ALEXANDRIA, Va.–In a change of opinion, NCUA’s general counsel has decided the “individual policy” requirement of credit union fidelity bonds does not prohibit a credit union from having a bond also covering its CUSO, provided the credit union owns at least 50% of the CUSO or the service organization otherwise meets the definition of a “nominee,” according to an opinion letter made public by the agency.
The news was formerly reported by the Regulatory Report, published by Pat Keefe, who was formerly with NASCUS.
“This Office is changing its opinion of the permissibility of certain joint coverage provisions to clarify the permissibility of the prior bond forms approved by NCUA,” agency General Counsel Michael McKenna wrote. “As the individual policy requirement is neither a statutory requirement nor defined in the current regulation, but rather has been defined by OGC legal opinions, the agency may change its legal interpretation by revising its legal opinions.”
McKenna added that previous legal opinions did not address the issue of joint coverage in bond forms that NCUA had approved in the past. “This has resulted in an inconsistency between NCUA’s approvals and this Office’s legal opinions,” he stated. The inconsistency was determined, he stated, after a review of the previous opinions showed that the agency did not focus on the joint coverage provisions that had been included in approved bond forms before a previous regulatory change.
At issue in the Sept. 26 letter (NCUA opinion letter 17-0959, which does not show an addressee), is section 713.4(b) of the agency’s rules, which requires NCUA to approve any bond form before a credit union may use it, and to approve any changes or amendments to that form. Previously, McKenna wrote, NCUA’s process was to focus on the changed portions of an approved bond form, including joint coverage provisions.
The joint provisions approved by NCUA had been: nominee (for a “nominee” organized by the insured for the purpose of handling certain of its business transactions and composed exclusively of its employees); joint insureds (which explained how claims can be submitted if there is more than one insured under the policy and how losses are administered), and; “definition of insured” (which includes any subsidiary that is owned directly or indirectly by the insured in an amount greater than 50%).
The Sept. 26 letter notes that the agency’s recently published “proposed regulatory reform agenda” includes a recommendation to explore revisions to Part 713 of NCUA rules in the first 24 months of the agenda.