M A Y  2 0 1 2








Security Safekeeping Solution

Security safekeeping, defined as the keeping of assets which include securities by a financial institution, is a service provided by many banks and other financial institutions. The name itself implies that securities being held at an institution are safely kept. In general, this statement is used loosely and can be a little misleading.

Many brokerage houses offer a custody service to their customers for little or no fee; however, this service is not the same as security safekeeping. Why? The biggest difference is these brokers hold the securities in “street name”. Under street name, the broker keeps record showing the credit union as the real or "beneficial" owner, but the credit union will not be listed directly on the issuer's records. Instead, the brokerage firm will appear as the owner on the issuer's records. Many brokerage firms will automatically put your securities into street name unless you give them specific instructions. Be sure to read the fine print in your Broker/Dealer Agreement.

Here are a few risks to consider if your securities are held in street name:

Another difference between brokerage custody and security safekeeping is that most brokers don’t accept securities purchased from competing brokers. This binds a buyer to purchasing securities from a broker’s inventory versus a competitor’s, which limits the opportunity to shop for a better deal. One way around this would be to have several broker dealer accounts, but that is not an efficient way to manage a portfolio, especially considering the regulatory burden. A better solution would be to open a security safekeeping account with a financial institution, like SunCorp, that allows safekeeping of securities from any broker, thus holding them all in one place in customer name.

SunCorp provides third-party safekeeping of marketable securities to its members. Prudent investment management suggests that the safekeeping function be separate from the brokerage function. SunCorp's program allows your credit union to settle security purchases using the "delivery-versus-payment" (DVP) method — which ensures that funds are not disbursed until the security has been received into safekeeping. This method maximizes your earnings, and guarantees that your credit union is either holding the funds, or the marketable security — at all times.

SunCorp does all of the work, providing monthly statements of holdings and month-end market values to assist you in your accounting. All coupon payments are credited directly into your Cash Management Account, where they begin earning interest immediately. You can also borrow against your securities in safekeeping with a simple phone call. Our secured loans provide immediate liquidity to your credit union at competitive market rates.

For more information regarding SunCorp’s safekeeping services, please contact your Business Development Officer at 877-786-2677, option 2.

Back to top

To unsubscribe from this e-newsletter or to send comments or questions, please send an email to newsletter@suncorp.coop.

Contact Us   |  SunCorp Web site   |   Privacy Statement
Technical Problems? Contact webmaster@suncorp.coop
All contents © 2010 System United Corporate Federal Credit Union