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NCUA guides CUs on nondeposit investment sales
ALEXANDRIA, Va. (12/15/10)—The National Credit Union Administration (NCUA) in a letter to credit unions has advised federal credit unions to carefully review the financial statements and capital adequacy of eligible third party brokers. The NCUA in letter No. 10-FCU-03 specifically encouraged credit unions to determine if a given broker can provide the necessary services and adequately supervise its sales representatives at the given credit union’s location. Credit unions should also perform background checks via direct references and Financial Industry Regulatory Authority (FINRA) checks, the NCUA added. Directors of federal credit unions should adopt written policies and procedures concerning third party brokerage arrangements to ensure compliance with applicable law and regulation and to ensure consistency with these guidelines, and credit unions should consider engaging legal counsel to evaluate their policies, procedures, and contractual agreements, the NCUA added. Federal credit unions should also outline, in writing, the duties and responsibilities of each party in a third party brokerage arrangement, according to the NCUA. The guidelines also address sales by CUSOs that are wholly or partly owned by federal credit unions, sales by so-called “dual employees” of both credit unions and third party brokers, and sales resulting from a federal credit union bringing a registered third party broker to its members through a networking agreement or other means. For the full guidance, use the resource link.
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