Bank Brokers Group To Ask Eased Guidance From Agencies on Sales

The Bank Securities Association is preparing a campaign to ease guidelines governing bank brokerages, according to the group's general counsel.

By early summer, the group plans to present petitions to the bank regulatory agencies in an attempt to amend the "interagency statement" that governs bank investment product sales, said Robert M. Kurucza.

Among provisions the trade group wants revised is one forbidding banks to make cross-referral bonuses conditional on sales' being closed.

The association will soon start sounding out its members at bank brokerages to assemble a wish list of changes, which it will present to the Office of Thrift Supervision, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Federal Reserve Board. The four agencies published guidelines on bank investment product sales in February 1994.

Comptroller of the Currency Eugene A. Ludwig, who is to step down from his post today, has recently urged fellow regulators to turn the guidelines into rules, which could be enforced through fines and other penalties.

But Mr. Kurucza said the guidelines are ripe to be eased because bank brokerages are increasingly considered trustworthy. "I think the regulatory environment has matured," he said.

The association's campaign comes on the heels of a successful push by the group and other banking organizations to gut a regulatory document offered by the National Association of Securities Dealers.

The BSA and others lobbied furiously to amend the NASD's bank-broker rules that would have forbidden, among other things, referral fees and sharing of customer data between bank departments. A declawed version of the document took effect Feb. 15.

Most bank brokerage heads interviewed this week reacted favorably to the BSA's plan. Suggestions for changes ranged from simple language clarifications to scrapping the regulatory structure altogether.

Michael Boulden, vice president at the brokerage arm at Sanwa Bank, Los Angeles, said regulatory language is unclear when it comes to how banks must disclose investment products' risks to customers.

Because of the lack of clarity, banks play it safe by making the customer sign two disclosure forms. The procedure could be simplified under clearer guidelines, he said.

"If regulators could be clearer and more specific, that would be helpful," Mr. Boulden said.

Ed Hipp, president of the brokerage at Centura Bancorp, Charlotte, N.C., said it is unfair for banks to be subjected to tougher rules than wire houses and regional brokerages, particularly because the nonbank brokers can sell bank products like certificates of deposit.

Specifically, there should be no requirement to point out to customers that investment products are not FDIC-insured, said Mr. Hipp, who worked for almost 20 years as a wire house broker before becoming a bank executive.

"It's almost like the Interagency document doesn't recognize the common sense of our customers," he said. "Why should there be two sets of standards?"

Mr. Kurucza said that may be asking a little too much.

"We'll take a middle-of-the-road, realistic approach," he said.

Not all bankers are eager to see reforms. One bank brokerage head, who asked not to be identified, said protections are necessary because bank customers are not as savvy as nonbank investors.

They need to be told that mutual funds and other investment vehicles are not federally insured and can lose value, he said.

"We're dealing with customers that trust the bank," the executive said. "We should be held to a higher standard. It seems to me people are complaining because they've got to do a little more work."

Joy P. Montgomery, president of Money Marketing Initiative, a consulting firm in Morristown, N.J., said a compromise must be struck between increasing sales and protecting customers. That question bears on issues like using bank customer lists to cross-market products, a practice that is now restricted.

"It's very frustrating to the banks," Ms. Montgomery said. "You would want to find a way to modify it while still honoring some privacy concerns."

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