A threat by South Carolina regulators to shut down NationsSecurities operations in the state is expected to embolden other states in their regulation of bank brokerages.
"There's no question: A case like this will cause the legal wheels to grind in more states," said Karen L. Pletz, senior vice president of Central Trust Bank, Jefferson City, Mo.
The threat - a "notice of intent to revoke registration" filed Friday by South Carolina securities regulators - stems from NationsSecurities' response to an investigation of its sales practices.
The South Carolina regulators, like other state and federal regulators, are examining publicized allegations that the retail brokerage subsidiary of NationsBank Corp., Charlotte, N.C., has used misleading and inappropriate sales tactics.
NationsSecurities has denied the allegations, and the South Carolina action did not deal with this issue.
But NationsSecurities was accused of deception in its dealings with South Carolina regulators. In six instances, NationsSecurities allegedly either didn't respond to specific requests for information, or made misleading or incomplete responses, according to South Carolina authorities.
NationsSecurities has 30 days to ask for a hearing on the matter. If the brokerage fails to respond or loses its case, it could be stripped of its authority to sell investments in the state.
A NationsBank spokesman said the company had "always . . . been truthful" with South Carolina's securities regulators. NationsSecurities, he added, has supplied "literally thousands of pages of information" to the South Carolina regulators at their request.
Philip A. Feigin, president of the North American Securities Administrators Association, a trade group of state securities regulators, said he was not aware of any other instance in which a state had threatened to bar a bank-affiliated brokerage from operating.
Regulation of bank brokerages is an area of growing concern as sales rise and concerns over misleading sales tactics persist.
Mr. Feigin said state securities regulators worry that bank customers are being confused about the difference between deposits that are federally insured and investments that are not.
Karen Talley contributed to this article.