Magazine article American Banker

NASD Seeks More Oversight on Referrals to Brokers

Magazine article American Banker

NASD Seeks More Oversight on Referrals to Brokers

Article excerpt


Banks that sell investments through NASD-member brokerages may soon find their own employees under the regulatory agency's supervision.

Under a proposal published Friday by securities regulators, bank employees who mention services provided by an affiliated brokerage when promoting the bank's products would come under scrutiny of the National Association of Securities Dealers.

Though these employees would not have to register with NASD, they would have to abide by its rules, or else their affiliated brokerages would be penalized.

"This rule basically impacts the bank and its employees," said Sarah A. Miller, senior government relations counsel for the American Bankers Association.

The proposal, filed with the SEC in July, replaces an earlier version which would have required any employee who tells customers about brokerage services to register with the NASD.

Ms. Miller acknowledged that the new proposal is less onerous than its predecessor. Still, she said, it is unfair to banks with brokerage affiliates that are registered with the NASD.

"They would have a greater burden than those banks that have chosen a go-it-alone strategy and are selling securities through a bank," Ms. Miller said.

About 92% of banks in the securities business have an NASD-registered broker-dealer, according to the ABA and American Brokerage Consultants of St. Petersburg, Fla.

Under the proposal, nonregistered bank employees that "cold call" customers would have to agree, in writing, to adhere to NASD rules. They would be allowed to mention brokerage products and services that are available, but they could not discuss product specifics.

They would also be permitted to invite customers to brokerage-sponsored events and ask clients whether they want to discuss investments with a registered broker or get investment information from the firm. …

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