SEC Staff Takes Aim at Bank Investment Funds

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TUCSON, Ariz. -- A long-awaited Securities and Exchange Commission report is likely to recommend that Congress scale back the exemption that shields bank collective investment funds from the registration and disclosure requirements that apply to mutual funds.

SEC Commissioner Richard Y. Roberts, in Tucson for a mutual fund conference, said it was important that Congress eliminate the exemption for bank funds that hold assets for pension plans in which employees make the investment decisions.

"I have been advised by our staff that they will make that recommendation," he said in an interview.

While the SEC need not accept the staff recommendations, they are likely to carry great weight. In some areas, the commission may be able to adopt the staff recommendations without legislation. In other areas, including the collective investment funds offered by bank trust departments, legislation would be required.

James D. McLaughlin, director of agency relations for the American Bankers Association, said the industry would oppose the recommendation of the SEC staff, which he described as an effort to "expand their turf."

"A lot of banks couldn't pay for registration," he said. "They'd be driven out of the business and then there would be fewer in investment options."

Congress Passed Exemption

Mr. McLaughlin said banks believe that laws and regulations governing retirement plans and fiduciary responsibilities provide enough protection for individuals with investments in bank funds.

A 1970 law exempted banks and insurance companies that offer investment funds for pension plans from normal securities registration requirements. Congress concluded at the time that pension services were being purchased by institutions and other sophisticated parties who did not need as much investment advice as individuals. …