[Federal Register Volume 59, Number 221 (Thursday, November 17, 1994)]
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  Federal Register / Vol. 59, No. 221 / Thursday, November 17, 1994 /
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[Federal Register: November 17, 1994]


                                                   VOL. 59, NO. 221

                                        Thursday, November 17, 1994

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 704

 

Corporate Credit Unions

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: NCUA is amending its regulations governing corporate credit 
unions to reduce the close ties between many corporate credit unions 
and credit union trade associations. The final rule requires that at 
least a majority of a corporate credit union's directors, including the 
chair, be representatives of member credit unions. The rule provides 
that a majority of a corporate credit union's directors may not be 
individuals who also serve as officers, directors, or employees of the 
same trade association or affiliated trade associations. The rule 
requires that the chief executive officer of a corporate credit union 
answer solely to the board of directors and not also serve as an 
employee of a trade association. While the rule imposes these and other 
requirements to ensure corporate credit union governance is controlled 
by member credit unions, substantial revisions from the Board's earlier 
proposed rule have been made to address concerns raised by commenters.

EFFECTIVE DATE: January 1, 1996.

ADDRESSES: National Credit Union Administration, 1775 Duke Street, 
Alexandria, VA 22314-3428.

FOR FURTHER INFORMATION CONTACT: H. Allen Carver, Director, Office of 
Corporate Credit Unions, (703) 518-6640, or Robert M. Fenner, General 
Counsel, (703) 518-6540, at the above address.

SUPPLEMENTARY INFORMATION: 

A. Background

     On April 12, 1994, the NCUA Board issued an advance notice of 
proposed rulemaking (ANPR) regarding the relationship between corporate 
credit unions and credit union leagues and trade associations. 59 FR 
18503, April 19, 1994. The ANPR noted that approximately half of the 
corporate credit unions are closely tied to leagues and trade 
associations, through integrated boards or management relationships. 
The ANPR requested comment on whether Part 704 should be amended to 
require that the board of directors of a corporate credit union be 
independently elected by its members, with the condition that a 
majority of the board seats be held by representatives of member credit 
unions, that all or a majority of the corporate credit union board be 
comprised of representatives who do not also serve on the board of a 
league or trade association, and that management of a corporate credit 
union report solely to the board of the corporate credit union.
    NCUA received 400 comment letters in response to the ANPR, 115 
expressing general support for the proposed changes, 278 expressing 
general opposition, and 7 commenting on tangential issues. Remaining 
concerned that a corporate credit union system independent of trade 
association control is important to the safety and soundness of the 
credit union system, the Board determined to request comment on 
specific proposed changes. Accordingly, on September 16, 1994, the 
Board issued a notice of proposed rulemaking. 59 FR 48832, September 
23, 1994.
    It was proposed that the definition of ``corporate credit union'' 
be amended by providing that a corporate credit union could not require 
its members to belong to any other organization. It was proposed that 
at least a majority of a corporate credit union's directors, including 
the chair, be individuals who represented member credit unions and who 
were not officers, directors, or employees of a credit union-related 
organization. ``Credit union-related organization'' was proposed to be 
defined as a credit union league or trade association, an affiliate of 
a credit union league or trade association, or an entity operated or 
controlled by a credit union league, trade association, or affiliate. 
For purposes of meeting the required majority, it was proposed that an 
individual be prohibited from serving as a director of a corporate 
credit union if another individual from his or her credit union was 
serving as an officer, director, or employee of a credit union-related 
organization.
    To implement the existing requirement that elections be conducted 
by mail ballot, revisions were proposed to the standard corporate 
federal credit union bylaws. In addition, it was proposed that state 
chartered corporate credit unions be required to comply with those 
bylaws. It was proposed that if an individual ceased to be the 
representative of an organization for any reason, his or her seat would 
be declared vacant and filled by the corporate credit union board in 
accordance with the bylaws. Finally, it was proposed that the recusal 
provision be strengthened, that management report solely to the board, 
and that no management official or other employee of a corporate credit 
union could be an employee or official of a credit union-related 
organization.

