brokerage, thought his unit had done a good enough job disclosing the risks of investing in nondeposit investment. But a wave of investor suits convinced him to err on the side of increased disclosure. Speaking at a meeting of the Bank Securities Association in Boston last week, Mr. Cerini laid out the added steps his bank has taken to ensure that every customer knows the risks of investing. The following is an excerpt of his comments. Like so many of the bank-affiliated securities companies, Great Western Financial Securities was hit by a double whammy in 1994. Last year marked the worst bond market in 40 years. This forced our investors to come to grips with a reality that they knew but never wanted to face - that they could lose some of their principal. Now, we believe we had plainly told our investors about the investment risks and strategies. Since 1986, we have required investors to sign disclosure forms acknowledging the risks involved with investing and the differences between investments and deposit products. Again, we were trying to do all the right things. So, like many of you, we were surprised by the reactions of a small number of investors. Imagine our surprise when a group of our customers sued us. We were shocked. We were angry. We were dismayed. And we weren't the only securities firm struck by a similar investor backlash in the wake of a declining bond market. After our initial anger and shock wore off, we decided to examine the larger issues at stake more carefully. Even as we felt the claims against us lacked merit, we took the stance that if even one of our customers did not understand the true nature of investing, we needed to redouble our efforts. If there had been even one instance of us saying one thing and a customer understanding another, what could we do to prevent a recurrence? Our efforts have paid off. And, they have brought a number of changes in our organization. We started with disclosure. I know, you may feel you already do all that is required. We are confident that we do. But could we do even more? We rely on our representatives. Like us, they thought they were doing the right thing by including disclosure in the conversation and then ensuring that each and every investor signed the written form acknowledging they understood the risks. We had steps in place to distinguish the securities operations from the bank, like different signage, the use of different colors, and different business cards. Now we rely on an even more formalized disclosure process. Each prospect is read a verbatim statement, which we hope reduces the possibility of misinterpretation. Here's what we tell our prospective investors: "I am an employee of Great Western Financial Securities. I am not an employee of Great Western Bank. I offer investment and insurance services. These investments are not deposits in Great Western Bank, are not guaranteed by the bank, and are not FDIC-insured. These investments involve risk as fully described in our disclosure forms. This could include a number of factors, including the possible loss of the principal invested. My job is to assist you in determining which investments or insurance products will help you meet your goals." Other measures are planned for implementation in the coming weeks and months. When customers walk into a Great Western branch, they will see the GWFSC logo on one side of the door and the Great Western Bank logo on the other. That way they will know as they enter the branch - if they don't already - that two separate companies operate on the premises. There will be sign-in forms so that customers can indicate whether they've come to inquire about banking services or investment services. If customers indicate an interest in investments, they will get referral cards from tellers. Each card spells out in simple language the fundamental difference between deposit products and investments. The card will also inform the customer that the teller receives a small fee for referring customers to an investment representative. The investment sales areas will be redesigned so that they are even more distinct from bank areas then at present. They'll also be set off by green stanchions and they'll feature enhanced signage. As has long been the case, each desk in the investment area will have on it a poster that spells out the fact that investments are not FDIC-insured. But now, customers also will see a small poster bearing a brief profile of the representative, including credentials and some personal information so that consumers will have an even greater sense of who they're dealing with. These are by no means revolutionary changes. But we think they stand to reinforce our ongoing efforts to educate our customer about the distinct nature of investments as opposed to savings.

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