Industry awaits word on suit over bank inroads
The mutual fund industry is going to have to wait at least a little while longer for a final decision on its effort to keep the banks out of the funds.
Last month, the Investment Company Institute (ICI), the mutual fund industry's trade association, filed suit in federal district court in Washington against the Federal Deposit Insurance Corporation, one of the federal regulators of the banking industry. The suit charged that the FDIC abdicated its responsibility by not holding hearings on plans by the Boston Five Cents Savings Bank to open a money market fund.
The ICI argues that banks are prohibited from offering a money fund because of the Glass-Steagall Act 1933, which makes it illegal for them to enter the securities business. Although several banks are offering mutual fund services, the services are arranged through an existing mutual fund company, and not offered directly by the bank.
Since the suit was filed May 21, the parties have been taking depositions from all sides, including directors of the FDIC, an attorney for the ICI said.
As far as he knows, no other bank has tried to follow the Boston Five's lead, said the attorney, Matthew Fink. ''But there are rumors that there's a line forming'' in case a final decision should go against the mutual fund industry.
Because the ICI was granted speedy action in the case, a decision could come quickly, another attorney working with the institute said.