An investment strategy for credit unions?

RE Kaplan's query regarding the insurance coverage of exposure of a credit union to investment losses resulting from credit unions officers' actions - Sure, it could claim, but it's prospects of success are somewhere between remote and non-existant!!. The Insurer expects the client to avoid unnecessary and inappropriate risks, and that would be seen to include avoidance of activity that the Officers are not normally expert in. If the fidelity bond were to cover such losses, it would effectively amount to a license for essentially risk-free speculation by credit union investment officers.
 
Tadhgin

From your response, it seems the issue may be a bit of a grey area. I wonder if credit unions have sought independent expert opinion or advice on the extent of their coverage. Could it be that a policy covers the risks of credit union officers decisions when made in good faith ?

Kaplan
 
Kaplan,

An investment decision consists of a decision made by the Officers (the Consumer) on the basis of the Officers' investment expertise and on information provided by the Investment Vendor or Agent (the Provider).

Were it possible to insure against the risk of Investment Loss, there would have to be at very least, a quantification of
(a) the exact nature of the existing portfolio,
(b) the stated Board Investment policy,
(c) the expertise available to the Board and
(d) the likely investment products to be adopted.

This information is not sought.

If such a claim were to be successful, the whole risk/reward relationship would be ended, and Boards would be best advised to put their least-informed Officers on the Investment Committee and speculate extravagantly!!!!! And the product vendors would probably pay the premiums!!!!!!
 
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Tadghin

“Credit Unions Have Rights as “Private Clients” under the Investment Intermediaries Act 1995 (IIA) in their relationship with their Investment Advisors Unless they choose otherwise, credit unions are regarded as “private clients” for the purposes of Section 37 of the Investment Intermediaries Act 1995. (IIA). This entitles credit unions to important rights in their relationships with Investment Intermediaries” (RCU Guidance Note on Investments Jan 2005)

You are correct that is if credit unions are by default retail investors (and its previous incarnation of private clients). Which is something that may shortly be tested in the courts.

But this is a different issue to fidelity bond coverage. My inquiry is not that fidelity bond coverage should extent to investment decisions but rather does the existing contract cover decisions by officers made in good faith where these have resulted in losses to the credit union.

Kaplan
 
The Irish League of Credit Unions has recently published a new advertising leaflet entitled "My Place for Savings". In the leaflet, it poses the question "Are My Savings Secure?". It then goes on to answer as follows:- "Credit Unions affiliated to the Irish League of Credit Unions are members of the Savings Protection Scheme. Also, members' savings are insured through Life Savings insurance (subject to certain terms and conditions). For more details, pick up a copy of the 'Loan Protection and Life Savings Insurance leaflet in your credit union."
What a load of cobblers - they ask one question, and answer a different one!!!!
Typical ILCU fudge and obfuscation, but at least they didn't say they are secure or are guaranteed.
 
Yes the new revamped ILCU public wesbite is a model of consumer transparency ! Funny thing is its members and others continue to masquerade the SPS as a benefit and with one even claiming savings are guaranteed. Interesting post here : [broken link removed]

Intriquing point on the Regulator's website and its role in supervising credit union advertising. The Regulator has deleted reference to the ILCU SPS on its own website (it used to state the SPS " provided an important level of protection).

Kaplan
[broken link removed]
 
What is the Financial Regulator doing by ignoring the false and misleading claims that are still appearing on credit union websites? Does the Financial Regulator not have a responsibility to point out to Credit Unions when and where such false advertising exists? I would assume that Credit Unions would move to amend their websites if the matter were to be pointed out by the Regulator. This surely is an important matter, that would not cost millions to implement!
 
Consider this:

2008
One credit union invests in an instrument that does not comply with the trustee investment order 1998 (and Investment Guidelines 2006). It loses millions. These actions are it appears in breach of section 43 of the credit union act 1997 which says “ If a credit union knowingly contravenes any of the provisions of this section, it shall be guilty of an offence.” What’s more as credit unions are only permitted to act by specific laws then any investment made in breach of these laws is probably irrecoverable. You cannot sue unless you have clean hands.

Another credit union makes a loan which it should not have made which it publically declares it made and states it shouldn’t have. The loan is over 2.5 times larger than legally permissible. Once again the act says : “If a credit union knowingly contravenes any of the provisions of this section, it shall be guilty of an offence.”

Another credit union: Has made a series of loans in excess of legally permitted limits. It’s exposure to loans of over 10 years is multiples of the permitted limit of 10% - it is close to 30% (which is on outside of the new lending guidelines that it cannot qualify for). The act says “If a credit union knowingly contravenes any of the provisions of this section, it shall be guilty of an offence”

These are three examples of some of the many cases where credit unions may be committing offences under the act. How many credit unions have been subjected to legal proceedings for offences committed ?

Kaplan
 
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