After months of intensive discussions, six national trade associations are putting the finishing touches on standards of industry practice for banks that sell mutual funds.
The standards, which will cover a range of consumer protection and disclosure issues, are being developed in response to heightened concern from lawmakers and regulators over banks' growing role in the sale of mutual funds.
The idea is for bankers to police themselves, rather than wait for policymakers to step in with rigid requirements. The industry standards are intended to provide practical tips on implementing guidelines that have been put forth by federal bank and thrift regulators.
"The work is about 98% done at this point, and parts of it have already been circulated to committees of bankers," said James McLaughlin, director of federal agency relations at the American Bankers Association. The groups expect to issue their recommendations at a joint press conference in mid-January, he said.
Other participants in the project are The Bankers Roundtable, the Consumer Bankers Association, the Independent Bankers Association of America, the National Bankers Association, and the Savings and Community Bankers of America.
The project has absorbed hundreds of hours of staff time since it was announced by the trade groups in September. In the past month alone, eight key staff members from the associations have been holed up in meetings twice a week for three hours at a stretch.
Disclosure remains the focus, and guidelines are being crafted to make sure that discussions of the risks of mutual fund investing are an integral part of mutual fund market advertising by banks.
Growing in Detail
But, Mr. McLaughlin said, the associations' approach "became more detailed and more expansive as we got into it."
For one thing, the groups have decided to come out with guidance on how to reach an arbitration agreement with a dissatisfied customer, he said.
"Another thing we didn't have on the agenda right up front was due diligence," he added. But it became clear that bankers want advice on selecting a third-party provider of mutual funds. and such guidelines are being developed.
The Investment Company institute, meanwhile, is revving up a new consumer-awareness campaign to help the public understand how mutual funds differ from insured deposits.
The campaign, to be launched in January, will emphasize that mutual funds lack Federal Deposit Insurance Corp. coverage and involve possible risk to principal, according to Erick Kanter, chief spokesman for the Washington-based association mutual fund companies.
