The National Association of Securities Dealers is preparing to beef up its oversight of mutual fund salespeople.
The association's standards will zero in on what representatives say to potential customers, said R. Clark Hooper, NASD vice president for advertising.
The goal of this effort is to "bring the representatives' goals and objectives in line with those of the customer," Ms. Hooper said.
The measures, which will likely appear in a notice to NASD members, will apply to all association-member firms, including bank brokerages, officials said. The measures are separate from proposals the association is developing specifically for bank brokerages.
The association's mutual fund notice will urge representatives to offer whichever load - back end or front end - is most economical for customers, Ms. Hooper said.
The organization also wants representatives to fully explain income funds, which supply cash distributions but fluctuate in value.
Ms. Hooper said the association also is looking at what kind of disclosures funds should make if they invest in derivatives.
"We want to make sure the way funds are being sold is appropriate, fair, and not misleading," she said.
The association got the ball rolling this month by asking its legislative affiliate, the Securities and Exchange Commission, to adopt rules that rein in incentive payments to brokers. The association's proposal covers cash incentives and sales contest awards that brokers may receive from mutual fund companies. The association wants to make sure brokers feel no loyalties to particular fund companies, Ms. Hooper said.
Bankers said the group's approach was fair, given its focus on thwarting actions against customers.
"It's appropriate," said John Bettfreund, chief compliance officer with Gateway Investment Services, the brokerage unit of Fidelity Federal Bank, Glendale, Calif.
"It clarifies everything for all brokers and mutual fund companies," Mr. Bettfreund said.