NCUA Board Approves Non-Registered Investment Fund Pilot Program

The National Credit Union Administration Board approved, by notation vote, an investment pilot program authorized under section 703.19(c) of the NCUA’s regulations.

The NCUA will permit up to 30 complex federal credit unions to engage in investment activities prohibited under part 703 but permitted by the Federal Credit Union Act. ALM First Financial Advisors, LLC., a Securities and Exchange Commission registered investment advisor, requested the investment pilot program.

The requested pilot program would allow complex federal credit unions to invest in a series of non-registered investment funds comprised of consumer loans, as follows:

• The pilot fund would be comprised of permissible consumer loans for federally insured credit unions with maturities of less than 10 years and overnight investments.

• Federal credit unions must be complex and have a capital adequacy classification of well capitalized to invest in the fund and are limited to an aggregate investment of 50 percent of net worth as defined in part 702 of NCUA’s regulations.

The pilot program is subject to the ALM First Loan Fund Investment Pilot Program Requirements and Conditions, which are available on the NCUA website.

Under part 703 of the NCUA’s regulations, federal credit unions are authorized to invest in funds that are registered with the SEC or regulated by the Office of the Comptroller of the Currency, provided the underlying assets purchased by the fund are permissible under NCUA rules for federal credit unions.