BOSTON - A dozen community bankers gathered here last week for a workshop on the National Association of Securities Dealers' proposed rules for bank brokerages.
And while the banks are pursuing distinctly different approaches to investment sales, they were united in one respect: All were eager to head off the type of problems that might crop up once the NASD's rules are adopted.
"It's a maze of regulation out there," Garrett J. Hennessy, a vice president at the Savings Bank, Wakefield, Mass., said during a break in the workshop.
The meeting was sponsored by the Independent Bankers Association of America and Massachusetts Financial Services, a leading mutual fund company.
Mr. Hennessy said his $250 million-asset company is trimming its "short list" of mutual funds in a bid to tighten control over the products offered to customers. The focus is on a handful of top performing funds, he said.
"We want to be conservative about what we offer," Mr. Hennessy said. "The name and reputation of the bank is more important to us than high sales."
Martin E. Lybecker, a partner with the Washington law firm Ropes & Gray, told the bankers to expect the NASD to look closely at issues of suitability and disclosure, as well as licensing of investment representatives.
"Suitability will be the bane of the 1990s" for banks, Mr. Lybecker said, adding that he expects securities litigation to become more commonplace in the near future.
That has William J. Napolitano worried about the investment sales program his First National Bank of the Berkshires is scheduled to launch later this month.
Mr. Napolitano, president of the Lee, Mass., bank, said after the meeting that he plans to keep close tabs on how his sales reps are doing their job.
"The liability is so great," Mr. Napolitano said. "If a customer loses out on an investment that you've sold him, then you've probably lost him forever."
He added that if the investment sales program "doesn't work out for us then we'll pull out."
But Mr. Lybecker also said that while the NASD was tightening rules, the current proposal would not curtail investment sales done through a bank's trust department.
That's good news for James E. Rich Jr., vice president and senior trust officer at Beverly (Mass.) National Bank.
Beverly doesn't currently sell retail investments; it does, however, offer mutual funds and annuities to its trust customers. Despite that, the bank is building a compliance program with retail investment sales in mind.
"We want to make sure that whatever regulations are put in place by the NASD, that we're in compliance from head to toe," Mr. Rich said.
