NEW ORLEANS -- Managerial lapses within banks are causing delays in compliance with regulatory guidelines for sales of investment products, according to a senior regulator of national banks.
"There are some pauses as people wait to see who within the bank is going to take care of it," said Owen Carney, senior adviser at the Office of Comptroller of the Currency.
Mr. Carney said senior management and those in charge of investment product programs appear to be waiting for each other to act on the Comptroller's edicts.
The delay could be prevented by better communication, but there is an "us-them" mentality at some banks, he said. "I'm not sure within your own organization you folks are mainstream."
Not Seen as Widespread
Mr. Carney directed his comments to bankers attending the Bank Securities Association's annual mutual fund conference.
It was the second time in as many weeks that Mr. Carney's agency pointed to problems in compliance with the guidelines. Earlier, Eugene Ludwig, the comptroller, said he was "unhappy" with disclosure efforts by banks.
Mr. Carney declined to say how many times examiners have run into the organizational issue during their reviews of banks. But he did suggest these institutions were in the minority. By and large, he said, banks have put their programs into compliance.
Since the guidelines came out in July, banks have been responding by stepping up disclosures about mutual funds' lack of deposit insurance.
Banks are also required to look closely at customers' needs and objectives before placing them in certain products.
Examiners who check on banks' adherence to the guidelines do not appear to be going into institutions with guns blazing.
Comptroller's office examiners took a "friendly, informative" tone with First National Bank of Omaha during a review last week, said Sonia Proctor, marketing director with the bank's investment product program.
First National, in response to examiners' findings, will start using questionnaires to profile customers before making product recommendations, Ms. Proctor said.
Banks would do well to follow the guidelines, and subsequent instructions from examiners, said Robert Kurucza, partner at Morrison & Foerster, in Washington.
"If you're not focusing on compliance and disclosure, you're making a huge mistake," Mr. Kurucza said. "If you don't police it, the legislators will."
In fact, the legislators are already, on the case. House members introduced three bills in recent weeks to step up regulation of banks that sell investment products.
And, as a possible prelude to action from the Senate, a banking subcommittee last week heard testimony from Arthur Levitt, chairman of the Securities and Exchange Commission.
Mr. Levitt told the subcommittee that many bank customers, as well as brokerage customers, believe their mutual funds are guaranteed by the government.
The SEC obtained the information through a survey that many bankers and mutual fund company heads have since discounted, maintaining that the sampling was too narrow.