B. Comments

    NCUA received 417 comments on the proposed rule: 330 from natural 
person credit unions, 29 from corporate credit unions, 33 from credit 
union trade associations, 10 from state regulatory agencies, 10 from 
individuals, 3 from central credit unions, 1 from a chapter of a state 
league, and 1 from a bank trade association. Of the commenters 291 were 
opposed to any NCUA regulation in the area of corporate credit union 
governance, 95 supported some regulation in that area but stated that 
the proposed regulation went too far, and 31 supported the proposed 
regulation with no or only minor modifications.
    Many of the commenters who objected to any regulation in the area 
of corporate credit union governance expressed the view that the Board 
should not go forward with a proposed regulation in the face of 
opposition by the majority of commenters on the ANPR. Some suggested 
that the decision to go forward was an indication that the Board did 
not bother to consider the comments and that commenting was useless. In 
fact, the Board took very seriously the comments of interested parties, 
and relied on them to produce what it considers to be a better product. 
The regulatory process, while allowing interested parties to 
participate in rule making through submission of written data, views, 
and arguments, does not bind the Board to abide by such submissions. 
Having solicited comments, the Board, as an independent regulatory 
body, must then act in its best judgment to establish policies that it 
believes will ensure the safety and soundness of federally chartered 
and insured credit unions.
    The Board has concluded that because the interests of trade 
associations (which are basically political organizations) and 
financial institutions often conflict, trade association control of a 
corporate credit union can cause, and in several instances has caused, 
improper allocation of corporate resources. By this rule, the Board 
seeks to position corporate credit unions to remain free of conflicts 
of interest and to avoid the appearance of such conflicts that could 
diminish public confidence in the credit union system.
    The commenters on the proposed rule who objected to any regulation 
on interlocks did so primarily on the basis that corporate credit union 
governance is not a safety and soundness issue. The fact is that trade 
association control of corporate credit unions is a safety and 
soundness issue. Less than arms length financial transactions, and 
problems of financial and fiduciary accountability and control in 
corporate credit unions with close board and management ties to trade 
associations, can affect resource allocation decisions. The Board is 
well aware of several instances where such misallocations have 
occurred. To prevent both the real and apparent conflicts of interest, 
the Board has determined that regulatory changes are in order.
    The commenters who were in favor of some regulation in the area of 
corporate credit union governance tended to believe that the proposed 
regulation was on the right track but that some of its provisions were 
too broad. The commenters argued that the proposed rule could be 
modified and still meet the goal of eliminating trade association 
control of corporate credit unions. The Board agrees and has amended 
the proposed rule as discussed below.

C. Section-by-Section Analysis

Section 704.2  Definitions

    The final rule retains the proposed addition to the definition of 
``corporate credit union'': the requirement that a corporate credit 
union may not condition a credit union's eligibility to join the 
corporate credit union on that credit union's membership in any other 
organization. Most of the commenters who favored some regulation in 
this area supported the amendment. In a first step in providing a 
clearer definition of what a corporate credit union is, the final rule 
also adds two new elements to the definition. These are that a 
corporate credit union is chartered by state or federal law as a credit 
union and that it provides share and loan services to other credit 
unions.
    Among the commenters who favored some regulation, many suggested 
that the term ``credit union-related organization'' was confusing. 
Accordingly, that term has been eliminated and replaced with the term 
``trade association,'' which is defined in the final rule to include 
entities owned or controlled directly or indirectly by a trade 
association. When used in the regulation, ``trade association'' is 
modified by the words ``credit union.'' ``Credit union trade 
association'' includes, but is not necessarily limited to, state credit 
union leagues and league service corporations, national credit union 
trade associations and their affiliates and service organizations, and 
local, state, and national special interest credit union associations 
and organizations.

