Barnett Banks Inc. has organized 20-member task force to deal with new regulatory guidelines governing bank sales of mutual funds and annuities.
The bank is considering retraining employees, reprinting brochures, and even rearranging some furniture as it comes to grips with the compliance problems spawned by the guidelines that were issued this summer by the Office of the Comptroller if the Currency and the Federal Reserve Board.
Although Barnett is already substantially in compliance with the guidelines, some fine-tuning will be needed to get completely in sync with the new regulatory regime. according to Jane Kilby, investment products manager for the Jacksonville. Fla.-based company.
Chinese Walls
For instance, the guidelines call for investment centers in branches to be distinct from areas where tellers serve customers, Ms. Kilby said. That has made it necessary for Barnett to review floor plans to make sure that teller lines don't snake toward investment centers.
Barnett apparently is not alone. Other banks in the investment products business are said to be making similar efforts to evaluate and upgrade their disclosure and compliance efforts.
The OCC and Fed guidelines heightened the already considerable attention that banks had been paying to compliance, said Rolland Johannsen, senior partner at Furash & Co.. a Washington consulting firm.
Barnett organized the task force last month, soon after the OCC and Fed came out with their similar guidelines, said Ms. Kilby, who chairs the panel. Employees from the bank's compliance, legal, trust, and marketing departments are also represented.
The group is especially interested in stepping up disclosure, Ms. Kilby said.
For example, signs placed on desks in investment areas will explain that sales representatives offer products that are not prolected by federal deposit insurance.
And the bank expects to move investment centers away from the teller lines, "so customers don't confuse the role of the [securities] salesperson," Ms. Kilby said.
Tax-Deferred Offerings
Barnett has about 110 of its own sales representatives offering mutual funds through 632 branches in Florida and Georgia. A separate sales force employed by James K. Mitchell & Co., San Diego. offers tax-deferred investments, including annuities, to Barnett customers.
Tellers and other bank employees are also targeted. They will receive refresher courses in making referrals to ensure they are making clear the nature of investment products. Ms. Kilby said.
At the same time. thousands of brochures and other marketing materials will be reprinted to note that investors face potential loss of their principal.
The bank also expects to develop a formal "acknowledgment statement" for customers to sign, allowing different parts of the bank to share information about them with investment product salespeople, Ms. Kilby said.
Ms. Kilby has drafted a 10-page policy statement for different parts of the bank to follow to implement the action plan.
And she is confident that, with help from the blueprint. Barnett can make many of the changes this fall.
Barnett hasn't put a dollar amount on the undertaking. but the bank apparently feels whatever it takes is worth it.
"Cost isn't the issue," Ms. Kilby said. "The issue is doing the right thing."
Six Major Trade Groups Form Coalition
As banks hustle to implement new federal guidelines on investment product sales, six national banking trade groups are promoting a self-regulatory approach.
The six trade groups will hold a press conference in Washington on Tuesday to preview jointly drafted sales guidelines. A key aim is to help consumers understand that investment products, unlike bank deposits, aren't backed by the Federal Deposit Insurance Corp., the groups said in a news release.
Members of the informal coalition are the American Bankers Association, the Association of Reserve City Bankers, the Consumer Bankers Association, the Independent Bankers Association of America, the National Bankers Association, and the Savings and Community Bankers of America.
"The industry wants to try and do a better job of self-regulating in a way that expresses concern for the consumer," said Virginia Dean, chief spokeswoman for the ABA.
