The National Association of Securities Dealers is about to unveil a blueprint for mutual fund sales practices at banks, the group's top executives said.
The guidelines, which will be distributed to broker-dealers within the next two weeks, will outline roles registered brokers and nonlicensed bank personnel may play in an investment products program.
R. Clark Hooper, a vice president of the association, a standard-setting body for brokerdealers, described the initiative at a mutual fund conference earlier this week.
"You follow this, you stay out of trouble," added NASD deputy director Susan Hechtlinger, who joined Ms. Hooper in making the presentation.
Banking regulators already have issued uniform guidelines for banks that sell mutual funds. The NASD's effort is aimed at brokerage firms that sell through banks, whether they are affiliated with the bank or not.
Though the NASD has issued a series of directives on bank mutual fund sales over the past year, this is its first attempt at a comprehensive plan.
Bankers said the new guidelines could clear up some uncertainty about what the NASD wants from broker-dealers that operate in banks. "It's always been kind of gray before, said Martha Fox, securities compliance manager at Fleet Investment Services.
Ms. Hooper, speaking at a conference sponsored by International Business Communications, said the NASD is issuing the comprehensive guidance in response to the boom in mutual fund activities at banks.
The guidelines the NASD is adopting were first outlined last November in a no-action letter issued by the Securities and Exchange Commission.
In that letter, the SEC said Chubb Securities Corp. could begin operating securities sales programs in banks provided it met certain standards.
The NASD's guidelines are largely in sync with those of banking regulators, but there are some key differences.
For instance, the NASD will urge brokerage firms to devise and issue "conduct manuals" that spell out do's and don'ts for non-licensed employees such as bank tellers who have frequent contact with prospective mutual fund and annuity customers.
Like banking regulators, the NASD will allow tellers to receive nominal one-time fees for making referrals to sales people. But the agency goes a step further by specifying that these employees "will not receive any other compensation, such as trips, free meals, or monetary awards."
Broker-dealer firms should review periodically how banks and their employees are complying with the manual, the NASD says.
The NASD guidelines also ban investment representatives from selling a bank's own debt instruments to branch customers, though they permit sales of individual shares of the banking company's stock to customers who request them.
The NASD also calls for significant separation between regular banking operations and units that sell investment products. This could make it difficult for small branches to operate investment sales programs, said Jay Baris, a law partner at Reid & Priest, New York.
