August 29, 1997
Mr. Carlos A. Figueroa
Shay Financial Services Co.
888 Brickell Ave., 5th Floor
Miami, FL 33131
You have asked for some clarification of my letter to Mr. Tony
Romero, dated April 30, 1997, concerning deposit brokering. A
copy of that letter is enclosed. Briefly summarized, it addresses
issues related to a federally insured credit union accepting deposits
from a custodian who is acting on behalf of other credit unions
and the insurance coverage of those deposits by the National Credit
Union Share Insurance Fund. The letter notes that, if a credit
union issues a certificate registered only "in nominee name"
and accepts funds from a nonmember custodian, there would be no
insurance. This is because only member funds are insured, and
a registration only "in nominee name" provides no insurance
to a nonmember nominee. The letter states that, to avoid this
problem, the funds from the participating credit unions must be
pooled and then the share certificate issued at the time the funds
are deposited.
You have asked for a clarification regarding the requirement that
funds be pooled prior to issuance of a certificate and, also,
whether the credit union issuing a certificate in nominee name
must know the identity of the credit unions actually investing
in the certificate.
On the first question regarding the pooling of funds, you are
basically asking whether it is permissible for a credit union
to issue a certificate of deposit at the same time that the custodian
is sending that credit union the funds it has collected from the
investing credit unions. You describe a scenario in which investing
credit unions transmit funds to XYZ Custodian. XYZ transmits
the funds to the issuing credit union at the same time that that
credit union issues a share certificate. Each investing credit
union will own a portion of the certificate. The certificate
is titled "XYZ as Custodian for Others." This scenario
meets the pooling requirement. We note that it would be preferable
for the certificate to be titled "XYZ as Custodian for Other
Credit Unions." This will remind the issuing credit union
that the certificate represents more than $100,000 in insured
shares.
Regarding your second question, the issuing credit union does
not need to know the identities of the investing credit unions.
An investing credit union's funds will be insured to $100,000 as
long as it maintains records establishing
that it is an owner and the extent of its ownership of the share
certificate.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/LH:bhs
SSIC 3500
97-0642
Enclosure