Bankers Applaud Easing of Reins on Customer Data Sharing

Bankers are praising a regulator for diluting a proposed rule affecting how broker-dealers share customer information.

A new draft of a National Association of Securities Dealers rule would let banks share client data freely with affiliated firms and subsidiaries, including securities and insurance oper-ations-as long as the customer does not protest.

In a previous draft, a salesperson would have had to ask for customer approval before sharing information. In neither draft would companies be allowed to share information with an unrelated company without written permission.

"We feel it is an appropriate change," said Sarah A. "Sally" Miller, a lawyer for the American Bankers Association. "There are certain times when it is in the customers' best interests to share information.

This way information can be shared among business affiliates as long as the customer hasn't objected."

The Securities and Exchange Commission, which must approve the broker- dealer rule, had received 87 written comments-mostly complaints about restrictions on sharing customer information-before the rule was revised this month, the NASD said.

Among the protesters was the Bank Securities Association, which argued that restrictions would hamper the selling to clients of a variety of products from within the same institution.

"The BSA urged that the rule be watered down so that it's more do-able," said Heywood Sloane, a director of the Wayne, Pa.-based trade group.

After hearing bankers' complaints that the initial draft affected only them, the NASD broadened the application of the rule to cover all member brokers, including those at major houses. Thus far, the brokerage community has stayed quiet on the matter.

"We don't have a big retail operation, but it hasn't crossed the radar screen," said Peter Rose, director of media relations at Goldman, Sachs & Co. And Margaret Draper, a spokeswoman for the Securities Industry Association, said the proposed NASD rule had yet to make waves among brokers.

NASD's broker-dealer rule also would prohibit referral fees used within banks. At present, tellers typically receive a $10 fee for referring business to another sector of the bank. If the rule is approved as written, those gratuities would end.

Finally, the rule would require bank brochures and other written information to include a recognizable icon-similar to the "Equal Opportunity Lender" house logo-and the words, "not FDIC insured."

The rule, designed to protect consumers as walls separating brokerages, banks, insurance companies, and other financial service industries fall, is open for public comment until April 30.

The SEC is not expected to act on it before summer, at the earliest.

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