WASHINGTON - The National Association of Securities Dealers and the four bank supervisory agencies said Tuesday that they have agreed to coordinate examinations of bank brokerage units.
The pact, which could lead to fewer examinations for bank affiliates, applies to NASD-registered brokerages that sell mutual funds and other nondeposit investment products on the premises of insured depository institutions. That covers the vast bulk of mutual fund sales at banks.
"It's a terrific agreement," said Ellen Broadman, director of the securities investment and fiduciary practices division at the Office of the Comptroller of the Currency. "It recognizes that the marketplace is changing and that entities supervised by one agency are often supervised by another."
Although the NASD has moved twice in the past month to tighten its regulation of members who sell securities at banks, a top NASD official said Tuesday's announcement was unrelated to those actions.
John Pinto, executive vice president of regulation at the NASD, said he expects that bank regulators will tell the NASD when examiners see practices that violate NASD and SEC rules on compensation, sales practices, and advertising.
The agreement also could pave the way for talks aimed at resolving differences in the rules enforced by the NASD and the bank regulatory agencies, Ms. Broadman said.
The NASD oversees member brokerages, including some that are owned by banks and some that market their wares through banks. The bank and thrift regulatory agencies, by virtue of supervising banks, also oversee bank affiliates that sell brokerage products.
Although securities and banking regulators oversee some of the same institutions, they enforce separate sets of rules. That distinction was highlighted last month when the NASD proposed a new regulatory framework for sales of securities on bank premises.
The NASD proposed, among other things, that banks be barred from using depositor lists to drum up business for their brokerage units. Banking regulators, by contrast, expressly permit such cross-marketing.
"The next step would be coordinating rules," Ms. Broadman said. "We've already begun talking informally about that."
Tuesday's agreement called for the following steps:
* The five agencies will share examination schedules for banks and thrifts with affiliated broker-dealers. Either the NASD or the bank supervisory agency could send an observer to the examination.
* The NASD will give the banking agencies access to its examination findings and work papers.
* The banking agencies will refer violations of securities law to the NASD, and the securities agency will refer violations of banking law to the bank agencies.
* The agencies will share information about activities of nonaffiliated broker-dealers selling nondeposit investment products on bank premises.
In addition to the NASD and the Comptroller's office, the agreement was signed by the Federal Deposit Insurance Corp., the Federal Reserve Board, and the Office of Thrift Supervision.