March 31, 2000
Jonathan G. Katz
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549-0609
RE: Gramm-Leach-Bliley Act Privacy Rule,
Regulation S-P - File No. S7-6-00
Dear Mr. Katz:
The Credit Union National Association (CUNA) appreciates the opportunity to comment on the Securities and Exchange Commission's (SEC's) proposed privacy rule. CUNA represents more than 90 percent of our nation's 11,000 state and federal credit unions.
The SEC privacy rule will apply to credit union service organizations (CUSOs) to the extent that such CUSOs are engaged in securities activities. CUSOs are limited partnerships, corporations, or limited liability companies where a credit union has made an investment and/or loan. CUSOs provide services that primarily serve credit unions or members of affiliated credit unions.
In general, the federal regulators are using a 25% threshold for determining if an entity is an affiliate. This threshold derives from Section 23A of the Federal Reserve Act. The National Credit Union Administration (NCUA) has issued a proposed privacy rule for federally insured credit unions and has specifically requested comment on whether a CUSO that is 100% owned by credit unions should be considered an affiliate of all the investing credit unions, regardless of whether any one credit union owns 25%. This issue has been raised out of recognition that CUSOs occupy a unique role in the credit union cooperative structure with no parallel in other types of institutions and that CUSOs are subject to restrictions that do not apply to other types of affiliates.
We are urging the NCUA Board to eliminate the 25% threshold. If the threshold is eliminated in NCUA's final rule, this will only apply to information that is disclosed by the credit union to the CUSO. However, this change will not apply to information that is disclosed by the CUSO to the credit union, unless the SEC changes its rule accordingly with regard to the CUSOs that are subject to the SEC's jurisdiction.
We believe the SEC should make the necessary change so that the affiliate provisions with regard to CUSOs are equivalent to the provisions in the NCUA rule. The Gramm-Leach-Bliley Act requires that the privacy rules be consistent among the federal agencies. Our suggested change with regard to the treatment of CUSOs as affiliates will help achieve this consistency.
Thank you for the opportunity to comment on the SEC's proposed privacy rule. If you or agency staff have questions about our comments, please give me a call at 202-218-7795.
Assistant General Counsel
Credit Union National Association