Note that this one-click-away rule does not apply to the "Equal Housing Lender" or "Member FDIC" language (or to the Nondeposit Investment Product
Before discussing these matters in more detail, I believe it would be helpful to discuss briefly the continuing growth of the banking industry's sale of mutual funds and other nondeposit investment products that has occurred since early 1994, when the Board last testified on this subject.
In February 1994, the banking agencies jointly issued an Interagency Statement on the Retail Sales of Nondeposit Investment Products. The interagency statement calls for banks selling such products on their premises to intensify their disclosure efforts to advise retail customers that the investments are not deposits insured by the FDIC, are not guaranteed by the bank, and are subject to the risk of loss of principal.
The FDIC recently released the results of its market trends survey, which show that some banks and securities firms selling on bank premises need to improve their efforts to advise customers of the risks associated with nondeposit investment products. We agree.
A comparison of knowledge levels before and after a consumer seminar indicates that individuals seem to have a better understanding of the risks associated with nondeposit investment products: 91 percent know these products are not FDIC-insured, compared with 65 percent before the seminar; 87 percent know these products carry the risk of loss of principal, compared with 72 percent before the seminar.
In response to the rapidly growing involvement of depository institutions in the sales of mutual funds, the Board and the other bank regulatory agencies last month jointly issued a comprehensive set of guidelines governing the retail sale of mutual funds and other nondeposit investment products by depository insitutions.
Written material that contain information about both FDIC-insured deposits and nondeposit investment products should clearly segregate the two types of information.
To further minimize the potential for customer confusion, the interagency guidelines provide that, except in very limited situations when physical considerations prevent it, sales or recommendations relating to nondeposit investment products should be conducted in a physical location distinct from the area where retail deposits are taken.
Another element that must be considered in minimizing the potential for customer confusion relates to the personnel who provide advice about, or sell, mutual funs or other nondeposit investment products. The interagency guidelines provide that tellers and other employees should not make general or specific investment recommendations or accept orders for nondeposit investment products, even if unsolicited, while located in the routine deposit-taking area.
The interagency guidelines provide that depository institution personnel who sell, or provide investment advice about, nondeposit investment products should receive training that is the substantive equivalent of the type of training required for brokers licensed by the National Association of the Securities Dealers (NASD).