Rep. Jay Hoffman

Filed: 4/20/2021

 

 


 

 


 
10200HB3698ham001LRB102 10352 BMS 25468 a

1
AMENDMENT TO HOUSE BILL 3698

2    AMENDMENT NO. ______. Amend House Bill 3698 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Credit Union Act is amended by
5changing Sections 19, 23, 34, 51, 57, 59, and 64.7 and by
6adding Section 20.5 as follows:
 
7    (205 ILCS 305/19)  (from Ch. 17, par. 4420)
8    Sec. 19. Meeting of members.
9    (1)(a) The annual meeting shall be held each year during
10the months of January, February or March or such other month as
11may be approved by the Department. The meeting shall be held at
12the time, place and in the manner set forth in the bylaws. Any
13special meetings of the members of the credit union shall be
14held at the time, place and in the manner set forth in the
15bylaws. Unless otherwise set forth in this Act, quorum
16requirements for meetings of members shall be established by a

 

 

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1credit union in its bylaws. Notice of all meetings must be
2given by the secretary of the credit union at least 7 days
3before the date of such meeting, either by handing a written or
4printed notice to each member of the credit union, by mailing
5the notice to the member at his address as listed on the books
6and records of the credit union, or by posting a notice of the
7meeting in three conspicuous places, including the office of
8the credit union, by posting the notice of the meeting on the
9credit union's website, or by disclosing the notice of the
10meeting in membership newsletters or account statements.
11    (b) Unless expressly prohibited by the articles of
12incorporation or bylaws and subject to applicable requirements
13of this Act, the board of directors may provide by resolution
14that members may attend, participate in, act in, and vote at
15any annual meeting or special meeting through the use of a
16conference telephone or interactive technology, including, but
17not limited to, electronic transmission, internet usage, or
18remote communication, by means of which all persons
19participating in the meeting can communicate with each other.
20Participation through the use of a conference telephone or
21interactive technology shall constitute attendance, presence,
22and representation in person at the annual meeting or special
23meeting of the person or persons so participating and count
24towards the quorum required to conduct business at the
25meeting. The following conditions shall apply to any virtual
26meeting of the members:

 

 

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1        (i) the credit union must internally possess or retain
2    the technological capacity to facilitate virtual meeting
3    attendance, participation, communication, and voting; and
4        (ii) the members must receive notice of the use of a
5    virtual meeting format and appropriate instructions for
6    joining, participating, and voting during the virtual
7    meeting at least 7 days before the virtual meeting.
8    (2) On all questions and at all elections, except election
9of directors, each member has one vote regardless of the
10number of his shares. There shall be no voting by proxy except
11on the election of directors, proposals for merger or
12voluntary dissolution. Members may vote on questions,
13including, without limitation, the approval of mergers and
14voluntary dissolutions under this Act, and in elections by
15secure electronic record if approved by the board of
16directors. All voting on the election of directors shall be by
17ballot, but when there is no contest, written or electronic
18ballots need not be cast. The record date to be used for the
19purpose of determining which members are entitled to notice of
20or to vote at any meeting of members, may be fixed in advance
21by the directors on a date not more than 90 days nor less than
2210 days prior to the date of the meeting. If no record date is
23fixed by the directors, the first day on which notice of the
24meeting is given, mailed or posted is the record date.
25    (3) Regardless of the number of shares owned by a society,
26association, club, partnership, other credit union or

 

 

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1corporation, having membership in the credit union, it shall
2be entitled to only one vote and it may be represented and have
3its vote cast by its designated agent acting on its behalf
4pursuant to a resolution adopted by the organization's board
5of directors or similar governing authority; provided that the
6credit union shall obtain a certified copy of such resolution
7before such vote may be cast.
8    (4) A member may revoke a proxy by delivery to the credit
9union of a written statement to that effect, by execution of a
10subsequently dated proxy, by execution of a secure electronic
11record, or by attendance at a meeting and voting in person.
12    (5) As used in this Section, "electronic" and "electronic
13record" have the meanings ascribed to those terms in the
14Electronic Commerce Security Act. As used in this Section,
15"secured electronic record" means an electronic record that
16meets the criteria set forth in Section 10-105 of the
17Electronic Commerce Security Act.
18(Source: P.A. 100-361, eff. 8-25-17.)
 
