Know What Your Bank Branch Is Pitching By JAIME LEVY PESSIN November 12, 2006 Stashing your money at your local bank? Make sure you understand if you are opting for a traditional bank deposit, complete with federal deposit insurance, or for somewhat riskier fare. As more banks add stockbrokers to their branches, bank customers are increasingly being offered not just deposit accounts, but also products such as mutual funds and annuities whose returns are tied to the fluctuations of the stock market. The National Association of Securities Dealers, a self-regulatory body for the brokerage industry, is worried that brokers based in bank branches aren't doing a good enough job of telling customers that these investments, unlike deposits, carry risk of loss. When bank customers have certificates of deposit that mature, "they might be steered in the direction of an affiliate and sold products that may or may not be suitable," says Emily Gordy, NASD senior vice president of enforcement. The NASD recently slapped an $850,000 fine on CCO Investment Services, a subsidiary of Citizens Bank of Rhode Island, partly because of unclear lines between employees selling bank and brokerage products. A spokeswoman for the bank says it is now in full compliance. The NASD has several open investigations of bank-affiliated brokerages; it's also looking into whether brokers based in banks are adequately trained and supervised. Stock investments are entirely appropriate for many investors. But some bank customers may not understand that they are being steered away from deposits that don't fluctuate in value to stock investments that do, says Jill Gross, director of the Pace Investor Rights Project at Pace University Law School in New York . The issue is becoming a bigger concern as the financial-services industry consolidates and firms increasingly try to sell brokerage products to their bank customers. This year, Citigroup started putting offices of its Smith Barney brokerage unit inside Citibank branches. In 2005, 23 local banks around the country signed up to have brokers from PrimeVest, a unit of ING Groep, located in their branches. Stockbrokers stationed in banks are required to make several disclosures -- both orally and in writing -- to indicate products they are selling aren't as safe as traditional bank fare. When buying products at banks, investors should look and listen for what the industry calls "Not, Not, May" language -- which explains that brokerage products are not insured by the Federal Deposit Insurance Corp.; are not obligations of, or guaranteed by, the bank; and may lose value. Ms. Gross advises bank customers to ask whether their principal will be protected. Just because a broker says a product is low-risk, it doesn't mean you can't lose some of the investment, she notes. Also, it's important to ask if there are any penalties for withdrawing money from a brokerage or annuity product. Write to Jaime Levy Pessin at jaime.pessin@dowjones.com