VIA E-MAIL: firstname.lastname@example.org
July 17, 2001
Honorable Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 5th Street, NW
Washington, DC 20549-0609
Re: File No. S7-12-01 - Interim Final Rules and Request for Comment 17 CFR Parts 200 and 240, Definition of Terms in and Specific Exemptions for Banks, Savings Associations, and Savings Banks Under Sections 3(a)(4) and 3(a)(5) of the Securities and Exchange Act of 1934
Dear Mr. Secretary:
This comment letter is submitted on behalf of the National Association of State Credit Union Supervisors (NASCUS), which is the professional association of state supervisory agencies which regulate the nation's 4,400 state chartered credit unions.
Our members are state regulatory agencies which are organized as co-equal units of departments which supervise credit unions, banks, savings banks, savings and loan associations, trust companies and securities activities. All states have securities divisions that deal with these activities on a day-to-day basis.
In addition to state regulators, NASCUS membership includes an affiliated organization, the NASCUS Credit Union Council. The Credit Union Council is comprised of nearly 800 state-chartered credit unions that uniquely interact with the NASCUS regulators.
NASCUS has reviewed the interim final rule and we are writing to explain our paramount concern.
Our concern is that, unless state chartered credit unions are afforded the same SEC treatment as commercial banks and savings institutions, the powers granted credit unions by state legislatures and by state regulators will be unnecessarily preempted by SEC regulation or the rule will trigger redundant and costly examination and oversight.
NASCUS, therefore, urges the Commission to extend the same specific exemptions that are proposed for savings associations and savings banks to the nation's state chartered credit unions.
We fully understand that the Commission chose to extend the exemptions to savings associations and savings banks (1) in recognition that it was the intent of Gramm-Leach-Bliley that other "banks" would broaden marketplace competition, but (2) only after it assured itself that the Office of Thrift Supervision had the requisite expertise to oversee the securities related activities of these institutions.
Recognizing that, we urge the Commission to amend the rule to exempt state credit unions, as it does banks and thrifts.
First, assuring that credit unions continue to offer these bank-like services has the effect of even further expanding competition, as envisioned by Gramm-Leach-Bliley.
Second, if credit unions are dissuaded from continuing to offer these services, state chartered credit unions will become less competitive in the marketplace and that, too, would be contrary to the powers granted by state legislatures and state regulators to these institutions.
And, third, like savings banks, sufficient expertise for these purposes resides in the offices of the state regulator who regulates state-chartered credit unions.
In fact, we are of the opinion that, upon review, the Commission will come to appreciate the fact that NASCUS member state agencies regulate both credit unions and securities activities. Clearly, that expertise assures that the requisite competence is available within their state regulatory agency.
We clearly recognize that the Commission would prefer to interact with only one or two Federal agencies for oversight and compliance of "other banks" engaging in regulated securities activities. We suggest, however, that the role played by state credit union regulators is so significantly unique that it makes sense for the Commission to forge a special working relationship with the state credit union regulators and delegate to them these securities functions.
Foremost, the agencies that regulate state credit unions are almost always the part of the same agency that regulates securities activities within the state.
Beyond that, these very state agencies have the demonstrated ability to work in concert with and on behalf of Federal regulatory agencies.
The National Credit Union Administration (NCUA) has been able to successfully rely upon the state regulatory system to implement their responsibilities as administrator of the National Credit Union Share Insurance Fund. Similarly, there is a working interaction in the state regulatory system with the Treasury, the Federal Reserve and others.
The partnership between the state agencies and the NCUA, provided for in Federal law, has resulted in the NCUA's reliance upon state examination reports produced by the state credit union supervisory agencies. Specifically, this reliance upon state regulators is statutorily defined in Title II of the Federal Credit Union Act. As a result, state examination reports are used to determine the continued eligibility of state chartered credit unions for the NCUA share insurance program, the credit union counterpart to the FDIC deposit insurance system. In fact, most federally insured state chartered credit unions rarely are subjected to a safety and soundness examination by the federal agency.
NASCUS believes that the Commission should amend the interim rules to extend an exemption to state credit unions to the same extent the Commission exempted other "banks" in a manner which is in keeping with the intent of Gramm-Leach-Bliley Act.
Obviously, this will require study by the Commission and its senior staff.
In a separate communication, NASCUS will ask to arrange a meeting at the earliest opportunity between NASCUS regulators and appropriate SEC staff to discuss our exemption proposal and the other issues that have been raised by some federal banking regulators.
We appreciate the opportunity to provide these comments and look forward to working with you in the coming months.
NASCUS and the 48 state and Territory of Puerto Rico regulators and the nation's 4,400 state chartered credit unions stand ready to provide additional information and to assist you in every possible way as you work to improve these rules.
Douglas F. Duerr
President and Chief Executive Officer