Magazine article American Banker

OCC Suggests Improvements in Mutual Fund Disclosures

Magazine article American Banker

OCC Suggests Improvements in Mutual Fund Disclosures

Article excerpt

Armed with a study that uncovered lingering problems with mutual fund and annuities sales disclosures, Comptroller of the Currency Eugene A. Ludwig is pressing banks to rethink their approach.

The comptroller's study, based on a review of marketing materials submitted voluntarily by 700 banks, found that a sizable minority failed to provide consumers with written explanations of investment risks. The findings run counter to some studies done for the banking industry. (See related story, page 24.)

For instance, one out six documents reviewed by the OCC failed to state that mutual funds lack federal deposit insurance. And nearly one in four lacked the mandatory disclaimer that investment products are not deposits or obligations of the banks that sell them.

In a letter released Monday, Mr. Ludwig outlined steps banks must take to improve the quality of their disclosures. Among them: providing key information in large, bold type on the front of sales documents,

He also called on banks to take greater care with their descriptions of annuities, which are often likened to deposits in marketing materials.

Mr. Ludwig also announced that he will convene a meeting with leading banking trade groups early next month to encourage them to lead the way in communicating the requirements to their members.

"It's clear from what the comptroller found that there is work that needs to be done," said Donald G. Ogilvie, executive vice president of the American Bankers Association.

Over the past year, the OCC has been working closely with the ABA and other banking trade groups to develop mutual fund sales standards. …

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