19    (205 ILCS 305/20.5 new)
20    Sec. 20.5. Appointment of associate directors.
21    (a) The board of directors of a credit union may, in its
22discretion, appoint one or more associate directors to serve
23in an advisory capacity. The board shall prescribe the duties
24of an associate director and the manner in which associate
25directors are appointed and removed. The board shall not

 

 

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1delegate to associate directors any of the duties or
2responsibilities prescribed by this Act or other applicable
3law to be performed by directors duly elected by their
4members. An associate director shall not be deemed or
5considered to be a director for any purpose under this Act.
6    (b) Before appointing an associate director, the board
7shall confirm that the person meets all of the requirements to
8serve as a director, including, without limitation, a working
9familiarity with the financial and accounting practices of the
10credit union as set forth in subsection (c) of Section 30.
11    (c) An associate director may participate in meetings of
12the board but may not vote or otherwise act as a director. With
13respect to any issue that comes before the board for
14deliberation, the board may request that all associate
15directors excuse themselves from the meeting of the board and
16the associate directors shall immediately comply with the
17request.
18    (d) The board shall require each associate director to
19sign a confidentiality or non-disclosure agreement to ensure
20that information concerning the credit union remains
21confidential.
 
22    (205 ILCS 305/23)  (from Ch. 17, par. 4424)
23    Sec. 23. Compensation of officials.
24    (1) Directors and committee members may receive reasonable
25compensation for their service as such, the amount of which

 

 

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1shall be set by the board of directors, in accordance with
2written policies and procedures established by the board of
3directors. If the Department determines the payment of
4director or committee member compensation, or both, creates a
5safety and soundness issue for a credit union, the Department
6shall utilize the standards set forth in 38 Ill. Adm. Code
7190.25 and supplemental guidelines to address and resolve the
8issue. An enforcement action taken pursuant to 38 Ill. Adm.
9Code 190.25 and guidelines and specified by the Act shall be
10used to reduce or suspend the compensation paid to the
11directors and committee members. The Department shall, by
12rule, establish maximum rates of reasonable compensation that
13are generally applicable to credit unions considering factors
14the Department may establish from time to time, including, but
15not limited to, total assets, nonprofit cooperative structure,
16and the best interests of members. "Compensation" as used in
17this subsection (1) refers to remuneration expense to the
18credit union for services provided by a director or committee
19member in his or her capacity as director or committee member.
20The remuneration expense is in the form of monetary payments
21and shall be disclosed on an annual basis to the membership in
22the financial statement that is part of the annual membership
23meeting materials. The disclosure shall contain: (i) the
24amount paid to each director and (ii) the amount paid to the
25directors as a group. "Compensation" does not include any of
26the expenses described in subsections (2) and (3) of this

 

 

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1Section.
2    (2) The credit union may incur the expense of providing
3reasonable life, health, accident, and similar insurance
4protection benefits for directors and committee members.
5    (3) Directors, committee members and employees, while on
6official business of the credit union, may be reimbursed for
7reasonable and necessary expenses. Alternatively, the credit
8union may make direct payment to a third party for such
9business expenses. Reasonable and necessary expenses may
10include the payment of travel costs for the foregoing
11officials and one guest per official. All payment of costs
12shall be made in accordance with written policies and
13procedures established by the board of directors.
14    (4) The board of directors may establish compensation for
15officers of the credit union.
16(Source: P.A. 101-567, eff. 8-23-19.)
 
