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Mr. CAHOUET. I would rather only kind of comment as it relates to our organization. It is difficult for me to project myself into the other bank situations.

Ms. MARGOLIES-MEZVINSKY. Mr. Stein? Mr. STEIN. I think having the names on the funds would only add to the confusion, and I think it is something that should be banned from that portion of the industry,

Ms. MARGOLIES-MEZVINSKY. Across the board?
Mr. STEIN. Across the board, yes.

Ms. MARGOLIES-MEZVINSKY. Can I come back to the confidentiality question, if you don't mind. I want to be sure that you are saying that customer lists, particularly those at Mellon, would not be made available to Dreyfus in an attempt to sell securities; is that what you are saying?

Mr. CAHOUET. I apologize, I didn't hear the question.

Ms. MARGOLIES-MEZVINSKY. The question is, customer lists, particularly those at Mellon, are not going to be made available to Dreyfus in an attempt to sell securities?

Mr. CAHOUET. No. I don't want to quite answer it that way, if I can. Clearly, Mellon, as well as Dreyfus, has products that are of interest or potential interest to these customers, and we don't know at this point as we sit here what is the best way to make those products available to our respective customers, but we do feel it is important for us, where we feel we are in a position to provide value-added products to our customers, to consider what is the most effective way of doing that. How we are going to do that, we don't know at this point.

Ms. MARGOLIES-MEZVINSKY. I guess I would like to follow up on a question that the Chair asked yesterday, and that is, if you were are an older woman who has just lost her husband and is a part of your bank and falls into this category, how do we protect someone like that?

Mr. CAHOUET. Well, Congresswoman, what we would be doing, as Mr. McGuinn explained in his comments, we go to great lengths to do a suitability analysis with that customer with the customer participating in that suitability analysis as to the appropriateness of any decision that she wanted to make, we used an example of a widow, at any point in time. That would be of considerable concern to us, particularly if she was just recently widowed, or something.

Ms. MARGOLIES-MEZVINSKY. I would like to know what kinds of implications might having access to such lists create for consumer protection?

Mr. CAHOUET. As I sit here today with you, I don't think that the implications would be all that serious because, realistically, if that person was inheriting money or whatever, she might be trying to make a decision and it would be important for her to have available to her people that she could talk to that could help her make that decision. So I think that probably, in most cases, it would be a positive fora rather than a negative fora.

Mr. STEIN. There is one observation about the widow, with the 125 years experience that the Mellon Bank has had with trusts, estates, it is mostly with older people who do have the funds, and I think in that area they have a very, very good record of how to handle those specific requests without getting into difficulties.

Ms. MARGOLIES-MEZVINSKY. Yesterday we heard that there are a number of banks currently selling mutual funds. Some of these banks were described as being aggressive, or attempting to develop state-of-the-art disclaimers and materials to weed out confusion but, on the other hand, others were described as bottom-feeders, those are people who had not come up to the Comptroller's guidelines. These are banks that put disclaimers in fine print or have a tendency to be confusing.

What actions do you think the Comptroller and other bank regulators ought to take against these so-called "bottom-feeders"?

Mr. STEIN. I think the first action that should be taken is the passage of the Dingell-Markey Bill. I think that would be a great step towards eliminating the problems.

Next, I think that the meeting here and the hearing today will have a very significant influence on the action of the OCC because the problem in the industry is a very short one. It is just occurring, and the knowledge of the problem is occurring in about the last 6 months, that everyone is becoming aware of this confusion. They were here, I think they heard a good deal about the problem, and I think they are beginning to make efforts to bring in the appropriate legislation and the appropriate guidelines or rules or laws, in effect, that deal with the problem. I think the meeting made everybody aware of what has to be done.

I feel confident that the institutions and the regulatory bodies will move in the direction of finding the appropriate regulation to eliminate these confusions.

Ms. MARGOLIES-MEZVINSKY. Mr. Cahouet?

Mr. CAHOUET. Well, I think that misleading statements advertising whatever is terribly wrong and shouldn't be tolerated in any sense, and where that appears a corrective action should be taken. It is very dangerous and shouldn't happen, and the people trying to take advantage by misrepresenting themselves, false advertising, it just has to get routed out. It is bad for the industry, it is bad for the people that are involved. We just shouldn't have it.

Ms. MARGOLIES-MEZVINSKY. Thank you, gentlemen.
Thank you, Mr. Chair.
Mr. DINGELL. The Chair thanks the gentlewoman.
The gentleman from Colorado, Mr. Schaefer.
Mr. SCHAEFER. Thank you, Mr. Chairman.

Gentlemen, I just have a couple other questions here. Due to the fact of the Keating problem, Lincoln, et cetera, I am still unclear about the role that bank tellers are supposed to play when a customer asks them about the possibility of switching from a deposit that is earning lower interest to something beyond that. What is the procedure, what do you see as the procedure? I mean, are they

I going to go to a customer representative, or are they going to have a brochure, or what?

