10.8 Broker-Dealers Operating Within A Bank Setting

Many broker-dealers operate within bank settings. Because this may lead retail customers to assume that banking rules apply to broker-dealers, the NASAA has issued model rules regarding broker-dealers who operate within a bank setting. They include the following:

• The broker-dealer should offer its services in an area that is separate from the location where retail banking activities are taking place.

• The broker-dealer’s name needs to be clearly stated where the broker-dealer activity is taking place.

• The broker-dealer needs to distinguish its services from the services of the retail bank.

• The broker-dealer must disclose orally and in writing that the securities purchased/sold by the broker-dealer are not insured by the FDIC, are not guaranteed by the bank, and are subject to investment risks, such as loss of principal. The broker-dealer should try to get a written acknowledgment of the disclosures at the time that a client opens the account.

• If a representative of the broker-dealer makes a reference to SIPC coverage, she must clearly explain (in written or oral form) the coverage to the client.

• Communications with the public that include the location of the broker-dealer must include the information stated in the fourth bullet above. The following shortened version may be used in most adverti