Securities Law Blog

The New York Times reported Sunday that Mary Schapiro, the chief executive of the Financial Industry Regulatory Authority ("FINRA"), would like to see more protections for individual investors included in the planned overhaul of the regulation of the securities markets. Ms. Schapiro would like to ensure that consumers do not fall between the cracks in the current system. She expressed concern that consumers who buy annuities for retirement do not understand that these investments are regulated by the S.E.C., FINRA, state insurance regulators, or "some combination thereof." "We shouldn't leave it to the investor to figure it out," she adds. "We've left them in this never-never land of dramatically different protections, and that's one of the real shortcomings of the regulatory system." Ms. Schapiro also called for more regulatory oversight of mortgage brokers. "The amount of regulation required to offer someone a $500,000 mortgage," she says, "pales in comparison to what's needed to sell a $100 mutual fund." To addrss this, Ms. Schapiro says, mortgage brokers should be added to the groups that are more closely regulated, like stockbrokers and sellers of retirement products, like mutual funds, life insurance policies and annuities. Four important safeguards should be in place she says. "First, the person who sells the product should be licensed. Second, sales materials and advertising should not be misleading. Third, products can only be sold to a suitable investor in terms of objectives and risk tolerance. Fourth, disclosures should be complete and cover everything from risk to cost." None of these safeguards were in effect in the years leading up to the current mortgage crisis.

For more information on this subject contact securities attorneys, Michaels, Ward & Rabinovitz, LLP.