Mr. CAHOUET. Mr. Congressman, I would like to ask Mr. McGuinn if he would respond to that because that is a very important question.

Mr. SCHAEFER. Certainly.

Mr. MCGUINN. Yes, sir. Remember now that the customer is standing at the teller window, and there is this sign that I showed you before which makes these various disclosures. At that point in time, if the customer inquired as you indicated, our tellers actually have a laminated card which they are required to read from, too, which also orally supplements that disclosure on the sign and goes into the fact that investment products are not insured by the FDIC and are not guaranteed, and so forth.

After having done that, the teller would then refer that customer over to a customer service representative who, if the customer wanted to make an appointment with one of our PIC's to get investment advice, that appointment would be made. Then the customer would be dealing with that licensed and trained PIC.

Mr. SCHAEFER. The chairman sent a letter to Mr. Stein and Mr. Çahouet on January 28th of 1994 to which you responded, I am understanding from staff in the response, and this was dealing with compensation for tellers, that it indicated that the referrals by tellers and branch platform staff to InvestNet brokers can result in increased compensation to tellers and branch platform staff although the increased compensation is linked only indirectly to the referrals. This is basically what you said.

Now, in other words, the tellers are going to get compensation?

Mr. CAHOUET. Well, sir, they will only indirectly, as that statement indicates, and what that means is the tellers are part of a whole branch compensation system which is based on a variety of factors to build a team effort. But a couple of points are very important, I think.

One, none of those teller referrals, as I just described, over to the customer service representative depend on whether or not a sale is ever made.

Second, in terms of just having made the referral itself, that is one of just many factors that would go into the team award for that particular branch and, indeed, among the many factors considered, actually a deposit sale would be given more credit than even a noninsured product sale.

Mr. SCHAEFER. One final one. Some of the responses to, again, the chairman's questions, referred to self-directed customers. Are self-directed customers ones who are approached telemarketing; wise, or through ads, or whatever else it is? How do the tellers and customer service representatives distinguish them from the nonself-directed? What is a self-directed?

Mr. CAHOUET. Well, sir, a self-direct customer I would interpret to mean somebody who is not seeking investment advise but rather has read about the Dreyfus fund or has read about a particular mutual fund and wants to come in and buy that mutual fund. In that case, that customer would be referred, again, to our InvestNet broker-dealer subsidiary where the customer could place the order. No investment advice is given, it is just a regular broker-dealer member of NASD.

Mr. SCHAEFER. In other words, they are coming in knowing what they want?

Mr. CAHOUET. Yes, sir.
Mr. SCHAEFER. Thank you, Mr. Chairman. I am finished.
Mr. DINGELL. The Chair thanks the gentleman.

Gentlemen, Mr. McGuinn, Mr. Cahouet, Mr. Stein, Mr. DiMartino, the subcommittee thanks you. We have kept you here a long time. We appreciate your courtesy to us. We know you have

answered a great number of questions, responded to the concerns of the committee, and I want to express to you my personal thanks for the time you have given us and for your presence today and for your assistance to us as we have considered this matter. Gentlemen, thank you very much.

The subcommittee stands adjourned.
(Whereupon, at 4:17 p.m., the subcommittee was adjourned.)

[The following subcommittee memorandum, OCC final order, and correspondence were submitted:)

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INTRODUCTION

The Subcommittee on Oversight and Investigations will hold hearings on Wednesday, March 2; 1994, and Thursday, March 3, 1994. Both days of hearings will commence at 10:00 a.m. in Room 2123 of Rayburn House Office Building. The hearings will focus on the significant legal, public policy, and consumer protection issues raised by the proposed Mellon-Dreyfus transaction, as well as on the adequacy of existing safeguards in connection with mutual funds and other securities products advised on or sold by banks or their affiliates.

on December 6, 1993, Mellon Bank Corporation (Mellon), a major bank holding company, and Dreyfus corporation (Dreyfus), one of the largest mutual fund investment advisers and managers in the United States, announced that they had entered into a merger agreement. See Mellon Bank & Dreyfus, "Mellon Bank Corporation and the Dreyfus Corporation to Merge in Stock Transaction Valued at $1.85 Billion," Dec. 6, 1993.

Dreyfus serves primarily as an investment adviser and manager of mutual funds and, through a wholly owned subsidiary, Dreyfus Service Corporation, as distributor of the shares of the Dreyfus Group of Mutual Funds. In addition, Dreyfus provides investment advisory and administrative services, directly and through a wholly owned subsidiary, Dreyfus Management, Inc., to various pension plans, institutions and individuals. Accordingly, Dreyfus Service Corporation is registered with the Securities and Exchange Commission (SEC), the National

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