Magazine article American Banker

Gonzalez Readies Bill to Regulate Fund Sales

Magazine article American Banker

Gonzalez Readies Bill to Regulate Fund Sales

Article excerpt

WASHINGTON - House Banking Committee Chairman Henry B. Gonzalez said he is introducing legislation to regulate bank sales of mutual funds and other nondeposit instruments.

The measure, cosponsored by Rep. Charles E. Schumer, D-N.Y., would require banks and thrifts to take a number of steps to make sure customer understand that mutual funds purchased through banks are uninsured.

Among other steps, banks would have to make written disclosures and would be barred from selling mutual funds with names similar to their own. Tellers who accept deposits could not sell mutual funds, and investment products would have to be sold in an area "physically segregated" from the teller platform.

Public Viewed as Misinformed

"Unfortunately, many people still think that anything they get from a bank is federally insured," said Rep. Gonzalez. "We need to make sure that tellers and customer representative - who deal most frequently with customer - clarify the uninsured nature of these products."

Joe Belew, president of the Consumer Bankers Association, said many of the provisions in the Gonzalez bill reflect existing industry practices.

"But the devil is in the details," he warned, adding that the trade group had not yet had an opportunity to review the bill.

Mr. Belew expressed concern about the bill's requirement to physically separate employees who take deposits from those who sell investment products.

"That's a tough one," he said. "You can't have different offices, because that's not how banks are built. …

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