WASHINGTON -- The plan by the Office of the Comptroller of the Currency to dispatch mutual fund "mystery shoppers" to bank branches appears to be on hold.
The agency failed to line up firm support for its proposal at a meeting of banking and securities regulators last Wednesday.
The meeting, requested by Comptroller Eugene A. Ludwig, drew together officials from the Securities and Exchange Commission, the Federal Deposit Insurance Corp., the Federal Reserve Board, and the Office of Thrift Supervision.
But the regulators remained far apart on whether to send mystery shoppers to test mutual fund sales practices and agreed only to keep talking.
Leonora S. Cross, a spokeswoman for the Comptroller's office, said the agency has not ruled out sending its own testers, but prefers to work with all the other regulators towards a uniform program.
"Part of the concern is that the confusion that arises seems to be coming from what customers hear from bankers and a variety of sources," Ms. Cross said. "We want the information to be consistent."
Mr. Ludwig proposed in April that his fellow regulators undertake a joint mystery shopping program. He said it would help them all to get a better handle on whether customers are being fully informed about risks of investment products offered at banks.
Fed, SEC Cool to Idea
The comptroller made the suggestion in the wake of heavy criticism of bank mutual fund sales practices from Congress and the news media.
But the plan quickly ran into opposition from Federal Reserve Governor John LaWare, who likened bank testing to a "witch-hunt," and said the Fed would have no part of it.
The Securities and Exchange Commission was also decidedly cool to the idea.
The comptroller's plan followed an Federal Deposit Insurance Corp. initiative to send mystery shoppers to the banks it regulates. Robert Miailovich, assistant director of the FDIC's division of supervision, said last week the agency is waiting for bids from firms to do the testing.
At last week's meeting, another source of conflict emerged. The Comptroller's office said it had reached one point of agreement with all other regulators: to encourage the institutions they regulate to hire their own mystery shoppers.
But the SEC said chairman Arthur Levitt had not endorsed such a self-testing program.
"I don't think we have taken a position on self-testing," said Simon M. Lorne, SEC general counsel. "We'd have to think about whether securities firms ought to be in the business of testing themselves."