Section 704.12(a)  Board Representation

    The proposed rule provided that the board was to be determined as 
stipulated in the standard federal corporate credit union bylaws. Some 
commenters objected to requiring state chartered corporate credit 
unions to comply with federal bylaws. The Board is sensitive to state 
interests but believes it is critical that each corporate credit union 
follow election procedures that will provide an opportunity for full 
participation by all members. At the same time, the Board does not wish 
to intrude unnecessarily on a state's prerogative, so the final rule 
makes clear that state chartered corporate credit unions need only 
follow the federal bylaws which govern elections. These would be the 
notice provisions of Article IV, Section 2, and Article V, both as 
amended in the final rule. Since these bylaws provide for elections by 
mail ballot, with procedures for nominations by petition, Section 
704.12(a)(2) of the proposed rule has been deleted as unnecessary.
    In response to comments, the Board has also substantially revised 
the other elements of proposed Section 704.12(a). The Board agrees that 
proposed Section 704.12(a) went beyond preventing trade association 
control and in fact prevented individuals who serve on the corporate 
credit union board from serving in other capacities in the credit union 
system and, in addition, prevented other individuals from their credit 
unions from serving in the system.
    Since corporate credit unions should exist to serve the interests 
of natural person credit unions and their members, Section 704.12(a)(1) 
of the final rule retains the requirement that a majority of corporate 
credit union board members, including the chair, must be 
representatives of member credit unions. Section 704.12(a)(2) of the 
final rule, however, only prohibits the board chair from serving in a 
trade association, on the theory that the chair should be an individual 
whose loyalty is in no way divided between the corporate credit union 
and a trade association.
    Rather than prohibiting the majority of board members who represent 
member credit unions from any service in the credit union system, 
Section 704.12(a)(3) of the final rule simply prohibits a majority of 
board members from serving with a given credit union trade association 
or its affiliates, excluding chapters. The Board believes that a 
corporate credit union's board should not be controlled or overly 
influenced by individuals who represent a particular trade association.
    League chapters were excluded from the restriction because 
individuals serving as officers of such chapters generally are not 
involved in setting policy or making decisions for the league. 
Individuals who serve on league committees are likewise excluded 
because the regulation only applies to officers, directors, and 
employees of a trade association. The proposed prohibition against a 
majority of board members serving as ``agents'' of a trade association 
has been deleted. The provision was unclear in its meaning and 
unnecessary, given the rule against a majority serving as officers, 
directors, or employees of the same or affiliated trade associations.
    State leagues that are members of the Credit Union National 
Association (CUNA) are considered to be affiliated with CUNA and with 
each other. Thus, for example, a five-member corporate credit union 
board could not have two members who serve on the boards of different 
state leagues and one member who serves on the board of CUNA. A five-
member board could, however, have two members who serve on the boards 
of different state leagues, and one member who serves on the board of 
another, unaffiliated trade association. Thus, individual leaders in 
the credit union system would retain the ability to serve in various 
capacities, but a corporate credit union could not be dominated by a 
given trade group.
    Section 704.12(a)(4) of the final rule operates to prevent the 
limitations of paragraphs (2) and (3) from being circumvented by 
placing a senior employee of a credit union on a trade association 
board and a subordinate employee of the same credit union on a 
corporate credit union board. For example, again in the case of a 
corporate credit union with a five-member board, it would not be 
permissible to have the following combination of board members: one 
corporate board member who also serves on the board of CUNA, one board 
member who also serves on the board of a state league, and one 
corporate board member who is an employee of a credit union whose CEO 
serves on the board of a state league. This same example would become 
permissible, however, if the credit union CEO were on the corporate 
credit union board and the vice president were on the league board, or 
if either or both of the two individuals were board members at their 
natural person credit union instead of employees. This distinction is 
based on the belief that only superior to subordinate employee 
relationships result in the kind of domination that would subvert the 
rule.
    Section 704.12(a)(5) of the final rule is a new requirement which 
provides that in the case of any corporate credit union whose 
membership is comprised of more than 25% non credit unions, the 
majority of directors representing member credit unions must be elected 
only by those member credit unions. At least 80% of the membership of 
all corporate credit unions but U.S. Central consists of credit unions. 
Approximately 60% of U.S. Central's membership, however, consists of 
individuals or organizations that are not credit unions and that, for 
the most part, are officials or affiliates of CUNA, CUNA Mutual, the 
World Council of Credit Unions, and the leagues. In the absence of some 
special rule for U.S. Central, this majority would be able to elect, to 
the majority of board seats that must be held by representatives of 
member credit unions, representatives of their choosing, thus removing 
control from U.S. Central's member credit unions.
    Other than requiring the use of the bylaw provisions regarding mail 
ballots and nomination by petition, the Board will not prescribe 
specific procedures for achieving the requirements of Section 
704.12(a). Each corporate credit union has the freedom to develop its 
own election procedures, subject to the requirements of the rule and 
the bylaws.

