WASHINGTON -- Banks were scolded by a Senate panel on Thursday for misleading older customers about the risks of investing in mutual funds.

"Some banks are using sales practices which encourage older Americans to take their money out of insured investments and put it into the uninsured securities market," said Sen. David Pryor. D-Ark. and chairman of the Senate's Special Committee on Aging.

Despite efforts by federal bank regulators to tighten disclosure requirements on mutual funds and other uninsured products sold by banks, Texas Securities Commissioner Denise Crawford testified that the new rules are not being enforced.

"There are many regulations in place that would work if they were really enforced," agreed Laura Park, a securities broker and financial analyst.

"Saying 'fluctuating net asset value' is, on the face of it, full disclosure, but it doesn't alert customers that they can lose money."

Alfred Pollard, senior director of the Bankers Roundtable, defended the industry, claiming banks are making positive efforts to regulate themselves.

'I think where we're going is very positive," Mr. Pollard said. "I'm a firm. believer in selfpolicing in the industry.

Is that happening at every should be more responsible for knowing where they are investing their money.

"You really ought to say to yourself, 'Do I really understand this?' before you get to the front door," he said.

Sen. William Cohen, RMaine, echoed Mr. Pollard's belief:

"They have an obligation to make themselves informed and to be educated," said Sen. Cohen.

"If something appears too good to be true, it usually is."

Yet he also believes some bankers are less than forthcoming with customers, saying they sometimes "hide disclosure signs behind potted plants in bank lobbies."

Lawmakers at the hearing expressed interest in developing a form that would be signed by bank customers stating that they understand their investment is not backed by government insurance.

Currently there is no mandated disclosure form, but the Comptroller's office earlier this year issued disclosure guidelines that industry trade groups are using to create a uniform disclosure sheet.

"We're meeting with the OCC in a few weeks on this," Mr. Pollard said.

"There's no uniform document today, but we're going to try to get the industry to use a uniform mold."

The incentive system some banks use to generate mutual fund sales also came under fire. Witnesses said the commisstons are an attractive incentive to conceal the fact that the mutual fund or other security ts not feterally insured.

Catherine Hovism, a securities broker and former bank branch manager, said that some bank employees earn as much as $1,000 for just one referral.

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