BOCA RATON, Fla. - The National Association of Securities Dealers' plan to regulate bank broker-dealers isn't as restrictive as most bankers seem to think, according to a top official.
John Pinto, executive vice president of the Washington-based association, told bankers meeting here that there have been "considerable misunderstandings" regarding the plan.
"Our proposal is not an intent for the NASD to reach out and regulate banks," Mr. Pinto said at a securities sales management forum sponsored by the American Bankers Association. "It's certainly not a turf battle with bank regulators."
The NASD's plan, unveiled last month, would create a special regulatory regime for bank-affiliated brokerages and firms that provide brokerage services on bank premises. The association, which sets professional standards for the brokerage industry, says the rules are needed because bank customers are especially vulnerable to confusion and abuse.
Currently, the NASD applies its rules of fair practice to all brokerage firms, making no special provision for bank-related brokerages. Banks and their brokerage units are also subject to investment sales guidelines imposed by federal banking regulators.
Mr. Pinto rejected criticism that the NASD is seeking to regulate activities that banking regulators already monitor closely. "It is not a belt-and-suspenders thing," he said.
He said that, contrary to widespread perception, the NASD would not ban banks from paying referral fees to their own employees. Rather, the rule would block securities firms and bank broker-dealer units from paying referral fees to people who are not registered with the NASD.
Nor does the NASD's proposed rule bar banks outright from sharing customer lists with their brokerage affiliates, Mr. Pinto said. However, the NASD does consider it inappropriate for banks to provide brokers with lists containing "confidential information," such as details of customers' certificates of deposits and savings accounts.
Another area of confusion has been the use of bank logos on material marketing investment products, Mr. Pinto said.
He said the NASD is not prohibiting the use of the bank's name or the bank's logo on these materials. Rather, the NASD wants to prohibit banks from "misusing" those logos.
Bankers in the audience protested that it is unclear how banks could use their name or logos on marketing materials under the NASD's plan. Mr. Pinto replied that the bank's logo or name should not dominate the material.
The NASD's proposed rules are designed to protect investors and also to protect the banks' brokerages, Mr. Pinto said. But bankers seemed unconvinced that the rules would make their lives better.
"I don't think I got a lot of comfort out of what he said," said Gene S. Evenskaas, vice president of BankAmerica Corp.'s BA Securities unit. The NASD's proposed rules could "dramatically impact the sales process and how we conduct business," he added.
The NASD is inviting comment on its proposals through Feb. 15. Mr. Pinto said he expected the rules to win the Securities and Exchange Commission's blessing and be finalized and implemented by early fall.
In related news, Mr. Pinto said the NASD's board of governors last week authorized the creation of a bank broker-dealer committee. The move, which was widely expected, had been sought by banking trade groups. Panel members have not yet been chosen, Mr. Pinto said.