Responding to the banking industry's outrage, a group of state securities regulators is revising a set of guidelines it proposed for governing brokerage activities at banks.

The North American Securities Administrators Association plans to put out for comment in the next 60 days a new set of model rules for bank brokerages, chairwoman Denise Voight Crawford said.

"Our goal is to make it the best possible program we can," she said.

The NASAA first proposed a set of rules for bank brokerages in March. Its proposal enraged many banking industry lawyers, who called the document more onerous than both the National Association of Securities Dealers' proposed bank broker-dealer rule, and the Federal Reserve System's Interagency Statement on Retail Sales of Nondeposit Investment Products.

Making matters worse, the industry was only given one month to comment on the proposal, which lawyers said was simply not long enough. Ms. Crawford agreed. "A lot of people said we needed to give them more time to give detailed comments," she said. The comment period was short, "and that was really bad."

According to Ms. Crawford, the NASAA plans to take the comments it received into account when its revises its proposal. She declined to be more specific.

If adopted in their current form, the NASAA rules would put many banks with investment programs that conform to federal regulations at odds with state regulators. The March proposals are different than the NASD regulations for disclosure, bank employee referral fees, and investment product names.

For example, the NASAA proposal would not allow uninsured brokerage products to have names "identical or substantially similar to that of the financial institution." The NASD allows investment products to have names similar to the bank's name, but not identical.

Were this NASAA rule adopted, a number of banks would have to change their funds' names, such as Citibank's CitiSelect Portfolios and First Bank System's First American Funds.

"This type of overlapping and inconsistent regulation is exactly what Congress considered last year when it considered to what extent state regulation of securities firms is appropriate," said Donald W. Smith, a partner at Kirkpatrick & Lockhart, Washington. Smith added that Congress thought more coordination between state and federal regulators was necessary.

"We believe that legitimate concerns of state securities regulators can be adequately addressed by encouraging compliance with applicable federal authority, not by promulgating an additional layer of regulation," said the comment submitted by Sarah A. Miller, senior government relations counsel at the American Bankers Association.

The model rules add three new disclosures to the list bank brokerage customers must already sign. They address customer fees and the limits of Securities Investor Protection Corp. insurance protection. Customers at broker-dealers not affiliated with a bank do not have to sign such disclosures.

The NASD rule, which may be revised, allows banks to pay its non- brokerage employees a referral fee, as long as it is not contingent on whether or not the referred customer buys an investment product. The NASAA rule prohibits unregistered bank employees from receiving referral fees.

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