Regulators Place New Limits on Thrifts’ Sales of Securities

WASHINGTON —  Responding to complaints raised during the S&L; scandal, federal regulators on Tuesday prohibited savings institutions from using their offices to sell their own securities or securities issued by affiliates.

The new rule was issued by the Office of Thrift Supervision effective Nov. 6. It is aimed at preventing confusion among S&L; customers who might believe that they were purchasing federally insured certificates of deposit.

With one exception, the rule prohibits the sale of both stock and debt such as bonds. The exception, subject to tight restrictions, applies to S&Ls; that are converting from the mutual form of ownership, where depositors control the institution, to stockholder ownership.

The new regulation strengthens rules in effect since March, 1986, and responds to past complaints from some S&L; depositors that they were misled into purchasing uninsured securities.

Customers of Charles Keating’s Lincoln Savings & Loan Assn. in Irvine, Calif., complained of being tricked into purchasing subordinated debt in the S&L;’s Phoenix, Ariz.-based holding company. The debt became nearly worthless when the S&L; failed and the holding company declared bankruptcy.