MINNEAPOLIS -- The General Accounting Office plans a follow-up study to its recent report on derivatives in order to ascertain the adequacy of sales practice regulation.

Jerry Schober, a GAO official, disclosed the second study in remarks here at the annual meeting of the Government Finance Officers Association.

Some state and local finance officers complained about dealers using high-pressure tactics in trying to get them to use derivative financial products.

"I've heard that," Mr. Schober said.

The GAO official said he asked the Securities and Exchange Commission if it has regulatory control over derivatives sales practices.

He didn't indicate a time frame for completion of the follow-up study but did say it was being undertaken in response to congressional interest.

'Extreme Caution' Urged

Separately, the Government Finance Officers Association moved toward adopting two policy statements on derivatives. One would urge government finance officers "to exercise extreme caution."

This proposed statement says that "governmental entities should exercise caution in their selection of brokers, dealers, or investment managers."

It also says that agencies "should secure written acknowledgement from the broker or dealer that they have received, read, and understood the entity's debt and investment policies" and that "that broker, dealer, or investment manager has ascertained that the recommended product is suitable for the government entity."

Closing the Gaps

The second proposed statement would put the association on record in support of "appropriate federal action," among other things to "close regulatory gaps related to securities firms and insurance companies that are dealers of derivative products."

The Government Finance Officers Association is a profession organization that represents state and local government finance officers.

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