Making their voices heard in the National Association of Securities Dealers' committee rooms is suddenly looking like a priority for banks.
The board of the Washington-based association is expected to vote today on proposed rates to govern bank brokerage activities. Details won't be made public until Dec. 15, but the move marks the first time that the NASD has sought to regulate -- rather than simply guide -- the way banks Sell uninsured investments such as mutual funds, stocks, and bonds.
Though it is technically a trade association, the NASD has the authority to make its decisions stick. That's because it is also a "self-regulatory organization" with a federally mandated mission of setting professional standards for broker-dealers. It carries out these duties in close consultation with the Securities and Exchange Commission, which must give final assent to the NASD's plans.
The General Accounting Office, in a still-uncompleted study of bank mutual fund activities, is said to have concluded that 96% of such sales are conducted through NASD-registered broker-dealer units.
Now that banks have moved aggressively into the brokerage field, they have every reason to seize the chance to help set the ground rules. Yet sources say banks are sorely underrepresented at the NASD, particularly in the committee rooms where policy matters get their first airing.
"A lot of banks are members of the NASD, but I would not say we are in positions of power," said Sarah A. Miller, senior government relations counsel for the American Bankers Association. "We haven't worked our way up."
Indeed, only one of the 28 members of the NASD's board of governors comes from bank-affiliated brokerage. He is Dennis C. Hensley of J.P. Morgan Securities, New York.
Melanie Fein, a law partner with Arnold & Porter in Washington, says banks should consider pressing the NASD for a forum of their own. The association, she noted, has numerous standing committees, including one for brokerages affiliated with insurance companies and one for brokerages affiliated with mutual fund companies.
"Banks are a significant part of the NASD-regulated brokerage community," Ms. Fein said. "Why shouldn't the banks have a committee?" The ABA is considering approaching the NASD with just such a plan, according to Ms. Miller.
"If there are peculiarities to broker-dealers affiliated with insurance companies, there are certainly peculiarities for bank affiliates," she said. "We need a sounding board."
Separately, Ms. Miller said the ABA is making good progress in its plan to form an affiliated group for banks that are active in mutual funds and securities. Plans for the offshoot, tentatively named the American Bankers Securities Association, were reported by the American Banker last month.
Ms. Miller said the new association's board will meet next month to begin addressing such issues as the selection of a chief executive and the group's agenda.
