Magazine article American Banker

Settle with Fund Complainants, Lawyer Advises

Magazine article American Banker

Settle with Fund Complainants, Lawyer Advises

Article excerpt

A securities lawyer is counseling banks to negotiate financial settlements with disgruntled mutual fund customers rather than risk a backlash from regulators and the public.

Banks should settle these cases if there is even the slightest possibility that they ran afoul of guidelines governing mutual fund sales, said Philip J. Hoblin, partner at Parker Chapin Flattau & Klimpl, New York.

If regulators and lawmakers catch wind of complaints mounting against a given bank, that institution is bound to be looked at with a critical eye, he said at a recent mutual fund conference sponsored by International Business Communications.

Mum's the Word

He also urged bankers to have customers sign confidentiality statements when settlements are reached, prohibiting them from talking about any cases that do crop up.

"You don't want to appear in the Sunday Times," Mr. Hoblin said. "It's not good for business."

Other lawyers who joined Mr. Hoblin for a panel discussion at the recent conference said bankers should prepare for a wave of financial claims.

"If you're involved in mutual funds and the brokerage business, you're going to have litigation," said Theodore A. Krebsbach, partner with Kittay, Gold & Krebsbach, New York.

He said customers are most likely to challenge banks about the suitability of the products they sell. He advised bankers to protect themselves against such claims by getting "a lot of information up front about customers' investment goals."

And if customers' complaints end up before an arbitration panel or in court, "Prepare to death," he said. …

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