National Association of Federal Credit Unions
P.O. Box 3769 Washington, DC 20007-0269
(703) 522-4770   .   (800) 336-4644   .   Fax (703) 524-1082

July 15, 2002

Jonathan G. Katz
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549-0609

Re: File No. S7-12-01

Dear Mr. Katz:

I am writing on behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association that exclusively represents the interests of federal credit unions, in response to the Securities and Exchange Commission's request for comment on the application of Evangelical Christian Credit Union (ECCU) for exemptive relief under sections 15 and 26 of the Exchange Act.

Sections 201 and 202 of the Gramm-Leach-Bliley Act of 1999 created specific exemptions from broker-dealer registration requirements of the Securities Exchange Act of 1934 for certain bank securities activities. Last May, the Securities and Exchange Commission (Commission) issued an interim final rule implementing the specific exemptions and extending the exemptions to savings associations and savings banks. In relation to this interim final rule, ECCU requests relief from the broker-dealer registration requirements so that it might offer sweep account services without registering as a broker-dealer.

NAFCU supports extension of this exemption to ECCU and strongly encourages the Commission to extend such relief to all federal credit unions, the deposits of which are insured by the National Credit Union Share Insurance Fund, so that these credit unions may offer sweep accounts on the same terms and conditions as banks and thrifts. As stated in NAFCU's comment letter to you dated July 17, 2001, federal credit unions have a consistent track record of exemplary service to their members, as well as unparalleled safety and soundness. NAFCU believes the extension of the exemption to federal credit unions is appropriate, in the public interest and consistent with the need for protection of investors. NAFCU further believes this relief should be granted with respect to all credit union members as opposed to a particular class of members.

If such relief is not granted, federal credit unions will be placed at a significant and unfair competitive disadvantage with respect to banks and thrifts. Many members look to their federal credit unions, as trusted service providers, to provide certain investment services, including sweep account services, in addition to traditional services such as loans and share accounts. Registering as a broker-dealer involves significant fees and examinations that are well beyond the means of most credit unions. Therefore, the administrative and financial burden involved with broker-dealer registration will likely cause many credit unions to be unable to offer this service to their members, which may in turn force those members to seek services from other financial institutions. This result does not benefit consumers and certainly will harm credit unions. Furthermore, given the relatively small market share of credit unions in relation to other financial institutions, NAFCU does not believe that such an extension of relief would unfairly disadvantage banks, thrifts or other financial institutions.

NAFCU also does not believe that extension of this relief to federal credit unions will result in investor protection concerns. Sweep account transactions are conducted by registered broker-dealers and subject to the oversight of the Commission; furthermore federal credit unions are subject to the examination and oversight of the National Credit Union Administration. NAFCU believes there is already considerable regulatory oversight of these activities sufficient to warrant an exemption from the broker-dealer registration requirements for credit unions.

The Commission also requests comment on whether such relief raises issues that should be considered in connection with amendments to the May 11, 2001 interim final rules implementing the broker-dealer registration exceptions. NAFCU stated in its July 17, 2001 comment letter and continues to maintain that the same relief offered to banks, savings associations and savings banks should be extended to federal credit unions. In the interim final rules, the Commission noted the legal uncertainty that is created by some of the exceptions, such as the exemption relating to sweep accounts, by the possible suggestion that registration would be necessary for certain limited conduct by financial institutions. NAFCU is concerned about the impact of this legal uncertainty on federal credit unions if the exemption is not extended to them.

NAFCU appreciates the opportunity to share its views on this issue. Should you have any questions or require additional information, please call me or Gwen Baker, NAFCU's Director of Regulatory Affairs, at (703) 522-4770 or (800) 336-4644 ext. 266.


Fred R. Becker, Jr.