Academic journal article ABA Banking Journal

Uninsured Products Draw Federal Heat

Academic journal article ABA Banking Journal

Uninsured Products Draw Federal Heat

Article excerpt

Comptroller Eugene Ludwig is sending examiners into the field to perform surprise inspections of national banks' mutual fund and annuities sales efforts.

Ludwig told reporters during ABA's recent Annual Convention that evidence has reached his office that banks aren't complying with OCC guidelines regarding disclosures for uninsured investment products.

"The problem is that many people have come to believe that everything at a bank is safe because of federal deposit insurance," said Ludwig. The main aim of the spot inspections will be to determine if banks make it clear in signage, promotional materials, and physical facilities that mutual funds and annuities are not insured and subject to loss of principal.

Only a few days after Ludwig spoke, the Securities and Exchange Commission released a limited study that found that 20% of mutual fund holders think all mutual funds sold through banks are federally insured. The survey also found that 39% of mutual fund holders think mutual funds purchased from a stock broker are federally insured.

At the convention, Ludwig warned that persistent noncompliance could result in regulatory penalties. …

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