Magazine article American Banker

Regulation of Funds Seen as Industry's Next Hot Issue

Magazine article American Banker

Regulation of Funds Seen as Industry's Next Hot Issue

Article excerpt

SAN DIEGO -- While most participants at a recent compliance conference flocked to the fair-lending discussions, speakers predicted mutual fund sessions will be the big draw in coming years.

"The industry is just getting with it," said James M. Rockett, an attorney with the San Francisco law firm of Ropers, Majeski, Kohn, Bentley, Wagner & Kane. "It's probably one of the riskiest businesses we've gotten into."

Mr. Rockett told an audience at the California Bankers Association's annual compliance conference to expect exams not just from banking regulators, but from securities regulators as well.

Dudley Nigg, executive vice president at Wells Fargo Bank, is already preparing for these exams, putting a strict compliance program for mutual funds sales in place.

Any Wells Fargo employee who is hired to sell investment products must sign a contract that says he will be fired if he falls to give customers the proper disclosures.

Wells is checking up on those employees with mystery shoppers. The program hasn't tripped anyone up yet, but, Mr. Nigg admitted, "We're looking for a few scapegoats ."

While some bankers laughed at his cut-throat attitude, Mr. Nigg said a brokerage firm employee failing to make correct disclosures would be out of a job instantly.

"We've been much gentler in the banking industry," Mr. Nigg said. "If someone's not prepared to do it right, then find someone who is."

Bankers should be more careful, anyway, because customers . who buy products from a bank are likely to be less sophisticated, he explained. …

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