17    (205 ILCS 305/34)  (from Ch. 17, par. 4435)
18    Sec. 34. Duties of supervisory committee.
19    (1) The supervisory committee shall make or cause to be
20made an annual internal audit of the books and affairs of the
21credit union to determine that the credit union's accounting
22records and reports are prepared promptly and accurately
23reflect operations and results, that internal controls are
24established and effectively maintained to safeguard the assets
25of the credit union, and that the policies, procedures and

 

 

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1practices established by the board of directors and management
2of the credit union are being properly administered. The
3supervisory committee shall submit a report of that audit to
4the board of directors and a summary of that report to the
5members at the next annual meeting of the credit union. It
6shall make or cause to be made such supplementary audits as it
7deems necessary or as are required by the Secretary or by the
8board of directors, and submit reports of these supplementary
9audits to the Secretary or board of directors as applicable.
10If the supervisory committee has not engaged a licensed
11certified public accountant or licensed certified public
12accounting firm to make the internal audit, the supervisory
13committee or other officials of the credit union shall not
14indicate or in any manner imply that such audit has been
15performed by a licensed certified public accountant or
16licensed certified public accounting firm or that the audit
17represents the independent opinion of a licensed certified
18public accountant or licensed certified public accounting
19firm. The supervisory committee must retain its tapes and
20working papers of each internal audit for inspection by the
21Department. The report of this audit must be made on a form
22approved by the Secretary. A copy of the report must be
23promptly delivered to the Secretary as set forth in paragraph
24(C) of subsection (3).
25    (2) The supervisory committee shall make or cause to be
26made at least once each year a reasonable percentage

 

 

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1verification of members' share and loan accounts, consistent
2with rules promulgated by the Secretary.
3    (3) (A) The supervisory committee of a credit union with
4assets of $10,000,000 or more shall engage a licensed
5certified public accountant or licensed certified public
6accounting firm to perform an annual external independent
7audit of the credit union's financial statements in accordance
8with generally accepted auditing standards and the financial
9statements shall be issued in accordance with accounting
10principles generally accepted in the United States of America.
11    (B) The supervisory committee of a credit union with
12assets of $5,000,000 or more, but less than $10,000,000, shall
13engage a licensed certified public accountant or licensed
14certified public accounting firm to perform on an annual
15basis: (i) an agreed-upon procedures engagement under
16attestation standards established by the American Institute of
17Certified Public Accountants to minimally satisfy the
18supervisory committee internal audit standards set forth in
19subsection (1); or (ii) an external independent audit of the
20credit union's financial statements pursuant to the standards
21set forth in paragraph (A) of subsection (3).
22    (C) Notwithstanding anything to the contrary in Section 6,
23each credit union organized under this Act shall select the
24annual period it desires to use for purposes of performing the
25external independent audit, agreed-upon procedures engagement,
26or internal audit described in this Section. The annual period

 

 

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1may end on the final day of any month and shall be construed to
2mean once every calendar year and not once every 12-month
3period. Irrespective of the annual period selected, the credit
4union shall complete its external independent audit report,
5agreed-upon procedures report, or internal audit report and
6deliver a copy to the Secretary no later than 120 days after
7the effective date of the audit or engagement, which shall
8mean the last day of the selected annual period. The external
9independent audit report or agreed-upon procedures report
10shall be completed and a copy thereof delivered to the
11Secretary no later than 120 days after the end of the calendar
12or fiscal year under audit or fiscal period for which the
13agreed-upon procedures are performed. A credit union or group
14of credit unions may obtain an extension of the due date upon
15application to and receipt of written approval from the
16Secretary.
17    (D) If the credit union engages a licensed certified
18public accountant or licensed certified public accounting firm
19to perform an annual external independent audit of the credit
20union's financial statements pursuant to the standards in
21paragraph (A) of subsection (3) or an annual agreed-upon
22procedures engagement pursuant to the standards in paragraph
23(B) of subsection (3), then the annual internal audit
24requirements of subsection (1) shall be deemed satisfied and
25met in all respects.
26    (4) In determining the appropriate balance in the

 

 

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1allowance for loan losses account, a credit union may
2determine its historical loss rate using a defined period of
3time of less than 5 years, provided that:
4        (A) the methodology used to determine the defined
5    period of time is formally documented in the credit
6    union's policies and procedures and is appropriate to the
7    credit union's size, business strategy, and loan portfolio
8    characteristics and the economic environment of the areas
9    and employers served by the credit union;
10        (B) supporting documentation is maintained for the
11    technique used to develop the credit union loss rates,
12    including the period of time used to accumulate historical
13    loss data and the factors considered in establishing the
14    time frames; and
15        (C) the external auditor conducting the credit union's
16    financial statement audit has analyzed the methodology
17    employed by the credit union and concludes that the
18    financial statements, including the allowance for loan
19    losses, are fairly stated in all material respects in
20    accordance with U.S. Generally Accepted Accounting
21    Principles, as promulgated by the Financial Accounting
22    Standards Board.
23    (5) A majority of the members of the supervisory committee
24shall constitute a quorum.
25    (6) On an annual basis commencing January 1, 2015, the
26members of the supervisory committee shall receive training

