credit unions.

Corporates are member-owned, not-for-profit cooperatives. Although this operational structure differs from the for-profit structure of banks and thrift institutions, corporates, like their member credit unions, are subject to a regulatory framework and examination standards that are similar to those that apply to both banks and thrifts. For example, corporates, like banks and thrifts, are subject to periodic examinations, stringent capital requirements, and regulations governing the respective insurance funds. ACCU maintains that the regulatory framework for corporates should be sufficient to protect the interests of natural person credit union investors.

ACCU urges the SEC to extend the exemption from broker-dealer registration to corporate credit unions. Corporates offer their member credit unions a variety of services and products including securities safekeeping and custody, letters of credit and certificates of deposit. These services parallel services offered by savings banks and thrifts to their customers.

As part of the rationale for the exemption of savings associations and savings banks from the definitions of "broker" and "dealer", the SEC noted as follows:

In addition, the existence of some of the bank exceptions from broker-dealer registration, such as the trust and fiduciary activities exception, the safekeeping and custody exception, and the sweep accounts exception, that may suggest registration is necessary for certain limited conduct, create legal uncertainty for savings associations and savings banks engaging in such activities. (emphasis added)

The existence of some of the bank exceptions from broker-dealer registration, particularly the safekeeping and custody exception and identified banking products exception, that suggest that registration is necessary for certain limited conduct, creates legal uncertainty for corporates engaging in such activities.

As corporate credit unions are essentially limited to doing business with credit unions or other institutional organizations, and as those corporate credit unions and their credit union members are subject to a common regulatory authority, ACCU believes that extending the exemptions from the definition of broker or dealer to corporates is appropriate because:

ACCU again thanks the SEC for the opportunity to comment on these important interim rules. If you or your staff have any questions about ACCU's comments, please do not hesitate to call me at 202/218-7782.

Sincerely,

Christiane G. Hyland

Christiane G. Hyland
ACCU Executive Director

cc: Corporate Credit Union CEOs