Verbatim: Citi to NASD: Facts Don't Justify Holding Bank Broker-Dealers

The National Association of Securities Dealers is floating a new set of proposed rules for the conduct of bank-affiliated brokerages.

But Kimberly Crichton, the general counsel of Citicorp Investment Services, argued in a recent letter to the NASD that these proposals are unnecessary and would place banks at a disadvantage to their nonbank competitors. Excerpts of her letter follow:

There is no need for such an NASD Rule. The NASD has not presented statistical evidence that broker-dealers operating at banks cause more confusion or more complaints than other broker-dealers. Nor has the NASD proposed any other objective and verifiable analysis that suggests this "higher standard" is necessary or in the public interest.

By imposing a higher responsibility on broker-dealers operating on bank premises and on banks themselves, the proposed bank rule will disrupt our Citicorp Investment Services established services and practices, disturb its current customers and accounts, and require new printings of disclosures at substantial cost.

The proposed bank rule provides that a bank broker "shall not use confidential financial information maintained by the financial institution to solicit customers or its broker-dealer services."

In financial services, competitors possess, buy, and share customer information, including bank information. Bank regulators have permitted this practice. The NASD should consider current and permissible practices before it arbitrarily imposes an unreasonable restraint of trade on a single class of broker-dealers.