BOCA RATON, Fla. - As Congress moves to regulate the burgeoning derivatives market, securities experts yesterday warned that legislative overreaction could sap benefits to banks and other institutions using the complex securities.

Speaking at the annual meeting of the Securities Industry Association, experts said no law will completely settle concerns that derivatives threaten the security of banks and other users.

"I'm not sure there will ever be a resolution of all the questions that are out there," said Brandon C. Becker, director of market regulation at the Securities and Exchange Commission.

Concerns Called |Overblown'

Though he declined to predict specific regulation, Mr. Becker said it is certain that regulators want players in the $4 trillion a year global derivatives market to improve capital standards, clarify accounting rules, and tighten internal credit standards.

Others participating in the panel discussion here at the posh Boca Raton Resort and Club agreed that regulation was inevitable, but called "overblown" concerns that the failure of a major player threatens all users of derivatives.

Instead, Steven M. Benardete, managing director of derivatives at Morgan Stanley & Co., warned that the greatest risk is the legal enforceability of contracts between two parties in a transaction.

U.K. Court Case Cited

He noted that several municipalities in the United Kingdom reneged on agreements, and the courts stood behind them. As a result, Mr. Benardete said, many players enter only those contracts enforceable under U.S. law.

Jeffrey L. Seltzer, managing diretor of derivatives at Lehman Brothers and chairman of the association's swaps and derivatives committee, said that Congress should be careful when drafting regulations to affect the fast-moving derivatives market.

"It is a dynamic business," he told reporters here. "You can't have static rules."

It is not yet clear how legislation concerning the derivatives market would affect banks. Iowa Rep. Jim Leach, the ranking Republican on the House Banking Committee, has said he will introduce a bill in January.

Uniform Rules Proposed

He said his measure would include the creation of an inter-agency commission to establish uniform rules across all the financial markets for sellers and users of derivatives.

The congressmen has also said regulation should discourage unsophisticated and poorly capitalized banks from trading in derivatives.

At present, the Federal Reserve Bank says that about 650 banks report using off-balance-sheet derivatives as part of their risk management strategy.

Panelists at the conference here agreed with Mr. Leach's proposal in principal.

Kenneth G. Lay, director of financial operations at the World Bank, said that many of the counterparties in his $33 billion derivatives portfolio are not very savvy about derivatives, even though they include some of the nation's leading investors.

"A number of those institutional investors we deal with are the widows and orphans in this market," he said.

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