Comments of the National Association of Credit Union Service Organizations on S7-12-01

LASTOWKA & MESSICK P.C.
ATTORNEYS AND COUNSELLORS AT LAW

JOSEPH E. LASTOWKA, JR.
THE MADISON BUILDING

GUY A. MESSICK*
108 CHESLEY DRIVE
MEDIA, PA 19063-1712

JOHN B. WHALEN, JR.
FAX: (610) 565-9363

KATHERINE E. WEBER**
TELEPHONE (610) 565-0330

SUSAN MOESCH POTTS

*Washington State Bar also
**Connecticut Bar also

July 17, 2001

Jonathan G. Katz
Secretary
U.S. Securities and Exchange Commission
450 5^th Street, NW
Washington, DC 20549-0609

Re: File No. S7-12-01

Dear Secretary Katz:

Kindly be advised that I am an attorney engaged in the private practice of law. I am General Counsel to the National Association of Credit Union Service Organizations and generally represent credit unions and credit union service organizations. I have three (3) comments on the Interim Final Rule.

The first comment is that credit unions have not been included in the proposed Rule. Under the Gramm-Leach-Bliley Act, only banks were mentioned but thrifts were included in the Rule. While some of the exemptions do not apply to the current powers of credit unions, credit unions are engaged in some of the exempt activities, e.g. networking arrangements and sweep accounts. It is quite possible that other powers will be extended to credit unions from time to time that fall within the exemptions. To the extent the applicable credit union law permits credit unions to engage in the exemption activities, I recommend that credit unions be included as a covered financial institution.

The second comment is to confirm that this Rule does not adversely affect the ability of credit unions and credit union service organizations to receive a percentage of the commissions from third party broker/dealers in networking arrangements under the authority of the Chubb Letter (November 24, 1993). There are hundreds of these programs in effect and such a result would be catastrophic to the credit union industry that is attempting to meet the financial needs of their members through these arrangements.

My third comment is that the Rule refrain from tying a referral fee to an employee's hourly compensation. It is an administrative hardship to keep track of and constantly adjust various levels of referral fees. It also will cause disharmony in the workplace if one person is getting a different referral fee than another. I recommend the continued use of the word "nominal" with a "not to exceed" fee amount. Thank you for your consideration of these comments.

Respectfully yours,

Guy A. Messick
Guy A. Messick

GAM:mls