CHATSWORTH S&L'S RATING LEAPS : GREAT WESTERN FINANCIAL LAUDED IN INVESTMENT POLL.

Byline: Deborah Adamson Daily News Staff Writer

A Chatsworth savings and loan, accused in a lawsuit of misrepresenting the risks of mutual funds to seniors, has jumped from second worst to second best in a survey that rated top banks by disclosure of investment information.

In a study of the country's 50 largest banks, Great Western Financial Corp. is second only to Union Bank, according to Prophet Market Research & Consulting in San Francisco. In Prophet's 1994 report, Great Western placed second to the bottom.

``We're very pleased with the ranking,'' said Great Western spokesman Ian Campbell. ``Although we thought our practices were much better than what the survey showed in the fall of 1994 . . . we've introduced a series of changes in the way our securities representatives operate.''

These include telling customers of investment risks at the beginning of a sales presentation, separating the brokerage area from the rest of the bank and developing educational materials for investors.

Other California banks in the survey include Wells Fargo at sixth best, First Interstate as third worst and California Federal as sixth worst.

California Federal officials did not return calls for comment.

Wells Fargo spokeswoman Kathy Shilkret said the ranking was done almost entirely before its April 1 acquisition of First Interstate.

From April 1995 to April 1996, Prophet dispatched undercover finance experts to bank branches. Their mission: Find out how much information securities salespersons ask their customers before giving investment advice and how well brokers disclose the risks of the investments.

The investigation found that 30 percent of banks did not make key disclosures - risk of loss in mutual funds, lack of deposit insurance and that investments were not guaranteed by the bank.

Glendale Federal Bank, which was 40th on the list, and First Interstate were among seven banks that omitted one or more of these disclosures at least half the time, the report said.

Glendale Federal executives could not be reached for comment.

Four banks - Mellon, Republic, South Trust and Union - consistently made all three disclosures.

Also, 25 percent of bank brokers pitched an investment product with little or no knowledge of the customer's needs.

On Friday, senior citizens picketed Great Western branches in Los Angeles, Alhambra, Westwood and Venice over mutual fund sales practices.

Since October 1994, three lawsuits have been filed claiming that Great Western did not adequately disclose the risks of mutual funds to customers, many of whom were seniors. The bank also is the subject of a Securities and Exchange Commission investigation into mutual fund sales practices.

The charges in the lawsuit are ``wildly inflated,'' and the bank had ``very good disclosure practices'' before the litigation, Campbell said.

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Photo, Chart

Photo: no caption (Great Western Bank branch)

Chart: LEADERS AND LAGGARDS