BANKING

Near Ban Hits Thrifts: Long after small investors threw their money away on risky bonds sold in the branches of Lincoln Savings & Loan, the federal agency regulating thrifts said Tuesday that it has instituted a near total ban on S&Ls; selling their own securities out of their branches.

The Office of Thrift Supervision said it would permit the sale of a thrift’s securities in thrift branches only in connection with an S&L;’s conversion from a mutual form of ownership to stock ownership.

The OTS said the new regulation is designed to eliminate possible consumer confusion when thrifts offer federally insured deposit accounts along with uninsured products, such as stocks and bonds.

That’s exactly what happened to many small investors in Lincoln’s parent company, American Continental Corp. The Phoenix company began selling its bonds in the 29 Southern California offices of its Irvine thrift, and bondholders later accused the company of engaging in “bait and switch” tactics as it persuaded customers to use insured savings to buy uninsured bonds.

Bondholders lost $168.2 million in principal when the thrift and real estate company controlled by Charles H. Keating Jr. collapsed in April, 1989. Their loss was part of more than $285 million lost by small investors. Lincoln became the nation’s biggest thrift failure, costing taxpayers $2.6 billion.

In the aftermath, state regulators moved quickly, issuing a regulation in December, 1989, that banned the sale in branch offices of any securities issued by state-chartered S&Ls.;