In response to industry uproar, state securities regulators are revising their proposed bank broker-dealer rule to look more like proposed federal regulations, state regulators say.
The North American Securities Administrators Association, which puts out guidelines for state securities regulators, may wait for the National Association of Securities Dealers to finalize its bank broker-dealer rule before issuing its own, said Thomas Geyer, commissioner of the Ohio Division of Securities.
NASAA will decide at its November conference if it will wait for the final NASD rule, he said. The NASD Regulation rule governing bank brokerage activities is awaiting approval by the Securities and Exchange Commission.
Industry executives and lawyers criticized the NASAA rule put out for comment this year, because it deviated from the correlating NASD rule in areas such as disclosure, bank employee referral fees, and investment product names. .
"We have made a conscious effort to come in line where the NASD rule is," Mr. Geyer said. "Our goal is investor protection, not to impose burdensome regulations on people selling securities."
But selling securities on a bank's premises is different than selling investments in other environments, Mr. Geyer said.
NASAA's disclosure guidelines now mirror the NASD rule, which requires marketing materials and prospectuses to say investment products are not insured by the Federal Deposit Insurance Corp.
The state regulation prohibiting unregistered employees from sharing referral fees with registered sales representatives will apply to all securities firms, not just banks, Mr. Geyer said.
NASAA's final rule will no longer prohibit bank proprietary investments from carrying the bank's name, but will focus on disclosure, Mr. Geyer said. This is to ensure that there is no customer confusion about the uninsured nature of the products.
Bringing state regulations more in line with federal rules should reduce investor confusion, one industry lawyer said.
"I think (different rules) would complicate an already complicated situation," said Melanie L. Fein, an attorney at Arnold & Porter, Washington. Different federal and state regulations "just makes the compliance burden more difficult and more confusing for the customer."
"As far as I'm concerned, who ever has the strictest regulations, we'll follow theirs," said Curt Anderson, president and chief executive of Busey Bank's First Busey Securities, Urbana, Ill.
"I always say my job is just as much about making money as it is about following rules and regulations," Mr. Anderson said. "I don't want to be on the front page of the local newspaper."