Kansas Administrative Regulations
Agency 121 - DEPARTMENT OF CREDIT UNIONS
Article 3 - CREDIT UNION SERVICES ORGANIZATION (CUSO)
Section 121-3-1 - Credit union services organization (CUSO)
Current through Register Vol. 43, No. 52, December 26, 2024
(a) Organization. The board of directors of a credit union may invest in or make loans to a CUSO only if the CUSO is legally established under Kansas law as a corporation, a limited partnership, or a limited liability company, is operated as a legal entity separate from the credit union, and meets the following requirements:
(b) In order to document and verify the required separation, the board of directors of each investing credit union and the board of directors of each lending credit union that intends to invest in or loan to a CUSO on or after February 1, 2008 shall obtain a written legal advice or opinion regarding whether the CUSO is established in a manner that will limit potential exposure of the credit union to no more than the loss of funds invested in, or lent to, the CUSO. The written advice or opinion shall also address the following factors:
(c) Investments and loans. The board of directors of a credit union may invest in or make loans to a CUSO if all of the following conditions are met:
(d) Permissible services. The board of directors of a credit union may invest in or make loans to a CUSO that provides one or more of the following general services:
Each CUSO's president or chief executive officer shall ensure the CUSO's compliance with applicable federal, state, and local laws when engaging in any of the services specified in paragraphs (d)(1) through (8). Each service that is not authorized in paragraphs (d)(1) through (8) shall be required to be approved by the administrator of the Kansas department of credit unions, as a financial or operational service before a CUSO may offer that service. Each request for approval shall include a full explanation of the proposed service and how that service would provide a financial or operational benefit to the investing or lending credit union, the investing or lending credit union's members, or another credit union and its members.
(e) Prohibited activities. The board of directors of a credit union shall not invest in or make loans to a CUSO that has acquired control, directly or indirectly, of another financial institution or has invested in shares, stocks, or obligations of an insurance company, trade association, liquidity facility, or similar organization. The board of directors of a credit union shall not engage in any activity, contract for, or enter into any form or manner of arrangement with a CUSO that would cause the credit union to be committed or liable for an amount in excess of its investment in or loan to the CUSO.
(f) Conflict of interest.
All transactions with business associates or with individuals not specifically prohibited by paragraph (f)(1)(C) shall be conducted at arm's length and in the interest of the credit union.
(g) Accounting procedures. The board of directors of each credit union shall follow generally accepted accounting principles to record any investment in, loan to, or other transactions with a CUSO. The CUSO's president or chief executive officer shall agree in writing with any credit union for which the CUSO provides financial or operational services to follow generally accepted accounting principles.
(h) Financial statements. The board of directors of each credit union shall obtain the following from any CUSO with which the credit union has an outstanding loan or investment:
(i) Access to records. The board of directors of a credit union shall not invest in or make loans to a CUSO whose chief executive officer has not agreed, in writing, with that credit union's board of directors to provide representatives of the Kansas department of credit unions with complete access to any of the books and records of the CUSO as the administrator may request.