October 21, 1994
TO: BANK INVESTMENT MANAGEMENT MEMBERS NO. 30-94
BOARD OF GOVERNORS NO. 109-94
SEC RULES MEMBERS NO. 74-94
RE: SEC SANCTIONS BROKER WITH RESPECT TO BANK MUTUAL FUND SALES
ACTIVITIES
__________________________________________________________
The Securities and Exchange Commission recently sanctioned
a securities salesman for a bank-affiliated broker-dealer with
respect to the salesman's mutual fund sales activities. A copy of
the Commission's order is attached.
The Commission found that the salesman solicited the bank's
customers to transfer their bank deposits to shares of certain
mutual funds by the use of sales sheets that the salesman had
prepared. The salesman allegedly had placed copies of the sales
sheets in three bank branches without supervisory approval. The
Commission also found that the sales sheets were false and
misleading in several respects. For example, they contained yield
figures that were not computed according to statutory requirements
and failed to disclose the time periods to which they corresponded.
In most cases, the quoted yield figures exceeded the yields
actually generated by the funds during the previous year.
The Commission found that these activities violated the
antifraud provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as well as certain provisions of
the Investment Company Act of 1940. Without admitting or denying
the Commission's findings, the securities salesman agreed to cease
and desist from further violations of those provisions, to a
censure, and to a twelve-month suspension.
We shall keep you informed of future enforcement cases of this
type.
Paul Schott Stevens
General Counsel
Attachment