January 13, 1993
TO: BOARD OF GOVERNORS NO. 3-93
MEMBERS - ONE PER COMPLEX NO. 3-93
RE: LETTERS FROM CHAIRMAN DINGELL CONCERNING BOND INVESTMENTS
__________________________________________________________
Chairman John Dingell of the House Energy and Commerce
Committee has written to the Office of the Comptroller of the
Currency, the Securities and Exchange Commission, and the
National Association of Securities Dealers, requesting
information concerning the sale of bond funds and other bond
investments.
In particular, Chairman Dingell requested information
concerning (1) currently required disclosure regarding the risks
associated with a bond investment as opposed to a CD; (2) further
steps that are warranted to reiterate the NASD's advice
concerning a broker's obligation to disclose that bond
investments are sensitive to interest rate fluctuations and carry
a greater degree of risk to capital than CDs; and (3) whether
bank tellers and other personnel on bank premises are encouraged
or allowed to sell bond investments to bank customers. Copies of
Chairman Dingell's letters are attached.
As you know, the mutual fund industry has been engaged in
efforts to educate the public on how these funds work and how
they differ from CDs. In addition to the letters to shareholders
and communications to brokers and financial planners from fund
organizations, the Institute has undertaken a number of consumer
education efforts. As a result of these efforts, there have been
hundreds of articles in the news media explaining alternatives to
CDs and the risks and benefits associated with these
alternatives.
Matthew P. Fink
President
Attachments