The National Association of Securities Dealers continues to tinker with its proposed rule governing sales of securities by bank brokerages.

In a letter sent last week to the Securities and Exchange Commission, the association, which sets professional standards for brokers, offered relief to bankers with one hand while imposing new restrictions with the other.

The association dropped its outright prohibition on securities sales in one-person branches, such as supermarket kiosks. Yet in the same letter, the NASD effectively banned payments to bank employees for referrals, even when the payments are made by banks rather than by their broker-dealer subsidiaries.

The letter also clarifies exemptions from the rule when brokerage and bank are physically separate, as well as restrictions on sharing of customers' confidential financial information.

NASD officials refused to comment for this story.

Meanwhile, the association's latest broker rule changes are drawing a mixed reaction from bank industry representatives.

The broad ban on referral fees drew the most fire. The NASD proposal now states that "an NASD member may not compensate employees of the financial institution for referrals through payments made directly to the employee or by payments directed in the first instance to the financial institution."

That language presents "a terrible problem for brokers and banks," said Melanie Fein, a partner at Arnold & Porter, a Washington-based law firm, who represents banks. She said that the rule change threatens common marketing arrangements, in which brokerages make payments to bank holding companies, which in turn pass a portion on to bank employees as compensation for referrals.

Sarah A. Miller, senior government relations counsel with the American Bankers Association, echoed those concerns, but she called the easing of restrictions on supermarket banking a "significant improvement."

The NASD proposal says that lone bank brokers could overcome customer confusion even in cramped supermarket branches, "if the member exercises exceptional caution and adopts specific operational controls."

That "leaves room for banks to say we've set up appropriate controls," Ms. Miller said, while allowing the NASD "to come down on inappropriate behavior."

But this revision hardly cheered others, who said the NASD position continues to be too stringent.

"They're clearly backpedaling about selling from kiosks, but it's still stricter than the interagency statement," Ms. Fein said. Even as modified, the proposal could be interpreted by NASD field inspectors "as though it were a prohibition," she said.

An SEC official said the agency expected to publish the revised broker- dealer rule soon. The NASD has already agreed to the ABA's request for a 60-day public comment period.

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