WASHINGTON - One year after banking regulators issued guidelines for investment sales through branches, examiners are still spotting problems with compliance.
That was the stern message that senior regulators from the Federal Reserve and the Office of the Comptroller of the Currency delivered Tuesday at a Consumer Bankers Association conference here.
While most banks come up to snuff in disclosing investment risks to customers, some are clearly not doing enough, the regulators said. Trouble spots include poor recordkeeping and inappropriate sales pitches from bank tellers.
The criticism comes as bankers are trying to persuade regulators that they have made strides in explaining risks to customers who invest in uninsured products, such as mutual funds.
For instance, the Bank Securities Association released a study this week suggesting that banks "have taken tremendous steps," according to Peter J. Succoso, the association's past president.
He acknowledged, however, that the study did point out some lingering problems. "We're not going to be completely happy until we're perfect. We're not there yet, but we're working at it," said Mr. Succoso, who is senior vice president in charge of investment management at Wilmington Trust Corp.
The banking regulators said the problems turned up in exams conducted late last year and early this year. They declined to discuss banks by name.
One recurring problem is that the written agreements banks strike with investment product marketing firms frequently don't outline the responsibilities of each party, said Richard Ashton, an associate general counsel at the Federal Reserve. Such detailed agreements are required under the banking agencies' guidelines.
The Fed has also seen unlicensed tellers who are overstepping their bounds by talking up mutual funds, Mr. Ashton said. "They're prequalifying customers, asking about investment objectives" - activities that are strictly off limits under the guidelines.
Julia Olson, an assistant chief examiner with the Comptroller's office, said some brokers are keeping incomplete records of their dealings with customers. "There's no record that they asked customers questions to make sure a good recommendation was made," Ms. Olson said.
Also, some banks lack compliance departments, making it difficult for them to keep tabs on their marketing partners. "I don't know how these banks can know if the third-party vendor is operating within the purview" of the joint guidelines, Ms. Olson said.
