The National Association of Securities Dealers should require all its members to make the same disclosures, bankers said in comment letters last week.

"NASD must either abandon its crusade ... or extend disclosure obligations to all members which sell both FDIC-insured and uninsured investment products," wrote Kimberly Crichton, general counsel and vice president of Citicorp Investment Services, a subsidiary of Citibank.

In May the NASD proposed requiring all member broker-dealers to make oral and written disclosures that investment products are not federally insured. Broker-dealers also would be required to disclose that the products are not guaranteed by the seller and are subject to investment risks.

In 16 comment letters, bankers applauded the plan, arguing that many broker-dealers unaffiliated with banks sell both uninsured and insured products, such as certificates of deposit.

"The potential for consumer confusion does not end at the bank lobby," said Sarah A. Miller, senior government relations counsel at the American Bankers Association.

Securities firms, on the other hand, criticized the proposal, arguing that the disclosures should apply only to securities sold on bank premises.

Customers will not be confused about Federal Deposit Insurance Corp. coverage when buying securities sold outside of a bank, said Nathalie P. Maio, senior vice president of Prudential Securities Inc.

"The average person on Main Street simply has no expectation of FDIC insurance with respect to the vast majority of products purchased through a brokerage firm," Ms. Maio said. "Unlike banks, broker-dealers have consistently avoided marketing themselves as guarantors of products they sell."

Others argued that requiring mutual funds to warn consumers of a possible loss of principal would scare off potential investors.

"An unintended result of placing the 'loss of the principal invested' disclosure in a mutual fund advertisement would be that the potential investor may never even request a prospectus," said Michael J.C. Roth, president of USAA Investment Management Co., San Antonio. "In the history of mutual funds, we are unaware of any instance where an investor in a mutual fund has lost his or her entire principal."

The disclosure proposal has been pending for more than 18 months. In December 1995 the NASD originally proposed requiring these disclosures only of bank broker-dealers. After reviewing public comments on the plan, the Securities and Exchange Commission directed NASD to revise the proposal. In a May notice to members the NASD proposed expanding the disclosure requirements to broker-dealers outside banks.

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