Three powerful organizations, including one of state securities regulators, have featured banks prominently in a warning about investment sales practices that can harm elderly investors.

The American Association of Retired Persons, the Consumer Federation of America, and the North American Securities Administrators Association issued the warning at a press briefing last week.

They cited bank sales of investment products as one of a handful of sales practices by the "legitimate investment industry" that are of "greatest concern to older investors."

The warning comes as banks are already reeling from a series of magazine and newspaper articles and lawsuits alleging misleading sales tactics.

The warning also indicates that state securities regulators are looking harder at sales of investments by banks.

"I think that most state regulators think banks are of concern," said Richard S. Cortese, the state of Vermont's deputy commissioner of securities.

He said state securities regulators are especially concerned that investors are being misled about the difference between insured deposits and uninsured investments. He maintained that elderly and novice investors are particularly vulnerable because they tend to trust banks more than other investors.

Mr. Cortese's office supplied the groups with an example of an investment sales tactic by Merchants Bancshares, Burlington, Vt., that was said in the announcement to be problematical.

The groups noted that three-quarters of Americans older than 65 rely on investments for at least some income.

So anything that causes elderly investors to lose money on investments is of particular concern, especially since retired people have little chance to make up for losses through future earnings.

Previously, the three groups had warned against various fraudulent investment pitches that had stung elderly people. But in their most recent announcement, the groups noted that the "legitimate" investment industry also has unfairly caused "billions of dollars" of losses.

Practices that have been particularly harmful to elderly investors were said to include "misleading titles designed to portray commissioned sales people as impartial advisors; bank sales of uninsured investment products; the poor quality of oral and written disclosure; hidden derivatives in investment products touted as 'safe'; and unclear account statements."

Banks were cited as a source of many of these problems.

For example, the groups said a trust unit of Merchants Bancshares "marketed heavily to older investors" a Piper Jaffray mutual fund that was among those suffering spectacular losses last year on derivatives.

Investors may been have misled by the following statement, which Mr. Cortese said was included in an investor newsletter:

"The fund invests only in securities guaranteed as to payment of principal and interest by the U.S. government. We feel confident that this quality investment will continue on its spectacular performance track in the months and years to come."

In an effort to settle investor litigation, the bank in December agreed to give investors a total of $9 million to cover their losses. Mr. Cortese said that, to date, securities and banking regulators had taken no action against the bank.

Merchants' chief executive officer Joseph L. Boutin could not be reached for comment.

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