Various investor protection issues arising from expanded bank securities activities have sparked renewed interest in the issue of the appropriate regulation of bank securities activities. Recent surveys show that many investors misunderstand the uninsured status of banksold mutual funds. Customers also continue to be confused about the different type of protection afforded by the Federal Deposit Insurance Corp. and the Securities Investor' Protection Corp.

These concerns have generated a number of initiatives by both lawmakers and regulators, and a steady stream of correspondence between members of Congress and regulators.

I believe that the marked increase in the involvement of banks in securities activities has caused a corresponding increase in the risk that investors still may be unaware that securities perchased on the premises of a bank are not guaranteed by that institution or by any agency of the federal government'.

This concern, as well as concerns about proper customer information, is exacerbated by referral fees paid to unqualified employees.

This practice has, of course, been in the news of late. These fees encourage bank employees who are not securities professionals to refer bank customers to registered broker-dealers or qualified bank securities sales personnel and probably should be prohibited upon reflection.

Another regulatory concern that I have in the bank mutual fund area is the heightened existence of potential conflicts of interests between a fund and its adviser, custodian, and other administrative affiliates.

I believe that these potential conflicts are aggravated in a bank setting. For example, since it is quite common for a bank to serve as a custodian for a fund, greater concern exists when the bank also advises the fund.

It can be fairly argued that independent custodians ordinarily serve as a superior safeguard against self-dealing abuses. Of course, this concern is not just limited to banks, but is present to some extent with respect to any funds that use affiliated advisers and custodians. This may be an area ripe for further study and for a regulatory response.

Fund boards of directors also should carefully consider whether shareholders are best served, both in terms of cost and quality of services, by the fund's use of an affiliated custodian.

It appears to me that the SEC should seriously consider promulgating a rule that establishes for any custodian of an investment company (including a bank), a federal standard of fiduciary duty in dealings between the fund and its custodian.

I also wish to point out at least one area where bank mutual funds may be at a disadvantage compared to other funds.

Section 32 of Glass-Steagall bars any officer, director or employee of a member bank from serving as an officer, director or employee of a mutual fund.

This means that banks cannot have any bank insiders on the board of the fund they are advising. This is in contrast to other funds that can have up to 60% of the board composed of "interested" persons.

The subject of fund board composition is of great interest to me. Given that boards of directors are the first line of defense against mutual fund self-dealing and investor abuse, it is very important that board members be objective and be alert.

I have been a proponent of an amendment to the Investment Company Act to require all funds to have a majority of "disinterested" directors.

With the additional investor protection provisions which I have alluded to in place, I would support the elimination of the remaining Glass-Steagall restrictions on bank mutual fund activities.

Securities activities need to be subject to one uniform set of rules, consistently applied by a single expert regulator to all market participants, which I 'believe should be the SEC, regardless of whether those participants are engage in securities brokerage or advisory activities are generally excluded from regulation under the federal securities laws.

When these exemptions were enacted, more than half a century ago, banks were severely restricted from participating in the securities business. Those days have passed, and investors today are increasingly likely to purchase mutual funds and other securities directly from a bank.

Because the statutory exclusions remain in place, however, banks that engage in securities activities have the option of conducting those activities outside the framework of the federal securities laws.

As a result, investors who purchase securities directly from unregistered banks receive different standards of protection than those who deal with securities firms.

The resulting regulatory structure gives rise to regulatory inefficiency and duplication. It is confusing and unnecessary to have five separate federal regulators.- the SEC and the four federal banking agencies - involved in the regulation of securities sales and mutual fund operations.

Moreover, recently, the federal banking regulators have taken steps to apply their securities guidelines to registered brokerdealers and mutual funds that have some nexus to a bank.

In an era of fiscal restraint, it simply makes no sense for the banking agencies to train "miniSEC'' staffs to examine brokerdealers and mutual funds that are already regulated by the SEC.

Today's market realities call out for an overhaul of the existing regulatory system for bank securities activities. Investors should be provided with a single, consistent standard of protection.

To accomplish this, the problem of overlapping and potentially inconsistent regulation must be addressed. Unfortunately, most of these steps are ones that only Congress can take.

The SEC is pursuing several avenues to assess the extent of, and deal with, investor confusion relating to bank sales of mutual funds.

In-addition, the SEC is in the process of taking some steps toward better cooperation and coordination of regulatory efforts with our counterparts at the federal banking agencies, although it remains to be seen whether better cooperation and coordination will result.

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