 

 

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1related to their statutory duties. Supervisory committee
2members may receive the training through internal credit union
3training, external training offered by the credit union's
4retained auditors, trade associations, vendors, regulatory
5agencies, or any other sources or on-the-job experience, or a
6combination of those activities. The training may be received
7through any medium, including, but not limited to,
8conferences, workshops, audit closing meetings, seminars,
9teleconferences, webinars, and other Internet-based delivery
10channels.
11(Source: P.A. 100-778, eff. 8-10-18; 101-81, eff. 7-12-19.)
 
12    (205 ILCS 305/51)  (from Ch. 17, par. 4452)
13    Sec. 51. Other loan programs.
14    (1) Subject to such rules and regulations as the Secretary
15may promulgate, a credit union may participate in loans to
16credit union members jointly with other credit unions,
17corporations, or financial institutions. An originating credit
18union may originate loans only to its own members. A
19participating credit union that is not the originating lender
20may participate in loans made to its own members or to members
21of another participating credit union. "Originating lender"
22means the participating credit union with which the member
23contracts. A master participation agreement must be properly
24executed, and the agreement must include provisions for
25identifying, either through documents incorporated by

 

 

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1reference or directly in the agreement, the participation loan
2or loans prior to their sale.
3    (2) Any credit union with assets of $500,000 or more may
4loan to its members under scholarship programs which are
5subject to a federal or state law providing 100% repayment
6guarantee.
7    (3) A credit union may purchase the conditional sales
8contracts, notes and similar instruments which evidence an
9indebtedness of its members. In the management of its assets,
10liabilities, and liquidity, a credit union may purchase the
11conditional sales contracts, notes, and other similar
12instruments that evidence the consumer indebtedness of the
13members of another credit union. "Consumer indebtedness" means
14indebtedness incurred for personal, family, or household
15purposes.
16    (4) With approval of the board of directors, a credit
17union may make loans, either on its own or jointly with other
18credit unions, corporations or financial institutions, to
19credit union organizations; provided, that the aggregate
20amount of all such loans outstanding shall not at any time
21exceed the greater of 6% 3% of the paid-in and unimpaired
22capital and surplus of the credit union or the amount
23authorized for federal credit unions.
24    (5) With the approval of the board of directors, a credit
25union may make loans, either on its own or jointly with other
26credit unions, corporations, or financial institutions, to

 

 

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1community development financial institutions as defined in
2regulations issued by the U.S. Department of the Treasury and
3minority depository institutions as defined by the National
4Credit Union Administration. The aggregate amount of all such
5loans outstanding shall not at any time exceed 5% of the
6paid-in and unimpaired capital and surplus of the credit
7union.
8(Source: P.A. 97-133, eff. 1-1-12.)
 
9    (205 ILCS 305/57)  (from Ch. 17, par. 4458)
10    Sec. 57. Group purchasing and marketing.
11    (a) A credit union may, consistent with rules and
12regulations promulgated by the Secretary, enter into
13cooperative marketing arrangements to facilitate its members'
14voluntary purchase of such goods and services as are in the
15interest of improving economic and social conditions of the
16members.
17    (b) A credit union may create and use descriptive and
18brand references to promote and market its identity, services,
19and products to its members. In the case of a merger pursuant
20to Section 63, the surviving credit union may identify the
21merging credit union as a division, branch, unit, or other
22descriptive reference that ensures the members understand they
23are dealing with one credit union rather than multiple credit
24unions, as of the effective date of the merger.
25(Source: P.A. 100-361, eff. 8-25-17.)
 