Section 704.12(b)  Representatives of Organizational Members

    Proposed Section 704.12(b) has been carried through to the final 
rule with the addition of a sentence clarifying that an organizational 
member of a corporate credit union is a member that is not a natural 
person. In response to comments, proposed Section 704.12(b)(2) has been 
amended to make it clear that in filling vacancies, the board of a 
state chartered corporate credit union is free to use the credit 
union's own bylaws, as long as the substantive requirements of the rule 
are met.

Section 704.12(c)  Recusal Provision

    Again, most commenters who supported regulation in the area of 
corporate credit union governance agreed with the proposal to require 
recusal for all matters involving the pecuniary interest of an 
organization in which a corporate official is interested, rather than 
just matters where the amount in question exceeds 5% of the corporate's 
capital. The final rule makes this change. As noted in the 
supplementary information section of the proposed rule, a healthy and 
independent credit union movement depends, in part, on preventing even 
the appearance of conflicts of interest. A strong recusal provision is 
necessary to achieve this goal. Under the recusal provision, an 
individual who is interested in a matter may not deliberate or vote on 
the matter, or otherwise attempt to influence its outcome.
    The final rule has been amended to clarify that the recusal 
provision does not apply when the matter involves general policy 
applicable to all members, rather than a specific action regarding one 
member. In addition, the word ``agent'' has been deleted as being vague 
and potentially overly broad.
    The proposed definition of ``interested'' has been made final, with 
the clarification that recusal is only required when a director, 
committee member, officer, or employee of a corporate credit union has 
a relationship with someone and knows that that person has in interest 
in an entity whose interest will be affected by an action of the 
corporate credit union.

Section 704.12(d)  Administration

    Section 704.12(d) of the proposed rule required the management 
official of the corporate credit union to report solely to the board 
and prohibited any management official, officer, agent, or employee of 
the corporate credit union from being a management official, officer, 
agent, or employee of a trade association. In response to comments, the 
final rule prohibits only the chief executive officer of a corporate 
credit union from serving as an employee of a trade association.
    The provision was narrowed because of the criticism that 
prohibiting sharing of employees and resources with leagues or other 
organizations would put small corporate credit unions out of existence. 
It was argued that small corporate credit unions have a place in the 
future of the credit union system because large, regional or national 
corporate credit unions may not devote as much time and resources to 
providing service to small natural person credit unions. To address 
this concern, the final rule does not prohibit sharing of employees 
below the level of the chief executive officer of the corporate credit 
union. The CEO of the corporate credit union, who may not be an 
employee of a trade association, must report to the corporate board, 
which cannot be dominated by persons associated with any given trade 
association. With those restrictions in place, a corporate credit union 
should be allowed, based on its business judgment, to share employees 
and other resources with any other organization.
    To clarify that the provision applies to the top paid employee of 
the corporate credit union, not the chair of the board, the final rule 
substitutes ``chief executive officer'' for ``management official.''
    As discussed earlier, Section 704.12(e), the definition of ``credit 
union-related organization,'' has been deleted from the final rule.

D. Applicability to State Chartered Corporate Credit Unions

    The final rule applies to all federally insured corporate credit 
unions. (Non federally insured corporate credit unions must comply with 
the rule in order to receive funds from federal credit unions.) The 
Board acknowledges the strong sentiment against NCUA applying this rule 
to state chartered corporate credit unions. The Board's rationale for 
applying this rule to such credit unions is provided in the analysis of 
Executive Order 12612, set forth below.

E. Effective Date

    This rule will not take effect until January 1, 1996. Board members 
in the midst of their terms on that date need not leave the board, even 
if that means the corporate credit union does not meet Section 
704.12(a) of the rule. Elections held after the effective date, 
however, must be conducted so as to bring the corporate credit union 
into compliance with the regulation. For example, on a nine-person 
board where each member serves as a director of Trade Association A, 
members serve three-year terms, and three members are elected each 
year, the three individuals elected in 1996 must not serve as officers, 
directors, or employees of Trade Association A or its affiliates. Two 
of the individuals elected in 1997 also must not serve in those 
capacities for the trade association. At that time, the majority of the 
board will not be serving as officers, directors, or employees of the 
same or affiliated trade association, a condition which must be 
maintained in subsequent elections. The requirement for an independent 
chair of the board would have to be met at the earliest possible date, 
the 1996 election in this example.
    Corporate credit unions must come into compliance with the other 
provisions of the rule on the effective date.

