December 16, 1997
Mark B. Wickard, Senior Vice President - Investments
Credit Union Services Group
PaineWebber Inc.
1500 Abbott Rd., Ste. 200
East Lansing, MI 48823
Dear Mr. Wickard:
You have asked whether PaineWebber's securities safekeeping arrangements
are permissible for federal credit unions (FCUs) under Section
703.60 of the revised rules governing investment and deposit activities
issued by the National Credit Union Administration (NCUA) Board
in June 1997. 62 Fed. Reg. 32989 (1997). They are under an interim
final rule issued by the NCUA Board on November 24, 1997, which
further amended Section 703.60. 62 Fed. Reg. 64146 (1997).
The interim final rule replaced the prohibition against a selling
broker-dealer acting as a safekeeper with the requirement, "Any
safekeeper you [an FCU] use must be regulated or supervised by
either the Securities and Exchange Commission or a federal or
state depository institution regulatory agency." PaineWebber
deposits book-entry securities with the Depository Trust Corporation
(DTC) and holds physical securities itself. Since both DTC and
PaineWebber are regulated by the Securities and Exchange Commission,
PaineWebber's safekeeping arrangements are permissible for FCUs.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/LH:bhs
SSIC 4660
97-1116