Corporate Credit Unions

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