A National Association of Securities Dealers official acknowledged that the group erred when it imposed a blanket ban, later eased, on bank advertising related to bank-brokerage operations.

The official also promised that a new set of rules on bank broker- dealers will take industry concerns into account.

Last November, the NASD, which sets professional standards for the brokerage industry, issued a notice to its members prohibiting the use of bank logos in broker-dealer advertisements and sales materials.

The notice, which was mailed to NASD members with their billing statements, flew in the face of the NASD's deliberate rulemaking process and infuriated bank brokers and at least one NASD official.

"I, as an attorney, choked when I found out about this," said Suzanne E. Rothwell, associate general counsel at at NASD.

The one-paragraph notice, issued by NASD's advertising regulation department, went so far as to permit bank names to appear only "nonprominently," to merely identify where the broker-dealer was located.

Addressing bankers at a seminar in New York earlier this week, Ms. Rothwell said: "We just can't issue that kind of wholesale statement, so it really was accidentally much more draconian than it should have been."

In response to the uproar from bankers, the NASD issued a "clarification" of the advertising policy this spring.

The group amended the advertising policy to allow bank broker-dealers to use the generic corporate logos of their holding companies as part of their advertising or communications.

But Ms. Rothwell's comments represent the first time the group has publicly acknowledged it went too far with its original notice.

"The problem is when you use the name of a non-(NASD) member entity in the logo next to the broker-dealer," Ms. Rothwell said. "That's what we were really concerned about."

She took great pains to assure the audience that the association has learned from its mistake.

And Ms. Rothwell pledged that the revisions to the proposed rule governing brokerage operations on bank premises will address bank-brokerage interests.

The notice of that proposed rule was floated last December and drew 278 comments, almost all of them negative, Ms. Rothwell said.

A NASD committee of bank-brokerage executives, formed this spring, and NASD staff have been reviewing the comments and working on revisions to the proposed rule, which covers such areas as in-branch advertising, segregation of the brokerage unit within the branch, and the division of labor between bank and brokerage operations.

Ms. Rothwell said that the NASD board of governors will vote on the revised rule next Tuesday.

If it is approved, as expected, it likely will be filed with the Securities and Exchange Commission in October, a NASD lawyer said. Only after adoption by the SEC does the rule become official, and that is not expected before early next year.

Some bank brokerage executives have noticed an attitude change at NASD since the advertising faux pas.

"I think they're starting to realize that if they work with us, the end result is that the customer is being served better," said Elizabeth J. Fisher, president of UB Investment Services, a subsidiary of Union Bank, Los Angeles.

Ms. Rothwell urged interested parties to obtain copies of the revised rule, which will become public after being filed with the SEC. The NASD general counsel's office will provide copies upon request at that time.

Some bankers are encouraged by the process so far.

"Generally there's optimism on the banking side that our concerns will be reflected in changes to the rule that goes to the SEC," said Robert E. Bostrum, executive vice president legal and regulatory, National Westminster Bancorp, Jersey City.

But he reserves final judgment until he sees the new version of the rule.

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