NASD Eases Proposed Curbs on Bank Sales

The National Association of Securities Dealers is amending its controversial plan to regulate bank brokerages, a top official said.

The group will soften restrictions it planned for joint marketing of bank products and investment products, said R. Clark Hooper, the association's vice president for advertising.

Banks will, however, have to include sufficient disclosure to differentiate between bank products and investment products, Ms. Hooper said.

Ms. Hooper's statements, made at the NASD's New York office Tuesday, offer the first peek at how the group is responding to bankers' criticism of the proposed brokerage rules, which were unveiled late last year.

The NASD views the measures, which would monitor selling and marketing activities at bank brokerages, as a way of protecting customers.

The NASD, a self-regulatory body that oversees brokerages, and its committee of bank brokerage representatives expect to present a final draft of the rules to the NASD's board of governors in September, Ms. Hooper said.

She declined to detail concessions and amendments that have been made so far, but did offer some insights.

To cut duplication and confusion, Ms. Hooper said the NASD will probably scrap parts of the proposal that are similar to the association's rules of fair practice, which bank brokerages and other investment companies already follow.

But NASD staff and bankers are still at odds over a number of measures, including restrictions on referral fees and the use of customer information to solicit brokerage accounts.

"Those areas we have to work through," Ms. Hooper said.

Bankers said the NASD's concessions, though welcome, did not go far enough.

"It's great they're doing something, but there are other important areas for us," said Dan Phillips, vice president for the Marquis Funds managed by First Commerce Corp., New Orleans.

Mr. Phillips cited the use of customer information to cross-sell products as "very important" to the bank's marketing efforts. He labeled as "nonsense" the NASD's plan to restrict it in relation to brokerage activities.

He also said the agency's restrictions on referral fees were not in sync with programs that bank regulators have traditionally allowed.

Mr. Phillips is among 274 bankers who criticized the NASD's proposed rules during a public comment period held last spring. Bankers charged the NASD's plan was too harsh and in conflict with the way bank regulators monitor the brokerages.

An NASD-appointed committee of bank brokerage heads and fund industry executives is now working with the NASD staff to review the comment letters and come up with compromises, where possible.

The committee could iron out its remaining issues next week, at its fourth meeting, Ms. Hooper said. The sessions generally run all day, but so far "no one has left early or fallen asleep," she said.

If the committee finishes its work, the final draft will go to the NASD board of governors in September and to the Securities and Exchange Commission for another round of public comment before adoption.

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