
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, June 20, 1993                   TAG: 9306180050
SECTION: BUSINESS                    PAGE: F-3   EDITION: METRO 
SOURCE: JERRY MORGAN NEWSDAY
DATELINE: NEW YORK                                LENGTH: Short

BANKS MUST TELL DEPOSITORS MUTUAL FUNDS AREN'T INSURED

The Securities and Exchange Commission has ordered banks to tell depositors that the mutual funds they sell are not federally insured the way deposits are.

As cash flows out of low-paying savings accounts, banks are increasingly trying to make money by turning depositors into investors - selling them mutual funds and picking up a commission as the money leaves the bank.

But the regulators want depositors to know that those mutual funds are not insured substitutes for their deposits, even though they buy the funds in the bank, and even if the funds are owned or managed by the bank.

The SEC has told banks to start printing that warning in their prospectuses. The SEC, especially concerned that mutual fund customers might be confused by funds that contain the bank's name, told those banks to "take immediate action to amend their prospectuses to provide this disclosure," according to a May 13 SEC letter to all registered mutual funds. Other funds that sell through banks can add the new language when they amend prospectuses, which happens throughout the year, an SEC official said.

The SEC action came in part because of a March letter from Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee, who wanted to know how investors could avoid being misled into believing that the funds are federally insured.

by CNB