Dear Ms. Schapiro, It’s NONE OF YOUR BUSINESS!!

The combination of the NASD and the NYSE into one self regulatory organization must have NASD chairman, Nancy Schapiro, lusting over the potential for the increase in her power and authority. In her recent talk at a Phoenix meeting for the Securities Industry and Financial Markets Association, New York, she insisted that she will continue to focus on the “sales practices aimed at seniors” and the “emerging life settlement industry.” It would be a very good thing if Ms. Schapiro did in fact try to clean up the serious violations of ethics in the securities industry in the sale of unsuitable and fraudulant risk instruments to our senior population. Brokers routinely place elderly clients with limited assets and income in high risk stocks, mutual funds, or in variable products, and brokers openly practice the illegal acts of churning client accounts for no other purpose than to generate themselves a commission. These practices are rampant, and no one in the regulatory branches of the securities industry is doing anything to try to control or eliminate these abusive actions.

But somehow, Ms. Schapiro seems to think that she DOES have time to meddle in the insurance industry affairs and implies, just as her predecessor did, that she should have authority over insurance matters that have nothing to do with securities. The only connection that Ms. Schapiro, or anyone else who has raised such a claim, can use to offer any reason for her need to step into the insurance industry and gain control over the sale of fixed and indexed annuities, and now the life settlement business, is that these products directly compete with the securities industry. Her claims that there should not be any kind of “regulatory arbitrage that provides an incentive for the sale of one product over another,” is really just her admission that these products are more suitable for this senior market, and in many cases these insurance products are beating the securities alternatives in a head to head competition, stealing hundreds of millions in commissions from NASD members.

What better way to compete with your competition than to get regulatory control over them? Already, by the combination of the NASD and the NYSE, the monopoly factors in the securities industry have been increased. Competition is the backbone of our free enterprise system. No one ever said that the economic playing field has to be level. It is the goal of business and industry to find a difference, secure a selling edge, in order to maintain, or gain market share.

Insurance is a completely different type of product than a security and the rules that govern them have correctly been placed under the authority and control of our state insurance departments, and should stay that way. To make any attempts to force similar regulation over these two different industries, just because they often compete for the same dollars among the same market, would be as ludicrous as requiring that automotive, bus, and rail travel be regulated the same as air travel. Both are getting passengers from point A to point B, but other than this, the similarities end. The same is true here. Insurance products may offer a means to financial growth, but they also offer guaranteed features and benefits that no securities products can match.

The proper way for the securities industry to compete with insurance is not to bash insurance, or try to change it or control it, but to dig deep into their creative processes and find product solutions that CAN compete with the safety and guarantees of insurance products. Oh, and if along the way you can stop the abusive selling of unsuitable risk investments to seniors, that would be a worthwhile way for you to devote your time and energy.