The mutual fund industry's leading trade group is voicing concern that banking regulators are needlessly clashing with their securities counterparts over banks' fund activities.
The Investment Company Institute said the fund industry will face "the same problems that have resulted from the multiplicity of banking agencies" unless the regulators do a better job of working together.
The institute's members include both bank and nonbank managers of mutual funds.
The trade group's general counsel, Paul Schott Stevens, outlined the concerns in letters sent late last month to banking and securities regulators and the White House. He cited three problems as examples of coordination difficulties.
For one thing, Mr. Stevens said, national bank examiners are pressing banks to provide prospective money market fund investors with risk disclosures that are inconsistent with those required by the Securities and Exchange Commission.
The practice is continuing even though senior officials in the Office of the Comptroller of the Currency have told bank examiners to be more accommodating, Mr. Stevens wrote.
He also complained that joint guidelines issued by banking regulators ask banks to make risk disclosures on confirmation notices for mutual fund sales that aren't needed, and are not required by the SEC.
Finally, Mr. Stevens said that the comptroller's office is preparing to embark on "substantive regulation of mutual fund administration and operations" that would duplicate, and potentially be inconsistent with, the SEC's oversight of these areas.
"It is clearly foreseeable that such regulation will be a special burden to bank participants in the fund industry, negatively affecting their profitability and success in the business," he said.
Such rules "could also occasion significant costs and burdens for all funds and their shareholders, [and] compromise the consistent and highly effective framework of regulation to which the industry has historically been subject," Mr. Stevens added.
For his part, David P. Apgar, senior policy adviser to the comptroller, said he thought there was no coordination problem between banking and securities regulators.
Mr. Apgar, a key figure in the crafting of bank investment sales rules, maintained that the concerns about regulation of mutual fund administration by the comptroller are overstated.
He said the comptroller's office was investigating only the possibility of adopting new examination procedures in this area. It is not yet clear if any new procedures will be proposed.
This isn't the first time the institute has publicly aired concerns about conflicts between banking and securities rules.
Indeed, institute president Matthew P. Fink complained about redundant rules in testimony this spring before Congress and in a keynote speech at an industry conference. The institute also has raised the issue in letters sent early this year to banking and securities regulators.
Mr. Fink said in an interview that the institute is reiterating its complaints because it feels that not enough progress has been made.
"The major complaint we hear from our bank members is that the banking regulators are attempting to regulate the very same areas the SEC already regulates," Mr. Fink said.
Melanie Fein, a partner with the Washington-based law firm Arnold & Porter, agreed that bankers are concerned about overlapping rules. Ms. Fein represents banks on investment sales issues, and has published a book on the subject.
She added that the fact that the National Association of Securities Dealers had failed to consult the comptroller's office in the preparation of its recently proposed rules for banks' investment sales shows that coordination continues to be a problem.
R. Christopher Maxwell, executive vice president of mutual funds for Keycorp, Cleveland, said bankers have found the inconsistencies to be "an annoyance." Although there have been several annoyances, they haven't caused major disruptions, he added.
