WASHINGTON - The National Association of Securities Dealers' forthcoming rules governing investment product sales will not hit banks any harder than their competitors in the securities industry.
At least that's what R. Clark Hooper, the NASD's vice president of advertising, told skeptical bankers attending the Financial Markets Association's compliance seminar here last week.
Ms. Hooper defended the NASD's plan to write rules restricting referral fee payments, limiting cross-marketing, and requiring physical separation of deposit-taking and brokerage activities.
"We don't want to regulate banks, we don't have jurisdiction to regulate banks, and we are not going to regulate banks," Ms. Hooper said to doubtful moans and rolling eyes.
The NASD in December proposed rules to govern broker-dealer sales of investment products on bank, thrift, or credit union premises. The government-chartered industry association does not know when it will finish the rules, but Ms. Hooper's staff is meeting Tuesday to work on revising the proposal.
Having analyzed the 285 comment letters filed on the plan, Ms. Hooper said banks are criticizing it without understanding the limits and restrictions placed on broker-dealers.
For example, while bankers are complaining that limits on referral fees hit them harder, Ms. Hooper said broker-dealers also would be constrained from paying unregistered employees for referring business.
An occasional finder's fee is okay, she said, but otherwise, employees need to be registered to receive referral fees.
The final rules may eliminate a requirement that would force banks to disclose that investment products aren't insured by the Securities Investor Protection Corp., Ms. Hooper said. If this is not dropped completely, then broker-dealers also will have to make the disclosure, she said.
How bank deposit and investment product sales areas should be physically separated also will be clarified in the final rules, Ms. Hooper said. Many commenters, she said, asked how small banks were supposed to comply.
"If you have a one-room bank, you're not going to have to put the broker-dealers outside the door," Ms. Hooper said.
The NASD will rephrase the requirements of a written agreement between the broker-dealer and the bank. This confused most of the commenters, Ms. Hooper said. Although she did not elaborate on the new version, it will probably be drafted in conjunction with bank examiners, she said.
Another issue of concern is communication with the public, Ms. Hooper said. Disclosures are often too muddled, she said.
"We are asking them to speak our language and it's confusing to them," Ms. Hooper said. The final rules will address this problem, she said, although she did not give specifics.