COMPANIES THAT HELP BANKS market mutual funds blasted regulators last week for demanding extensive disclosures of consumer records.
The controversy flared into view at a compliance and operations conference sponsored in Washington by the Bank Securities Association.
Ellen Broadman, director of securities and investment at the Office of the Comptroller of the Currency, was explaining the agency's new guidelines on investment products sales to an audience of 140 bankers and mutual fund marketers.
The policy, she said, "makes clear that the OCC wants access to whatever marketers.
The statement struck a raw nerve with listeners from companies known as third-party marketers.
Problem with Disclosing Customer Names
These firms provide numerous services that include training bank employees, supplying a sales force, and providing promotional and advertising material.
William Turner, senior vice president and director of compliance at Invest Financial Corp., Tampa, Fla., jumped up to argue that bank regulators have no authority to look at customer records.
"We have a major problem with disclosing names of customers," Mr. Turner said. "I think you're crossing the line."
Ms. Broadman's colleague, Owen Carney, senior adviser for investment securities at the Comptroller's Office, leapt into the fray.
Access Needed to Ensure Compliance, Says OCC
"We're saying that banks simply have to have access to all this material so they casn see for themselves that third-party vendors are in compliance," Mr. Carney said.
Another third-party marketer got into the action.
Marketing firms are already monitored by the National Association of Securities Dealers, said Patty Ross, compliance program supervisor with GNA Securities, Seattle. The agency's position, she maintained, amounts to overkill.
"We want to show you how we do it as opposed to disclosing confidential customer information," Ms. Ross said.
Representatives of the Comptroller's Office emphasized that examiners won't go into banks with guns blazing.
May Second-Guess Investment Sales
But they did indicate that signs of trouble or unusual trading would make examiners more apt to dig deeper into programs.
One bank compliance officer said marketers may fear that examiners would second-guess investment sales, perhaps by giving too much weight to such factors as a customer's age or income.
"It opens them to scrutiny on a customer-by-customer basis," said the compliance officer, who requested anonymity. "The question is, would vendors' decisions be O.K. with the OCC?"
Representatives of third-party marketing firms also said the OCC is inviting potential judgment against banks by holding directors responsible for investment product programs.
Regulators risk "creating liability for banks that should be with the broker-dealer," Mr. Turner said.