New Government Securities Sales Rules
T
hree federal authorities now require depository institution government securities broker—dealers to comply with rules that are substantively identical to the National Association of Securities Dealers (NASD) business conduct and suitability rules. The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation adopted the NASD rules jointly to provide consistent treatment for government securities customers. The new rules went into effect on July 1.
According to the new rules, banks dealing in government securities must observe "high standards of commercial honor and just and equitable principles" and have reasonable ground for believing that investment recommendations are suitable for a customer based on his or her holdings and financial situations and needs. The new suitability rules apply only when a bank makes a recommendation to its customer.
For more information, contact the OCC Securities and Corporate Practices Division at 202-874-5210; the Federal Reserve Board Legal Division at 202-452-3513; or the FDIC Division of Supervision at 202-898-3618.