F. Regulatory Procedures

Regulatory Flexibility Act

    The NCUA Board certifies that the final rule will not have a 
significant economic impact on small credit unions (those under $1 
million in assets). The rule applies only to corporate credit unions, 
all of which have assets well in excess of $1 million. Accordingly, the 
NCUA Board has determined that a Regulatory Flexibility Analysis is not 
required.

Paperwork Reduction Act

    The final rule does not impose any paperwork requirements.

Executive Order 12612

    Executive Order 12612 requires NCUA to consider the effect of its 
actions on state interests. It states, ``Federal action limiting the 
policy-making discretion of the states should be taken only where 
constitutional authority for the action is clear and certain, and the 
national activity is necessitated by the presence of a problem of 
national scope.'' The risk of loss to federally insured credit unions 
and the NCUSIF caused by actions of corporate credit unions are 
concerns of national scope. The final rule will help ensure that proper 
safeguards are in place to ensure the safety and soundness of corporate 
credit unions.
    The rule applies to all federally insured corporate credit unions, 
including those that are state-chartered. State-chartered corporate 
credit unions enjoy the same benefits provided by the NCUSIF as do 
federally chartered corporate credit unions. The benefits are provided 
through a federal system, the responsibility for which lies with the 
NCUA Board. The Board believes that those who benefit from the system 
should bear its burdens equally. The rule also affects, indirectly, non 
federally insured state-chartered corporate credit unions, which, 
pursuant to 12 CFR Part 703, must comply with the rule in order to 
receive funds from federally chartered credit unions. The final rule 
does not impose additional costs or burdens on the states or affect the 
states' ability to discharge traditional state government functions.
    The Board has determined, pursuant to Executive Order 12612, that 
the final rule may have an occasional direct effect on the states, on 
the relationship between the national government and the states, or on 
the distribution of power and responsibilities among the various levels 
of government. Further, the final amendments may supersede provisions 
of state law or regulation concerning federally insured state-chartered 
corporate credit unions.

List of Subjects in 12 CFR Part 704

    Credit unions, Reporting and record keeping requirements.

    By the National Credit Union Administration Board on November 
10, 1994.
Becky Baker,
Secretary of the Board.

    For the reasons set forth in the preamble, 12 CFR part 704 is 
amended as follows:

PART 704--CORPORATE CREDIT UNIONS

    1. The authority citation for part 704 continues to read as 
follows:

    Authority: 12 U.S.C. 1762, 1766(a), 1781, and 1789.

    2. Section 704.2 is amended by removing the definition of 
Affiliated organization, revising the definition of Corporate credit 
union, and adding in alphabetical order the definition of Trade 
association, to read as follows:


Sec. 704.2  Definitions.

* * * * *
    Corporate credit union means an organization that:
    (1) Is chartered under Federal or state law as a credit union;
    (2) Receives shares from and provides loan services to other credit 
unions;
    (3) Is operated primarily for the purpose of serving other credit 
unions;
    (4) Is designated by the National Credit Union Administration as a 
corporate credit union;
    (5) Limits natural person members to the minimum required by state 
or federal law to charter and operate the credit union; and
    (6) Does not condition the eligibility of any credit union to 
become a member on that credit union's membership in any other 
organization.
* * * * *
    Trade association means an association of organizations or persons 
formed to promote their common interests. The term includes entities 
owned or controlled directly or indirectly by such an association but 
does not include credit unions.
* * * * *
    3. Section 704.12 is revised to read as follows:


Sec. 704.12  Representation.

