Chemical Banking Corp. has taken the final step to dissolve its partnership with Liberty Financial Cos., a leading marketer of investments through banks.

The banking company last week received regulatory approval to begin offering mutual funds through a wholly owned retail brokerage.

The approval from the National Association of Securities Dealers will allow Chemical to bring its investment products program in-house early next month, executives at the New York banking company said.

The current program's 130 sales representatives will switch from Liberty to Chemical's payroll, and the bank will begin expanding the operation, said Leonard E. Malkin, Chemical's managing director in charge of retail investments.

Since May 1993, Chemical had operated a mutual fund sales program through Boston-based Liberty, in preparation for a joint venture the two companies had planned.

The pairing was billed as the first time an investment product marketer operated on equal footing with its bank client, sharing expenses and profits. But Chemical scuttled those plans late last year as its ambitions for the sales program grew.

In an interview, Mr. Malkin said Chemical has big plans for the unit, dubbed Chemical Investment Services Corp.

By yearend, the retail brokerage's sales force will grow to 150' sales representatives. And the unit will host 300 seminars to familiarize customers with investment products, Mr. Malkin said.

The brokerage will also help serve the bank's high-net-worth customers and will broaden its retail offerings to include individual bonds.

Investment Services for Small Businesses

Additionally, Chemical will use the brokerage to launch sales of investment products and services to small businesses and their owners.

Bankers said Chemical's array of activities signal an eagerness to capitalize on the new in-house operation.

"They've gained more control," said Joseph Dolock, president of Crossland Investor Services, the brokerage arm of Crossland Federal Savings Bank. "This extends to expenses, personnel, and the kinds of products and services they want to offer."

Mr. Malkin said Chemical will not cut Liberty out completely. The investment products marketer "will consult with us on a variety of subjects," including technology, Mr. Malkin said.

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