 

 

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1    (205 ILCS 305/59)  (from Ch. 17, par. 4460)
2    Sec. 59. Investment of funds.
3    (a) Funds not used in loans to members may be invested,
4pursuant to subsection (7) of Section 30 of this Act, and
5subject to Departmental rules and regulations:
6        (1) In securities, obligations or other instruments of
7    or issued by or fully guaranteed as to principal and
8    interest by the United States of America or any agency
9    thereof or in any trust or trusts established for
10    investing directly or collectively in the same;
11        (2) In obligations of any state of the United States,
12    the District of Columbia, the Commonwealth of Puerto Rico,
13    and the several territories organized by Congress, or any
14    political subdivision thereof; however, a credit union may
15    not invest more than 10% of its unimpaired capital and
16    surplus in the obligations of one issuer, exclusive of
17    general obligations of the issuer, and investments in
18    municipal securities must be limited to securities rated
19    in one of the 4 highest rating categories by a nationally
20    recognized statistical rating organization;
21        (3) In certificates of deposit or passbook type
22    accounts issued by a state or national bank, mutual
23    savings bank or savings and loan association; provided
24    that such institutions have their accounts insured by the
25    Federal Deposit Insurance Corporation or the Federal

 

 

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1    Savings and Loan Insurance Corporation; but provided,
2    further, that a credit union's investment in an account in
3    any one institution may exceed the insured limit on
4    accounts;
5        (4) In shares, classes of shares or share certificates
6    of other credit unions, including, but not limited to
7    corporate credit unions; provided that such credit unions
8    have their members' accounts insured by the NCUA or other
9    approved insurers, and that if the members' accounts are
10    so insured, a credit union's investment may exceed the
11    insured limit on accounts;
12        (5) In shares of a cooperative society organized under
13    the laws of this State or the laws of the United States in
14    the total amount not exceeding 10% of the unimpaired
15    capital and surplus of the credit union; provided that
16    such investment shall first be approved by the Department;
17        (6) In obligations of the State of Israel, or
18    obligations fully guaranteed by the State of Israel as to
19    payment of principal and interest;
20        (7) In shares, stocks or obligations of other
21    financial institutions in the total amount not exceeding
22    5% of the unimpaired capital and surplus of the credit
23    union;
24        (8) In federal funds and bankers' acceptances;
25        (9) In shares or stocks of Credit Union Service
26    Organizations in the total amount not exceeding the

 

 

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1    greater of 6% 3% of the unimpaired capital and surplus of
2    the credit union or the amount authorized for federal
3    credit unions;
4        (10) In corporate bonds identified as investment grade
5    by at least one nationally recognized statistical rating
6    organization, provided that:
7            (i) the board of directors has established a
8        written policy that addresses corporate bond
9        investment procedures and how the credit union will
10        manage credit risk, interest rate risk, liquidity
11        risk, and concentration risk; and
12            (ii) the credit union has documented in its
13        records that a credit analysis of a particular
14        investment and the issuing entity was conducted by the
15        credit union, a third party on behalf of the credit
16        union qualified by education or experience to assess
17        the risk characteristics of corporate bonds, or a
18        nationally recognized statistical rating agency before
19        purchasing the investment and the analysis is updated
20        at least annually for as long as it holds the
21        investment;
22        (11) To aid in the credit union's management of its
23    assets, liabilities, and liquidity in the purchase of an
24    investment interest in a pool of loans, in whole or in part
25    and without regard to the membership of the borrowers,
26    from other depository institutions and financial type

 

 

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1    institutions, including mortgage banks, finance companies,
2    insurance companies, and other loan sellers, subject to
3    such safety and soundness standards, limitations, and
4    qualifications as the Department may establish by rule or
5    guidance from time to time;
6        (12) To aid in the credit union's management of its
7    assets, liabilities, and liquidity by receiving funds from
8    another financial institution as evidenced by certificates
9    of deposit, share certificates, or other classes of shares
10    issued by the credit union to the financial institution;
11    and
12        (13) In the purchase and assumption of assets held by
13    other financial institutions, with approval of the
14    Secretary and subject to any safety and soundness
15    standards, limitations, and qualifications as the
16    Department may establish by rule or guidance from time to
17    time; and .
18        (14) In the shares, stocks, or obligations of
19    community development financial institutions as defined in
20    regulations issued by the U.S. Department of the Treasury
21    and minority depository institutions as defined by the
22    National Credit Union Administration; however the
23    aggregate amount of all such investments shall not at any
24    time exceed 5% of the paid-in and unimpaired capital and
25    surplus of the credit union.
26    (b) As used in this Section:

