August 9, 1993
Honorable George T. Mann Administrator Credit Union Division North Carolina Department of Commerce 1110 Navaho Drive, Suite 300 Raleigh, North Carolina 27609
Re: Advisory Opinion – Authority of State-chartered Credit Unions to Act as Signature Guarantors for Securities Transfers; Subchap. III, G.S. Chap. 54.
Dear Mr. Mann:
You have requested in your letter of July 27, 1993, that this office provide an opinion whether State-chartered credit unions are authorized to act as signature guarantors for securities transfers by their members. According to the information accompanying your letter, the signature of an owner who wishes to transfer any type of security must be guaranteed by an entity acceptable to the transfer agent handling the transfer. Historically, the only guarantees of signatures on securities that were generally acceptable were those provided by commercial banks, trust companies, and broker/dealers of certain stock exchanges. The Securities and Exchange Commission promulgated a rule, however, effective February 24, 1992, which requires transfer agents to accept signature guarantees from qualified credit unions. It further appears from the information furnished with your letter that a credit union acting as a signature guarantor may be financially liable for wrongful guarantees. As conditions for becoming an entity qualified to act as a guarantor, therefore, a credit union must enter into an indemnity agreement and must obtain a surety bond to protect the transfer agents and other financial institutions that rely on the guarantee from loss if the credit union guarantor is unable to meet its obligations under the indemnity agreement.
It is generally held that financial institutions are wholly creatures of statute, Young v. Roberts, 252 N.C. 9, 13, 112 S.E.2d 758 (1960); Pue v. Hood, 222 N.C. 310, 313, 22 S.E.2d 896 (1942); 13 Am.Jur.2d Building and Loan Associations § 6, and have no powers beyond those expressly granted or those fairly incidental thereto, Sparks v. Trust Company, 256 N.C. 476, 481, 124 S.E.2d 365 (1962). We have found nothing in Subchapter III of General Statutes Chapter 54 which specifically or impliedly authorizes State-chartered credit unions to serve as signature guarantors for securities transfers. It is our opinion, therefore, that, nothing else appearing, Statechartered credit unions may not act as signature guarantors.
We note, however, that G.S. § 54-109.21(25) (1992 Cum. Supp) provides, inter alia. that:
[T]he Administrator of Credit Unions, subject to the advice and consent of the Credit Union Commission, and upon a finding that action is necessary to preserve and protect the welfare of credit unions and to promote the general economy of the State, may adopt rules allowing Statechartered credit unions to engage in any activity in which they could engage if they were federally chartered credit unions.
The information that you furnished does not indicate whether federally-chartered credit unions are authorized to act as signature guarantors. If they are, and if the Administrator, with the advice and consent of the Commission, makes the findings required by G.S. § 54-109.21(25) and set out above, then we believe it to be likely that State-chartered credit unions could also act in that capacity. Before issuing a final opinion, however, we would have to examine the statutes, rules, or regulations which authorize federally-chartered credit unions to act as signature guarantors.
We hope that we have fully answered your request, but if you have any questions or comments, please contact us.
Ann Reed Senior Deputy Attorney General
Henry T. Rosser Special Deputy Attorney General