A credit union inquired whether securities in which it could legally invest but which were available only in bearer form could be held in an account with a broker who in turn would place them in the broker's own name in a custody account with a commercial bank in this State, but with a designation that they were the property of the credit union. Subdivision 14 of section 453 of the Banking Law, pertaining to securities in which a credit union may invest, provides with exceptions not here relevant that such securities if non-registrable “shall be placed in the custody of a bank or trust company or a national bank located in this State, in the name of the credit union__”

The department replied that the arrangement described would not be in compliance with law. As a technical matter the securities would be held by the bank in the name of the broker, not of the credit union as required by statute. As a matter of substance, the fact that there was some form of designation regarding the credit union's ownership would not give the credit union the same control over the securities as it would have if the account were in its own name. In addition, the placement of a broker in the chain of ownership, however nominal its interest may appear to be, adds a degree of risk to the liquidity of, and clarity of ultimate title to the investment securities concerned.

DATED: November 26, 1973