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April 16, 2008 - Comments are due by April 30 on the National Credit Union Administration's (NCUA) recent Advanced Notice of Proposed Rulemaking (ANPR). The ANPR addresses several important issues concerning credit union conversions, mergers, member rights and board fiduciary duties.
The ANPR would affect NCUA Rules and Regulations Parts 708a and 708b, sections that apply to all federally insured credit unions. The NCUA has not issued regulations regarding the merger or conversion of a FICU into a financial institution other than an MSB; the NCUA handles the situations on a case-by-case, as-needed basis. The agency is considering developing an administrative framework and procedures to govern these cases.
The ANPR considers six types of transactions:
• Merger of a FICU into a FICU;
• Merger of a FICU into a privately insured credit union (PICU);
• Conversion of a federally-insured state credit union (FISCU) into a PICU;
• Conversion of a FICU to an MSB;
• Merger of a FICU into a financial institution other than an MSB; and
• Conversion of a FICU into a financial institution other than an MSB.
The ANPR requests comments on four areas: management duties, member rights to equity, communications to members and member voting. Credit union boards apply state law and case law to understand fiduciary duties to members in individual states. State law also varies on procedures governing conversions and mergers of state-chartered institutions.
NASCUS agrees with the NCUA about the importance of upholding a board’s fiduciary duty to its members and continuing to foster transparency in communication to members regarding merger and conversions. However, NASCUS believes that processes and procedures governing state-chartered credit unions should be determined and administered by the chartering authority, or state agencies.
NASCUS will comment on ANPR’s approach on these issues as well as with the ANPR's effect on state law. If you have comments you would like to submit to NASCUS, please contact Brian Knight at brian@nascus.org.
To view a summary of the ANPR, click here. (Member log-in required.)
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