PITTSBURGH - Nearly 60 bank mutual fund specialists representing the vanguard of the nation's financial service industry learned last week that life after Glass-Steagall reform may be less rosy than they had hoped.

A seminar on mutual fund compliance, sponsored by Federated Investors, a fund company headquartered here, attracted bank executives, lawyers, and compliance officers looking for insight into the issue.

A bevy of lawyers described the evolving regulatory challenges for bank- managed funds as a mere taste of things to come.

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Securities regulators "will be significant new partners" for bankers as the distinctions between banks and securities firms blur, said Dennis E. Eckart, a former member of the House of Representatives' powerful Energy and Commerce Committee who is now a lawyer in Washington.

As regulatory disciplinarians, the SEC's small staff must often rely on enforcement by example, Mr. Eckart said. An SEC spokesman put the size of the enforcement division at 330 people.

So bankers accustomed to warm working relationships with familiar bank examiners and auditors may be in for a shock.

The distinction between traditional bank oversight and the SEC's approach is the "difference between regulation and crucifixion," said Mr. Eckart, now a partner at Arter & Hadden.

"There's a whole new enforcement attitude," he said.

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Proposed legislation could repeal the lion's share of exemptions bankers now enjoy from registering their broker-dealer and investment advisers with the SEC, said Melanie L. Fein, an attorney at Arnold and Porter, Washington, D.C.

Although the vast majority of banks that sell mutual funds do so through voluntarily registered broker-dealer subsidiaries, Ms. Fein said losing their exemptions would cost banks valuable "leverage against securities regulators in imposing restrictive conditions."

Bankers largely have bank regulators on their side, Ms. Fein added. "They stood up and said the NASD's proposal to regulate bank broker-dealers was inconsistent with bank exemptions," she said. And that support was as important in convincing the National Association of Securities Dealers to modify its proposal as the bankers' own objections, she said.

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Though many bank executives are daunted by the increasingly complex compliance labyrinth, they need to develop a "compliance culture," said Eugene F. Maloney, senior vice president and corporate counsel, Federated Investors. "Failure to do so can be enormously expensive."

The compliance seminar was provided free, Mr. Moloney said, and he estimated one third of attendees came from banks that are not Federated customers.

"It's tricky for someone who sells things to banks to be perceived as someone who has their best interests in mind," Mr. Moloney said.

"But the message we were trying to get out was that you're operating your business in a period of flux," he said. "You can't be afraid of regulation, and you must be aware it."

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