Comptroller of the Currency Eugene A. Ludwig is raising the prospect of new rules for mutual fund and insurance sales.

In a Jan. 26 letter to fellow regulators, Mr. Ludwig recommended that banking and thrift regulators consider formalizing their 1994 policy statement on retail sales of nondeposit investment products as a regulation.

The policy statement outlines the disclosures banks should make so customers understand that mutual funds and other investment products are not insured by the government. It also directs that only qualified employees may sell deposit and nondeposit products together.

"There has been some concern that they might not be taken as seriously because they are guidelines," Mr. Ludwig said in an interview Friday. "I think that is a misperception."

Though compliance with guidelines is voluntary, rules are mandatory. Violation would result in penalties. "If they did rules, that's a whole different level of regulatory oversight," said Richard M. Whiting, general counsel at the Bankers Roundtable.

However, with rules, the banking agencies would be seen as imposing stricter oversight on bank securities and insurance sales-a key concern of lawmakers debating financial reform.

The perception that banking regulators are cracking down could work to the industry's long-term advantage, Mr. Whiting conceded. "It's a way he (Ludwig) can strengthen his case for preempting state insurance laws."

Mr. Ludwig said his call was partly prompted by the National Association of Securities Dealers' adoption last year of a similar regulation governing broker-dealers inside and outside banks.

Mr. Ludwig also suggested that the rules be extended to cover rapidly expanding insurance sales at financial institutions because they raise the same types of disclosure and consumer protection issues as mutual funds.

"We ... need to ensure that effective disclosures are provided to financial institutions' customers, particularly regarding the lack of federal deposit insurance coverage," Mr. Ludwig wrote.

Reaction from the banking industry was mixed.

"There could be people worried about loss of flexibility," said Sarah A. Miller, general counsel of the ABA Securities Association. But other bankers might prefer a rule that reduces redundant disclosures, she said.

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