Compliance officers at bank brokerages say they are being extra vigilant amid the current stock market gyrations.
"Whenever you have a downturn, it heightens people's awareness," said Kim LaBarbiera, an associate director of compliance at Republic Financial Services Corp., New York.
Ms. LaBarbiera said that as a precautionary measure she has increased her surveillance of trading activity: "Before we sampled 10% of trades. Now we're doing 20%."
Ms. LaBarbiera and dozens of other bank compliance officials were here last week to attend a Bank Securities Association conference on regulation.
William S. Crews, who heads compliance for Wachovia Investments, a unit of Wachovia Corp., Winston-Salem, N.C., said he is telling brokers to "communicate more" with investors.
But Mr. Crews and other compliance professionals said that if proper suitability and disclosure procedures are followed at the time of the sale of the security, bank broker-dealers should have no problem-even in these markets.
"If it's properly explained in a bull market, it should be no different in a bear market," Mr. Crews said.
It is important to "develop and adopt contingency plans for down markets," said John W. Hopper, deputy general counsel at Amsouth Bancorp, Birmingham, Ala.
Mr. Hopper was speaking on a panel addressing bank sales practice litigation with Gregory B. Jordan, an attorney with Reed Smith Shaw & McClay, a Pittsburgh law firm.
Mr. Jordan warned that market corrections can provide a prime feeding ground for plaintiffs' attorneys looking to cobble together class actions against banks. "Plaintiffs develop what we call 'selective amnesia,'" he said.
But so far during this current market volatility, retail investors appear to be the ones sticking with their investments, said Judith A. Villarreal, compliance officer at Pacific Century Investment Services, the securities division of Bank of Hawaii.
"It's the institutions that are selling," Ms. Villarreal said. She emphasized that her comments do not reflect the bank's official opinion.
But the current market volatility is not just an issue for banks to worry about, said R. Clark Hooper, executive vice president in the National Association of Securities Dealers' office of disclosure and investor protection.
"In a market like this, every one of our members should make sure that their customers understand the risk," Ms. Hooper said. "Every single securities operation that has retail or institutional customers should be worried about supervision."