[Federal Register Volume 69, Number 188 (Wednesday, September 29, 2004)]
[Notices]
[Pages 58203-58204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-21758]


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NATIONAL CREDIT UNION ADMINISTRATION


Federal Credit Union Bylaws

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice and request for comment.

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SUMMARY: The NCUA Board is requesting comment on ways to update, 
clarify and simplify the Federal Credit Union (FCU) Bylaws. In 
addition, this notice requests comment on specific, suggested changes 
to the FCU Bylaws.

DATES: The NCUA must receive comments on or before November 29, 2004.

ADDRESSES: You may submit comments by any of the following methods. 
(Please send comments by one method only):
     NCUA Web site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     e-mail: Address to [email protected]. Include ``[Your 
name] Comments on FCU Bylaws'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary F. Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT: Chrisanthy Loizos, Staff Attorney, 
Office of General Counsel, National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518-
6540.

SUPPLEMENTARY INFORMATION:

Background

    The FCU Act requires the NCUA Board to prepare bylaws that ``shall 
be used'' by FCUs. 12 U.S.C. 1758. In 1999, the NCUA Board issued 
revised FCU Bylaws. 64 FR 55760 (October 14, 1999). The 1999 revision 
included consolidating the existing bylaws into one publication, 
deleting outdated and obsolete bylaws, and using plain English.
    It has been five years since that revision. The NCUA Board has a 
policy of continually reviewing NCUA regulations to ``update, clarify 
and simplify existing regulations and eliminate unnecessary and 
redundant and unnecessary provisions.'' NCUA Interpretive Ruling and 
Policy Statement (IRPS) 87-2, Developing and Reviewing Government 
Regulations. As a result of NCUA's 2003 review, the Board has decided 
to seek comment on the FCU Bylaws to see if there are areas needing 
additional revisions at this time. The Board is aware of a few 
provisions in the bylaws it believes should be revised and is 
requesting comment on the specific, suggested changes discussed below.

Request for Comment

    Article III, Section 7. In 1999, the Board clarified in the FCU 
Bylaws that owners of a joint account may be members of the FCU without 
opening separate accounts if they each purchase at least one share. 
Because some FCUs may not want to allow joint owners of one account to 
be members, the Board is proposing to add an alternative bylaw 
provision that would allow an FCU to require separate accounts for 
membership. An FCU would choose in its bylaws whether or not to allow 
joint account holders to be members without each opening a separate 
account. The Board proposes the following language as an alternative 
Section 7: ``Each member must purchase and maintain at least one share 
in a share account that names the member as the sole or primary owner. 
Being named as a joint owner of a joint account is insufficient to 
establish membership.''
    Article IV, Section 4. This section provides the suggested order of 
business at annual meetings but does not require that every item of 
business listed be addressed during the meeting. The Board seeks 
comment on whether this section should include the required items of 
business that FCU officials must present at the annual meeting. For 
instance, the annual meeting must include the election of directors to 
vacant seats. 12 U.S.C. 1761(a). The supervisory committee is also 
required to provide a summary of its annual audit report to the members 
either orally or in writing at the annual meeting. 12 U.S.C. 1761d; 12 
CFR 715.10. An FCU that participates in the Community Development 
Revolving Loan Program must report on its progress of providing needed 
community services at its annual meeting unless it sends the 
information to members in a written report. 12 CFR 705.6(b). The Board 
seeks comment on whether annual meeting requirements like the ones 
noted should be added to the bylaws.
    Article V, Option A4, Sections 1 and 2. In Section 2, the sentence 
``All elections are determined by plurality vote'' was inadvertently 
omitted from the beginning of this section. We recommend including this 
language that is present in the other three election options.
    In addition, the Board is considering changing this provision, 
which currently permits voting electronically, to allow for mailing all 
notices electronically if the member consents. This would be 
accomplished by: (1) Adding to Section 1 at the end of paragraph one 
``or the secretary may use electronic mail to notify members who have 
opted to receive notices or statements electronically''; (2) deleting 
``written'' everywhere it appears in Section 1, paragraph two; and (3) 
adding to the end of Section 2(b) ``provided, however, that electronic 
mail may be used to provide the notice of ballot to members who have 
opted to receive notices or statements electronically.''
    Article V, Option A4, Section 2(c)(2). The Board is considering 
amending this

