News & Highlights


As General Counsel to NACUSO, I have received many messages that indicate there is confusion as whether network investment programs that are still in a CUSO should be moved to the credit union. This message is being sent to our members in an effort to alleviate some of the confusion. The facts are as follows:

  1. As a result of the 2001 Incidental Powers Regulations, the SEC has told all who have asked that CUSOs no longer have a networking exemption to receive income without being registered, as CUSOs are no longer a “required service corporation” under the Chubb No-Action Letter. It is the position of the SEC that CUSOs have been out of compliance since July 2001.
  2. The SEC has required broker/dealers enter into new networking agreements only with credit unions and not CUSOs. The only exception has been for state chartered credit unions in states that have not confirmed that their state chartered credit unions have Incidental Powers similar to federally chartered credit unions. Wisconsin is the only state I know where this applies. Clarification is being sought from the Wisconsin state credit union regulator.
  3. In the proposed draft of Regulation B, credit unions and banks are provided a networking exemption but CUSOs and bank operating subsidiaries are not mentioned at all.
  4. The SEC has repeatedly stated that it has comfort in dealing with credit unions as they have regulators that the SEC can call upon to help correct any problem that may arise. Since CUSOs are not directly regulated by a credit union regulator, the SEC does not have the same comfort level with CUSOs.
  5. As to the networking exemption, the SEC has indicated that they do not see any reason, from their perspective, to treat CUSOs differently than operating subsidiaries for banks, which have never had a networking exemption.
  6. The SEC has indicated that it is their intention to issue a no-action letter based upon a request submitted by the CUNA Brokerage Advisory Task Force. That letter has not been issued as yet. That letter could provide some guidance as to the role of CUSOs in the investment program but there is no indication that that rule would be expanded to permit CUSOs to have an exemption, especially if CUSOs are not granted a networking exemption under Regulation B.
  7. I have received reports from some broker/dealers indicating that there is pressure from some NASD examiners to move the investment program from the CUSO to the credit union. This pressure does not appear to be uniformly applied. There are no enforcement actions that I am aware of against any CUSO based networking program.

What do we make of all this? NACUSO is responding in two capacities, as an advocate and as an advisor. As an advocate, NACUSO is strongly requesting that the SEC grant the networking exemption to both credit unions and CUSOs. NACUSO will not give up that fight. We expect that other credit unions, CUSOs, and trade associations will also be supportive of expanding Regulation B to include CUSOs. We believe we have good arguments but we have an uphill battle to convince the SEC. The SEC has different perspectives in its role as the securities industry’s regulator.

As an advisor we must not overlook the fact that it is very likely that CUSOs will not be included in Regulation B and only credit unions will have a networking exemption. You look to us for answers to aid you in planning. The ostrich approach to planning is not advisable. We recommend that, at the very least, you should be actively planning on how you will move your investment program from the CUSO to the credit union in order not to be caught unprepared if the SEC starts to initiate enforcement actions against CUSOs.

Many credit unions have already moved their networking program from the CUSO to the credit union. It is likely that the SEC will not begin to initiate enforcement actions against CUSOs until Regulation B is passed and passed in its present state without mentioning CUSOs but there is a regulatory risk in waiting. There is no official grace period that you can rely upon.

We are very close to this issue and we have given you the best assessment of the situation. The level of the regulatory risk of keeping the investment program in the CUSO has been constant and, in our opinion, has not changed as a result of the issuance of the proposed Regulation B for comment, but we think the risk will be very high once Regulation B is passed. The comment period ends September 1, 2004. It is anticipated that there will be many comments that the SEC will have to sort through. We cannot be certain as to you when the Regulation will be enacted but only that it will be enacted at some point, as it is required by the Gramm-Leach-Bliley Act.

Guy Messick
NACUSO General Counsel
July 30, 2004


Many of our members have expressed an interest in continuing to enable CUSOs to enter into networking agreements. CUSOs are not mentioned in the proposed Regulation and would not have that power. NACUSO intends to issue a comment letter in support of CUSOs (along with credit unions) to be able to have the power to enter into networking agreements and to provide administrative and management support for the investment programs. If you want your thoughts considered for inclusion in NACUSO’s letter, please submit them by email to Guy Messick by Monday, August 16th. You are invited to submit your own comments to the SEC as well. The comments are now due on or before September 1st.


