The Office of the Comptroller of the Currency issued guidelines last week for banks selling retail nondeposit investment products, such as mutual funds and annuities. Excerpts follow.
Banks should adopt a statement describing the features of the sales program, the roles of bank employees, and the roles of third-party entities.
Bank management must monitor compliance by other entities on an ongoing basis. The degree of bank management's involvement should be dictated by the nature and extent of nondeposit investment product sales, the effectiveness of customer protection systems, and customers' responses.
The bank should adopt policies governing the permissible uses of bank customer information in connection with a bank-related retail investment sales activity.
Banks should market nondeposit products in a manner that does not mislead or confuse customers as to the nature of the products or the risks. To the extent permitted by space and personnel considerations, bank management should take steps to separate the retail deposit-taking and the retail nondeposit sales functions.
Banks should prohibit tellers from offering investment advice.
No Use of Bank's Name
In addition, banks may not offer uninsured retail investment products with a product name identical to the bank's name. Banks also should recognize that the potential for customer confusion may be increased where the bank uses product names that are similar to the bank's own and should design their sales training to minimize this risk.
Complete and accurate disclosure must be provided to avoid customer confusion as to whether a bank-related product is an investment product or an insured bank deposit. Product disclosures should be made conspicuously and should include the fact that the products are not FDIC insured; are not obligations of the bank; are not guaranteed by the bank, and involve investment risks, including the possible loss of principal.
The OCC believes it is appropriate to obtain a signed statement acknowledging such disclosures from a customer at the time a retail nondeposit investment account is opened.