[[Page 58204]]

provision to require an FCU to include a mail ballot with its 
electronic election procedure instructions rather than require a member 
without the requisite electronic device to request a ballot. Requiring 
members to contact the FCU in order to receive a ballot may discourage 
member participation in the election process. If the mail ballot is 
included with the electronic election instructions, members will have a 
choice as to the voting method without having to contact the FCU.
    Article V, Option A4, Section 2(d)(5). This provision addresses 
mail ballots and states that, if one form is used for the ballot and 
identification form, it must be ``properly designed.'' NCUA's Office of 
General Counsel has interpreted this provision to require secrecy in 
the balloting process. OGC Legal Opinions 03-510, dated July 30, 2003; 
03-1048, dated March 12, 2004. Prior editions of the FCU Bylaws 
provided instructions that stated: ``[t]he ID form will be separated 
from your ballot when it reaches the credit union, and before any 
ballots are opened.'' Federal Credit Union Standard Bylaw Amendments 
and Guidelines, Sample Ballot, p. 41, October 1991.
    The Board is interested in comments on whether this bylaw should be 
revised to address the secrecy requirement in conjunction with what 
constitutes a ``properly designed'' ballot. One issue to consider is 
the manner in which an FCU can establish an election process that 
assures members their votes remain confidential and secret from all 
interested parties when an independent third-party teller reviews the 
ballots with the members' signatures.
    In another matter related to properly designed ballots, the Board 
is considering a change that would allow names printed on ballots to be 
placed in alphabetical order as an alternative to determining the order 
by drawing lots. The Board seeks comment on this suggestion and other 
alternatives to a fair and properly designed ballot.
    Article V, Section 4. This section currently reads: ``Members 
cannot vote by proxy, but a member other than a natural person may vote 
through an agent designated in writing for the purpose. A trustee, or 
other person acting in a representative capacity, is not as such, 
entitled to vote.'' The Board proposes deleting the second sentence. 
The second sentence reflects a prior legal view when FCU authority to 
establish trust accounts was limited to trust accounts for minors. 
Among other restrictions on these accounts at the time, the trustee had 
to be a member but was not entitled to vote. The provision is now 
outdated because a trust is recognized as a legal entity and may 
qualify for membership in its own right. Also, formal trust agreements 
generally provide that a trustee has the power to vote on behalf of a 
trust when the trust holds shares or stock that entitle the owner to 
vote.
    Article V, Section 7. The Board seeks comment on whether to include 
a provision that sets a minimum age as a qualification for eligibility 
to vote and hold office, as a second option to Section 7, which 
currently allows an FCU's board to establish the age by resolution.
    Article IX, Section 1. The FCU Act precludes the director who is 
the ``compensated officer'' from being the director who can also be on 
the supervisory committee. 12 U.S.C. 1761(b). The bylaw currently 
states that ``[t]he supervisory committee is appointed by the board 
from among the members of this credit union, one of whom may be a 
director other than the financial officer.'' The bylaw incorrectly 
assumes that the financial officer is the ``compensated officer.'' We 
propose replacing ``financial officer'' with ``compensated officer'' so 
that the bylaw is consistent with the FCU Act.
    The Board is seeking comment on all of the above mentioned proposed 
changes and also suggestions on other ways to update, clarify and 
simplify the existing FCU Bylaws. For example, NCUA has encouraged FCU 
managers and directors to consider improvements in matters relating to 
corporate governance and auditing in a manner similar to the 
requirements imposed on public companies under the Sarbanes-Oxley Act 
of 2002. NCUA Letter to Federal Credit Unions 03-FCU-07 (October 2003). 
The Board believes that sound corporate governance practices begin with 
prepared directors and managers. The Board welcomes comments on whether 
particular corporate governance practices or related issues should be 
added to the FCU Bylaws, such as board training or ethics. Based upon 
the comments, the Board will issue a notice with proposed bylaws and 
request for comment.

    By the National Credit Union Administration Board on September 
23, 2004.
Mary Rupp,
Secretary of the Board.
[FR Doc. 04-21758 Filed 9-28-04; 8:45 am]
BILLING CODE 7535-01-P