As discussed at the NACUSO Annual Conference in May, NCUA reviews one third of its regulations every three years. There is a list of those regulations that will be reviewed this coming year. That can be viewed on NCUA’s website Included in this year’s review will be the regulations governing, CUSOs, Incidental Powers, Privacy and Member Business Loans. If you have any thoughts on how these Regulations can be improved, please send them to NCUA by August 1st at . We ask that you copy our General Counsel Guy Messick at so that NACUSO can advocate on your behalf. Note that you will have the ability to comment on any proposed changes but this is your chance to help define the issues.


The Securities and Exchange Commission (SEC) has issued a proposed rule (“Regulation B”) that would grant credit unions some of the exemptions from the broker-dealer registration requirements that banks currently receive and provide new exemptions for banks. These exceptions are provided under the Securities Exchange Act of 1934 “Exchange Act,” as amended by the Gramm-Leach-Bliley Act (“GLBA”). These exceptions and how the SEC proposes to treat credit unions under Regulation B are described below:

  • First, the proposal would allow credit unions to enter into the same networking arrangements with broker-dealers that banks can. Currently, credit unions may enter into networking arrangements with broker-dealers under the conditions set forth in an SEC opinion letter (“Chubb letter”). However, banks can network with broker-dealers under the terms of the Exchange Act bank exception for third-party brokerage arrangements. This proposal extends that Exchange Act exception to include credit unions, and would thereby supercede the Chubb letter.
  • Second, the proposal would permit credit unions to sweep deposit accounts into no-load money market funds under the same terms as banks can under the bank exception in the Exchange Act. The SEC states that the statutory exception is limited and should place financial institutions offering similar services on a more level playing field.
  • Third, the proposal permits credit unions to buy and sell securities for investment purposes for themselves, or for accounts for which they act as trustee or fiduciary under the terms of the investments transaction exception in the Exchange Act.

The proposal would permit all credit unions, including federal- and state-chartered credit unions, as well as federally insured and privately insured credit unions to utilize the exemptions that are described above. Although the proposal would grant credit unions these three exceptions, it would not automatically give them any associated exemptions given to banks in the future. Moreover, the proposal does not grant credit unions all the exceptions that banks currently have. The SEC requests comments on whether all credit unions should be included in the current proposal, and asks for information on the regulatory oversight given all types of credit unions.

The proposal does not extend to credit unions an exemption to conduct safekeeping and custody activities because the SEC claims it did not find that credit unions engage in activities included in the safekeeping and custody exemption. Under this exception, a bank does not have to register as a broker, if it engages in certain specified types of safekeeping and custody services with respect to securities on behalf of its customers. The SEC invites comment on whether credit unions engage in these types of activities and what legal authority they use to do so. CUNA asked in its comment letter that credit unions be given this authority.

SEC has issued Regulation B and it amends a previous proposal (“Interim Rules”) that provided guidance on the bank exceptions for banks and thrifts under the Exchange Act.

Advocacy Updates

NCUA Meeting Provides CUSO Guidance 6/16/16

NACUSO Visits NCUA to Discuss the CUSO Registry and CUSO Reviews

On June 14, Jack Antonini, NACUSO President and Guy Messick, NACUSO General Counsel met with NCUA Staff on the results of the CUSO Registry and the thinking on how CUSO Reviews will be handled.

