State securities regulators have identified "best practices" to help outside directors of bank-run funds protect investors, a top official of their umbrella group said at a conference here.

But the regulators do not want to expand outside directors' liability under state laws, said Bradley W. Skolnik, president-elect of the North American Securities Administrators Association Inc.

Mr. Skolnik, who is Indiana's top securities regulator, was a panelist at a Securities and Exchange Commission roundtable on the role of independent directors.

Outside directors, who serve on fund boards alongside officers of the company and its affiliates, are expected to act as advocates for investors. But those at bank-run funds face special issues, Mr. Skolnik said.

Because of the heightened potential for investor confusion, they should "insist and be satisfied" that effective sales compliance procedures are in place, according to best-practices guidelines his group has prepared. Mr. Skolnik distributed the guidelines at the roundtable.

Bank funds' outside directors should make certain, the guidelines say, that systems ensure that customers know mutual funds are not guaranteed or insured. These directors should also be vigilant, the guidelines say, to police the danger that information provided by bank customers will be misused to sell mutual funds.

Other issues discussed at the two-day roundtable this week included fee disclosure, communication with shareholders, and companies' soft-dollar practices.

Kathleen A. Dennis is senior managing director of Key Asset Management Inc., the asset management arm of Cleveland-based KeyCorp. She said outside directors of her unit's Victory Funds have asked about sales practices for the funds. They have also asked to speak with representatives of KeyCorp's brokerage arm, she said. "They understand they don't have regulatory oversight, but they do have what I call a right to know."

Lawyers, fund directors, and regulators at the roundtable also discussed ways to enhance the effectiveness of the entire fund governance system.

Some suggested requiring that boards include more independent directors. Others said they would like more SEC input when conflicts arise between investment advisers and fund boards.

Arthur Levitt, the SEC chairman, said he would ask Paul F. Roye, the director of its division of investment management, to promptly submit recommendations on ways to improve fund governance.

But though Mr. Levitt has been reluctant to seek legislative changes or impose new regulations, he said that identifying best practices for mutual fund directors might not be "quite enough."

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