 

 

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1    "Political subdivision" includes, but is not limited to,
2counties, townships, cities, villages, incorporated towns,
3school districts, educational service regions, special road
4districts, public water supply districts, fire protection
5districts, drainage districts, levee districts, sewer
6districts, housing authorities, park districts, and any
7agency, corporation, or instrumentality of a state or its
8political subdivisions, whether now or hereafter created and
9whether herein specifically mentioned or not.
10    "Financial institution" includes any bank, savings bank,
11savings and loan association, or credit union established
12under the laws of the United States, this State, or any other
13state.
14    (c) A credit union investing to fund an employee benefit
15plan obligation is not subject to the investment limitations
16of this Act and this Section and may purchase an investment
17that would otherwise be impermissible if the investment is
18directly related to the credit union's obligation under the
19employee benefit plan and the credit union holds the
20investment only for so long as it has an actual or potential
21obligation under the employee benefit plan.
22    (d) If a credit union acquires loans from another
23financial institution or financial-type institution pursuant
24to this Section, the credit union shall be authorized to
25provide loan servicing and collection services in connection
26with those loans.

 

 

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1(Source: P.A. 100-361, eff. 8-25-17; 100-778, eff. 8-10-18;
2101-567, eff. 8-23-19.)
 
3    (205 ILCS 305/64.7)
4    Sec. 64.7. Network credit unions.
5    (a) Two or more credit unions merging pursuant to Section
663 of this Act may elect to request a network credit union
7designation for the surviving credit union from the Secretary.
8The request shall be set forth in the plan of merger and
9certificate of merger executed by the credit unions and
10submitted to the Secretary pursuant to subsection (4) of
11Section 63. The Secretary's approval of a certificate of
12merger containing a network credit union designation request
13shall constitute approval of the use of the network
14designation as a brand or other identifier of the surviving
15credit union. If the surviving credit union desires to include
16the network designation in its legal name, make any other
17change to its legal name, or both, it shall proceed with an
18amendment to the articles of incorporation and bylaws of the
19surviving credit union pursuant to Section 4 of this Act.
20    (b) A network credit union is a cooperative business
21structure comprised of 2 or more merging credit unions with a
22collective goal of efficiently serving their combined
23membership and gaining economies of scale through common
24vision, strategy and initiative. The merging credit unions
25shall be identified as divisional credit unions, branches, or

 

 

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1units of the network credit union or by other descriptive
2references that ensure the members understand they are dealing
3with one credit union rather than multiple credit unions.
4Descriptive and brand references may also be created and used
5to promote the identity, services, and products of the network
6credit union to its members.
7    (c) Each divisional credit union may have an advisory
8board of directors and a chief management official to assist
9in maintaining and leveraging its respective local identity
10for the benefit of the surviving credit union. The divisional
11credit union advisory boards shall be appointed by the network
12credit union board of directors. Each divisional credit
13union's advisory board of directors may appoint a divisional
14credit union chief management official and may also appoint
15one of its directors to serve on the network credit union's
16nominating committee. A divisional credit union may determine
17to identify its advisory board as a committee and its
18divisional chief management official with a title it deems
19reasonable and appropriate. The network credit union board of
20directors shall require each advisory board member to sign a
21confidentiality or non-disclosure agreement to ensure that
22information concerning the credit union remains confidential.
23    (d) The network credit union is the surviving legal entity
24in the merger and supervision, examination, audit, reporting,
25governance, and management shall be conducted or performed at
26the network credit union level. All share insurance, safety

 

 

10200HB3698ham001- 22 -LRB102 10352 BMS 25468 a

1and soundness, and statutory and regulatory requirements and
2limitations shall be evaluated at the network credit union
3level.
4(Source: P.A. 99-614, eff. 7-22-16; 100-361, eff. 8-25-17.)
 
5    Section 99. Effective date. This Act takes effect upon
6becoming law.".