Magazine article American Banker

Deferring to Rules 1st Union Doffs Cap Account Incentive

Magazine article American Banker

Deferring to Rules 1st Union Doffs Cap Account Incentive

Article excerpt

First Union Corp.'s aggressive marketing campaign for its bundled brokerage and banking account has hit a speed bump.

The Charlotte, N.C., banking company recently canceled a promotion for its Cap Account because of concerns that it did not square with investment regula- tions.

First Union mailings in July notified customers that if they shelled out $15,000 to open a Cap Account and invested a certain amount in the bank's proprietary Evergreen Keystone mutual funds, the bank would add $100 to the mutual fund investment.

A cash management account, First Union's Cap Account offers checking, brokerage, a daily sweep into a money market fund, discounted transaction fees, and a consolidated monthly statement.

Calls this week to the toll-free number included in the mailings showed that the $100 offer has been scrapped for "compliance" reasons. Instead, the com- pany will waive two years' annual fees for customers responding to the promo- tion.

A First Union spokesman would not elaborate on the decision but said other promotions for the Cap Account were unchanged.

"We modified our promotion to address a technical regulatory issue," First Union said in a statement issued Tuesday.

First Union's decision to scrap the incentive came as the company is pushing hard to promote its investment products business. Most recently, it took out splashy advertisements in The New York Times and The Wall Street Journal tout- ing its combination of banking and brokerage services. A television ad campaign has been running since February.

In the case of the scuttled promotion, the bank's zeal for growth may have clouded its judgment.

"I'm surprised the train got that far down the tracks," said Anne Moore, president of Synergistics Research Corp., an Atlanta retail investment products consultant.

It is not clear that any regulatory body-including the National Association of Securities Dealers, Internal Revenue Service, Office of the Comptroller of the Currency, or state regulators-instructed the bank to stop the promotion. …

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