    (a) Board representation. The board shall be determined as 
stipulated in the standard corporate federal credit union bylaws 
governing election procedures, provided that:
    (1) At least a majority of directors, including the chair of the 
board, must serve on the board as representatives of member credit 
unions;
    (2) The chair of the board may not serve simultaneously as an 
officer, director, or employee of a credit union trade association;
    (3) A majority of directors may not serve simultaneously as 
officers, directors, or employees of the same credit union trade 
association or its affiliates (not including chapters or other subunits 
of a state trade association);
    (4) For purposes of meeting the requirements of paragraphs (a)(2) 
and (a)(3) of this section, an individual may not serve as a director 
or chair of the board if that individual holds a subordinate employment 
relationship to another employee who serves as an officer, director, or 
employee of a credit union trade association;
    (5) In the case of a corporate credit union whose membership is 
composed of more than 25% non credit unions, the majority of directors 
serving as representatives of member credit unions, including the 
chair, must be elected only by member credit unions.
    (b) Representatives of organizational members.--(1) An 
organizational member of a corporate credit union is a member that is 
not a natural person. An organizational member may appoint one of its 
members or officials as a representative to the corporate credit union. 
The representative shall be empowered to attend membership meetings, to 
vote, and to stand for election on behalf of the member. No individual 
may serve as the representative of more than one organizational member 
in the same corporate credit union.
    (2) Any vacancy on the board of a corporate credit union caused by 
a representative being unable to complete his or her term shall be 
filled by the board of the corporate credit union according to its 
bylaws governing the filling of board vacancies.
    (c) Recusal provision.--(1) No director, committee member, officer, 
or employee of a corporate credit union shall in any manner, directly 
or indirectly, participate in the deliberation upon or the 
determination of any question affecting his or her pecuniary interest 
or the pecuniary interest of any entity (other than the corporate 
credit union) in which he or she is interested, except if the matter 
involves general policy applicable to all members, such as setting 
dividend or loan rates or fees for services.
    (2) An individual is ``interested'' in an entity if he or she:
    (i) Serves as a director, officer, or employee of the entity;
    (ii) Has a business, ownership, or deposit relationship with the 
entity; or
    (iii) Has a business, financial, or familial relationship with an 
individual whom he or she knows has a pecuniary interest in the entity.
    (3) In the event of the disqualification of any directors, by 
operation of paragraph (c)(1) of this section, the remaining qualified 
directors present at the meeting, if constituting a quorum with the 
disqualified directors, may exercise, by majority vote, all the powers 
of the board with respect to the matter under consideration. Where all 
of the directors are disqualified, the matter must be decided by the 
members of the corporate credit union.
    (4) In the event of the disqualification of any committee member by 
operation of paragraph (c)(1) of this section, the remaining qualified 
committee members, if constituting a quorum with the disqualified 
committee members, may exercise, by majority vote, all the powers of 
the committee with respect to the matter under consideration. Where all 
of the committee members are disqualified, the matter shall be decided 
by the board of directors.
    (d) Administration.--A corporate credit union shall be under the 
direction and control of its board of directors. While the board may 
delegate the performance of administrative duties, the board is not 
relieved of its responsibility for their performance. The board may 
employ a chief executive officer who shall have such authority and such 
powers as delegated by the board to conduct business from day to day. 
Such chief executive officer must answer solely to the board of the 
corporate credit union, and may not be an employee of a credit union 
trade association.

    Note: The following appendix will not appear in the Code of 
Federal Regulations

Appendix to the Preamble of the Final Rule

    The document entitled ``Corporate Federal Credit Union Bylaws'' is 
amended by revising Article IV, Section 2, and Article V, Sections 1 
and 2, and adding Article V, Section 4, to read as follows:

Article IV. Meetings of Members

* * * * *
    Section 2. At least 75 days before the date of any annual 
meeting or 10 days before the date of any special meeting of the 
members, the recording officer shall cause written notice to be 
mailed to each member at the address that appears on the records of 
this credit union. Such notice shall state the date, time, and 
location of the meeting and such other information as the board of 
directors shall determine consistent with these bylaws. The written 
notice for the annual meeting shall advise the members of the 
deadlines for elections. Any meeting of the members, whether annual 
or special, may be held without prior notice, at any time or place, 
if all members entitled to vote and who are not present at such 
meeting shall, in writing, waive notice thereof, before, during, or 
after such meeting.
* * * * *

