A member of the House Ways and Means Committee is pressing for a narrow version of legislation to oversee bank mutual fund sales programs.
A bill, introduced last week by Rep. Richard E. Neal, D-Mass., would require financial institutions to supply mutual fund customers with written notice that their investments are not insured.
The measure, which would amend the Federal Deposit Insurance Act, mandates that mutual fund advertisements and related marketing materials carry similar disclaimers.
Rep. Neal's bill mirrors a lone provision in the sweeping legislation that House Banking Committee Chairman Henry B. Gonzalez, D-Tex., and Rep. Charles Schumer, D-N.Y., introduced late last month.
Both proposals are a first stab by lawmakers to step up regulation of bank mutual fund activities. The proposed legislation comes on the heels of standards and guidelines that bank and thrift regulators issued this year.
Rep. Neal left the Banking Committee in January to serve on the tax-writing Ways and Means Committee.
But a spokesman for the financial institutions subcommittee said this would not prevent the representative's bill from being considered during broader hearings that the panel plans early next year.
Rep. Neal's staff was working on his bill when Rep. Gonzalez and Rep. Schumer introduced their measure, a spokeswoman for Rep. Neal said.
The Gonzalez-Schumer legislation drew immediate howls from bankers and bank trade groups.
That measure would sharply curb banks' sales programs and banks' use of names similar to their own for their mutual funds.
Rep. Neal decided to proceed with his version because he felt a narrower bill would have a quicker shot at passage, his spokeswoman said.
Rep. Neal's bill does indeed appear more palatable, said Fritz Elmendorf, communications vice president with the Consumer Bankers Association. "On the face of it, it wouldn't limit banks' ability to sell mutual funds, like the Gonzalez-Schumer bill."
In fact, many banks already appear to be making the kinds of disclosures that Rep. Neal wants.
This is the case with virtually all the banks that responded to a broader survey that the CBA expects to release later this year.
"We wouldn't see it as a problem at all," said Paul Klug, vice president in charge of mutual funds at Chase Manhattan Bank, New York. "It wouldn't cause us to change our business practice one bit."
The House financial institutions subcommittee expects to consider the Neal and the Gonzalez-Schumer bills early next year as part of mutual fund hearings.
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In another sign of congressional interest, a Senate banking panel plans to examine banks' growing involvement with noninsured investment products.
The Nov. 10 hearings by the securities subcommittee may serve as a launching pad for the Senate's version of legislation to regulate the industry, sources said.