RANCHO CUCAMONGA, Calif. (1/17/08)--The California Department of Financial Institutions (DFI) has given approval for state-chartered credit unions to hold investments in the restricted stock of Visa Inc. The California Credit Union League worked with state DFI officials for several months to encourage the blanket approval instead of having each credit union solicit a separate opinion. “This issue has been a top priority for us, and our lobbying team worked tirelessly with DFI [staffers] to give them the information they needed to provide guidance and approval, said league President/CEO Bill Cheney. When Visa USA becomes a public company later this year, it will change its name to Visa Inc. Then it will convert member ownership positions into restricted stock on a pro rata basis. State-chartered credit unions receiving such stock will be allowed to hold the stock under the terms of the ownership restrictions. Several other states have provided similar guidance to their state-chartered credit unions in recent weeks. The National Credit Union Administration (NCUA) has also provided similar guidance to federally chartered credit unions. Use the resource link to access Visa stock accounting tips provided by the Credit Union National Association's (CUNA's) Accounting Task Force. In October of 2006, Visa Inc. announced plans to restructure its non-European operations into a global corporation and offer a majority of its stock to the public. As a part of the restructuring, Visa U.S.A. will become a subsidiary of Visa Inc., and its members will receive stock in Visa Inc. calculated on the basis of fees a member has generated in the past. Visa member financial institutions, including credit unions, will not compensate Visa Inc. for the stock, nor will they receive the stock without taking any further action. No cash or other rewards to members are available in lieu of the stock. As part of the transaction, financial institutions will be prohibited from selling their shares for three years. Generally, the Federal Credit Union Act does not authorize federal credit unions to invest in the stock of companies other than credit union service organizations, said the league. However, on Nov. 1, 2007, the NCUA issued a legal opinion stating that federal credit unions may accept and hold Visa stock. The agency views the transaction not as an investment (since no tangible consideration will be paid, and federal credit unions are receiving it as the result of the business decisions of a third party), but as a by-product of lending, which is permissible. NCUA also cautioned that a federal credit union may not receive and retain the stock if its examiner determines holding the stock is a safety and soundness problem for that credit union. Unlike the NCUA, California's DFI views the receipt of Visa stock by credit unions as an investment requiring approval of the Commissioner (California Financial Code §14653.5). On Jan. 11, DFI issued a legal opinion letter granting blanket approval for state-licensed credit unions to hold the stock. According to the league, the DFI advises credit unions that this approval is only for the ownership of restricted stock resulting from the conversion of Visa, U.S.A., and for any other investment, including (but not limited to) common stock that will be issued in the Visa initial public offering.