Legality Of Certain Investments By State-Chartered Credit Unions - Q4 1998

By the Division of Banks

Mass. Gen. Laws chapter 167, section 15A sets forth the requirement that the Commissioner of Banks publish annually a list of investments, the Legal List, so called. Unsecured debt securities are not an authorized investment under General Laws chapter 171 for a state-chartered credit union, nor are such unsecured debt securities an authorized investment on the Legal List of investments pursuant to the provisions of section 15A of the General Laws. No such unsecured debt securities would be authorized under section 15B of said chapter 167 since the securities are not interest bearing.

In considering to invest in a particular product, the Division is of the opinion that a state-chartered credit union should undertake a two-step analysis: (1) determine if the investment is legal for the institution; and (2) determine whether the investment would be prudent and consistent with the institution's investment policy.