Article V. Elections

    Section 1. At least 120 days prior to each annual meeting the 
board of directors shall appoint a nominating committee of not fewer 
than three from among the members. It shall be the duty of the 
nominating committee to nominate at least one eligible candidate for 
each vacancy, including any unexpired-term vacancy, for which 
elections are being held, and to determine that the candidates 
nominated are agreeable to the placing of their names in nomination 
and will accept office if elected. The nominating committee shall 
file its nominations with the recording officer at least 90 days 
prior to the annual meeting, and the recording officer shall notify 
in writing all members eligible to vote at least 75 days prior to 
the annual meeting that nominations for vacancies may also be made 
by petition signed by 5 percent of the members with a minimum of 5 
members and a maximum of 100 members.
    The written notice shall indicate that the election will not be 
conducted by ballot and there will be no nominations from the floor 
when there is only one nominee for each position to be filled. A 
brief statement of qualifications and biographical data in such form 
as shall be approved by the board of directors will be included for 
each nominee submitted by the nominating committee with the written 
notice to all eligible members. Each nominee by petition shall 
submit a similar statement of qualifications and biographical data 
with the petition. The written notice shall state the closing date 
for receiving nominations by petition. The period for receiving 
nominations by petition shall, in all cases, extend at least 30 days 
from the date the petition requirement and the list of nominating 
committee nominees are mailed to all members. To be effective, such 
nominations shall be accompanied by a signed certificate from the 
nominee or nominees stating that they are agreeable to nomination 
and will serve if elected to office. Such nominations shall be filed 
with the recording officer at least 40 days prior to the annual 
meeting.
    In carrying out their responsibilities, the nominating committee 
and board of directors must ensure that the requirements of 12 CFR 
Sec. 704.12(a) are satisfied.
    Section 2. All elections shall be determined by plurality vote 
and shall be by mail ballot except where there is only one nominee 
for each position to be filled. Nominations shall not be made from 
the floor unless sufficient nominations have not been made by the 
nominating committee or by petition to provide for one nominee for 
each position to be filled or circumstances prevent the candidacy of 
the one nominee for a position to be filled. Only those positions 
without a nominee shall be subject to nominations from the floor. In 
the event nominations from the floor, when permitted herein, result 
in more than one nominee for a position to be filled, and when 
nominations have been closed, tellers shall be appointed by the 
board of directors, ballots shall be distributed, the vote shall be 
taken and tallied by the tellers, and the results announced. When 
only one member is nominated for each position to be filled, the 
chair may take a voice vote or declare each nominee elected by 
general consent or acclamation at the annual meeting.
* * * * *
    Section 4. Except as provided in Section 2 of this article, all 
elections shall be by mail ballot, subject to the following 
conditions.
    (a) The tellers of election shall be appointed by the board of 
directors;
    (b) Sufficient nominations having been made by the nominating 
committee or by petition to provide more than one nominee for any 
position to be filled, the recording officer shall, at least 30 days 
prior to the annual meeting, cause printed ballots to be mailed to 
all members eligible to vote;
    (c) The recording officer shall cause the following materials to 
be mailed to each eligible voter:
    (1) One ballot, clearly identified as such, on which the names 
of the candidates for the board of directors and the candidates for 
other separately identified offices or committees shall have been 
printed in order as determined by the draw of lots. The name of each 
candidate shall be followed by a brief statement of qualifications 
and biographical data in such form as shall be approved by the board 
of directors;
    (2) One envelope clearly marked with instructions that the 
completed ballot shall be placed therein and the envelope sealed;
    (3) One identification form to be completed so as to include the 
name, address, and account number of the voter;
    (4) One mailing envelope in which the voter, pursuant to 
instructions provided, shall insert the sealed ballot envelope and 
the identification form, and which shall have been postage prepaid 
and pre addressed for return to the tellers of election;
    (5) When properly designed, one form can be printed that 
represents a combined ballot/identification form, and postage 
prepaid and pre addressed return envelope;
    (d) It shall be the duty of the tellers of election to verify, 
or cause to be verified, the name and account number of the voter 
appearing on the identification form; to place the verified 
identification form and the sealed ballot envelope in separate 
places of safekeeping pending the count of the vote; and, in the 
case of a questionable or challenged identification form, to retain 
the identification form and sealed ballot envelope together until 
the verification or challenge has been resolved;
    (e) Ballots mailed to the tellers of election must be received 
by the tellers no later than midnight 5 days prior to the date of 
the annual meeting;
    (f) Voting shall be closed at the midnight deadline specified in 
subsection (e) hereof and the vote shall be tallied by the tellers 
of election. The result shall be verified at the annual meeting, and 
the board of directors shall make public the result of the vote at 
the annual meeting.

[FR Doc. 94-28367 Filed 11-16-94; 8:45 am]
BILLING CODE 7535-01-M