National Downtown Bank National Downtown Bank is a commercial full-service bank operating in a large urban area. The bank decided two years ago to enter some new lines of business. It began underwriting and selling life insurance, business liability insurance, and certain types of title insurance to its customers. It also decided to underwrite securities that were offered by its commercial customers and sell nondepositinvestment products, such as mutual funds and municipal securities, to all its customers. To enter these businesses, the bank simply promoted a trust department manager to the position of insurance operations manager. She set up operations in one of the bank's largest branches. No contact was made with any state authority. The bank also hired a securities manager who had the appropriate SEC license. The securities manager set up operation in the bank's main offices and had salespersons in the branches. In both cases the managers reported to the bank's CEO, and all staff hired by each department became bank employees. The bank received a notice from its primary regulator and from the state insurance department that it was operating its securities and insurance operations in violation of the law. The bank is now subject to fines from both.
a. What should the bank have done to lawfully begin selling insurance?
b. What should the bank have done to begin selling securities?