NASAA/AARP SURVEY ON BANK SALES OF MUTUAL FUNDS; JOINT NASAA/AARP/CFA STATEMENT ON BANK SALES LEGISLATION

February 2, 1994 TO: BANK INVESTMENT MANAGEMENT MEMBERS NO. 7-94 BOARD OF GOVERNORS NO. 11-94 STATE LIAISON COMMITTEE NO. 8-94 TASK FORCE ON BANK SALES ACTIVITIES RE: NASAA/AARP SURVEY ON BANK SALES OF MUTUAL FUNDS; JOINT NASAA/AARP/CFA STATEMENT ON BANK SALES LEGISLATION __________________________________________________________ The North American Securities Administrators Association and the American Association of Retired Persons recently released the results of a survey jointly undertaken to gauge investor understanding of the risks of bank-sold mutual funds. The survey found, among other things, that 39% of respondents who thought their banks offered mutual funds believed that such funds are FDIC-insured. (Eighteen percent knew that they were not FDIC-insured, and 43% were uncertain.) The survey found that a higher percentage (52%) of those who actually had bought mutual funds from their banks thought such are FDIC-insured (only 17% knew that they were not). The sample of respondents who had bought mutual funds from their banks was small: only 60 people out of the total sample of 1000. On releasing the survey results, NASAA, AARP, and the Consumer Federation of America issued a joint statement on legislation concerning bank sales of mutual funds and other uninsured products. The joint statement set forth minimum standards that these organizations suggest be incorporated in any legislation in this area. The minimum standards include: - concise and "simple English" disclosure, lobby posters, and customer acknowledgements that the investment is uninsured; - a ban on naming or advertising uninsured bank products in any way that creates confusion with insured bank products or the institution itself; - closing gaps in consumer protection available to bank customers, e.g., by extending broker-dealer regulation to all bank fund sales; and - a mandatory physical separation of the sale of insured and uninsured products within banks. A copy of the survey and joint statement is attached. We will keep you informed of further developments. Paul Schott Stevens General Counsel Attachments