Regulators Issue Uniform Guidance on Mutual Fund Sales
The federal bank and thrift regulatory agencies today released a
joint statement on retail sales of mutual fund and other nondeposit
investment products by federally insured financial institutions.
The statement supersedes guidance previously issued by each of the
Today's action means insured financial institutions will now be
operating under the same interagency statement for the provision of
mutual fund and other investment services. The statement applies
to insured depository institutions offering a mutual fund or other
nondeposit investment product sales program at the retail level,
either directly or indirectly. It reaffirms the agencies' belief
that retail customers must be fully informed about risks associated
with mutual fund or other nondeposit investment products. Banks
and thrifts recommending or selling such products should ensure
that customers are fully informed that the products: (1) are not
FDIC-insured, (2) are not deposits or other obligations of the
institution and are not guaranteed by the institution, and (3)
involve investment risks, including possible loss of principle.
These disclosures should be conspicuous and presented in a clear
and concise manner.
The statement makes clear that tellers should not make specific
recommendations about nondeposit investments, qualify customers, or
accept orders. It also outlines steps depository institutions
should take to minimize the possibility of customer confusion.
Among other things, banks and thrifts should:
advertise and disclose information about mutual fund and other products in a manner that clearly differentiates these products from insured deposits;
obtain a signed statement when a customer opens an investment account acknowledging that the customer has received and understands the disclosures;
conduct investment sales programs on bank premises in a physical location distinct from the area where retail deposits are taken;
ensure that investment sales personnel are properly qualified and trained;
ensure that sales personnel recommend particular investments that are suitable for the particular customer; and
ensure that incentive compensation programs are properly structured to protect customers.
Banks and thrifts should adopt written policies and procedures to
implement their investment sales program that are consistent with
the joint statement. The agencies will be examining the
institutions they supervise for compliance with the joint
The agencies will mail copies of the joint statement to the
institutions they regulate.