The CUSO Registry sign-up period and the follow-up by NCUA found there were approximately 900 CUSOs.   NCUA believes that there are more CUSOs that have not reported.  Under the NCUA Regulations (Part 712.1(d)), “A CUSO also includes an entity in which a CUSO has an ownership interest of any amount, if that entity is engaged primarily in providing products or services to credit unions or credit union members.”   So these subsidiary CUSOs are considered CUSOs and required to make annual reports to NCUA.   The NCUA staff believes that many CUSOs were not fully aware of this requirement and there are a number of subsidiary CUSOs that have not reported.   NCUA will be following up with CUSOs to obtain these filings.   NCUA is also scrubbing the data and asking for clarification if the data is indicating that there may have been a reporting error. (more…)

Report on Advocacy Fund spending…NACUSO Working for you

Through the support of our partners, NACUSO raised approximately $63,000 in contributions toward its Legal and Litigation Fund in 2014 with a primary purpose to develop strategies for the most effective way to seek the repeal and/or mitigation of the impact of the CUSO Rule that NCUA had adopted in November 2013.  Subsequently, NACUSO established an Advocacy Fund to supplement the Legal and Litigation Fund.  The goal of the two funds together were to enable NACUSO to coordinate legal decision making, with a crucial advocacy component that will have more impact than the always risky option of legal action.  In total, $190,600 was contributed to the NACUSO Advocacy Fund.  Combined these two related initiatives received total contributions from NACUSO partners of approximately $253,600 in 2014 and 2015.

In keeping with our commitment to be fully transparent and to regularly communicate our usage of these dollars, we would like to provide you with the following information.  NACUSO spent the following amounts from the two funds during 2014 and 2015:


CUSO Registry Clean Up Period 4/22/16

As most of you know, all CUSOs are obligated under the NCUA Regulations to register certain information directly with NCUA on an annual basis.   Over 800 CUSOs did so in February and March.   NCUA is now in the process of making sure all CUSOs have registered.   Their new deadline is April 30.  They are taking CUSO information from the credit union 5300 call reports and sending out letters reminding “CUSOs” that they have to register.   Some credit unions may have incorrectly listed a company as a CUSO.  Other credit unions list their CUSO but use an acronym for the CUSO instead of the CUSO’s full name.   NCUA, not knowing better is sending letters to any and all companies listed on the call reports. (more…)

Regulatory Update 3/15/16

Letter to NCUA regarding CUSO Registry Acknowledgement: Yesterday, NACUSO informed you of a change we negotiated with our General Counsel (Messick & Lauer) with the NCUA regarding the CUSO Registry Acknowledgment each CUSO is required to agree to when submitting their CUSO registration in the NCUA’s CUSO Registry system.  As we pointed out in our Regulatory Alert yesterday, the acknowledgment required CUSOs to agree to be bound by statutes that only apply to credit unions and which imposed penalties that are not applicable to CUSOs.


Change to the CUSO Registry Acknowledgement 3/14/16

During the process of assisting with CUSO Registry questions, it came to our attention that in order to complete the CUSO Registry, CUSOs were required to agree to be bound by statutes that apply to credit unions and which imposed penalties that are not applicable to a CUSO.  On behalf of NACUSO and the many CUSOs in this industry, Messick & Lauer (NACUSO’s General Counsel) have advocated and negotiated to revise this acknowledgement to more accurately describe the duty of CUSOs to respond to the CUSO Registry.  It is a contractual duty with the credit union and not a direct regulatory obligation to NCUA.   As NCUA continues to pay more attention to CUSOs, NACUSO will continue to take action to be the voice of CUSOs and to resist any attempts at regulatory overreach.  The NCUA has changed the acknowledgement text.  For your reference, the text of the previous and current CUSO Registry acknowledgments are below. (more…)

Regulatory Update 2/26/16

NCUA’s CUSO Registry Training & Demonstration webinar held on February 11 is now available to be viewed.  If you missed the webinar, or want to view it again, to help you in completing the CUSO Registry, you can watch it by clicking on the following link:  View 2/11/16 Webinar. You have until March 31, 2016 to complete your initial registration of all CUSOs.

Regulatory Update 2/1/16: NCUA’s CUSO Registry Opens Today

Credit unions and credit union service organizations can now get additional guidance on NCUA’s CUSO Registry from a new agency website page. Registration for the CUSO Registry opens today and continues through March 31. The new website page explains the agency’s requirement that CUSOs report information directly to the agency if they wish to work with credit unions and provides links to related resources available to help those completing the registry. You can link directly to the CUSO Registry from the resources page.