The National Association of Securities Dealers Inc. plans to keep a close eye on insurance products as it merges its regulatory operations with those of NYSE Regulation Inc.

Mary Schapiro, chairman of the NASD, delivered that message in Phoenix Monday at a seminar organized by the Securities Industry and Financial Markets Association, New York.

The new, combined, NASD-NYSE self-regulatory organization will merge the NASD Emerging Issues program with NYSE Regulation’s Office of Risk Assessment, Schapiro said, according to a written version of her remarks.

The new, merged emerging trends team will focus on issues that include “sales practices aimed at seniors” and the “emerging life settlement industry,” Schapiro said.

The combined SRO also will continue efforts to work with other regulatory organizations “to extend the protections of suitability to insurance products, such as equity linked and fixed annuities,” Schapiro said.

“There should not be a kind of regulatory arbitrage that provides an incentive for the sale of one product over another,” Schapiro said. “A customer should be sold an insurance product rather than a security because the salesperson makes the reasoned judgment that the insurance product meets the best interests of the client as opposed to the fact that such a sale may not be regulated by NASD, and subject to our sales practice rules.”

But Schapiro said the combined SRO will use a new cost-benefit analysis technique to analyze the effects of pending variable annuity regulations.

Schapiro also talked about the United Kingdom’s much-admired “principles based” approach to regulation.

The U.K. Financial Services Authority “relies upon 11 principles for financial services regulation,” Schapiro said.

But the FSA also has adopted 8,000 pages of rules, Schapiro said, noting that both systems rely on use of a combination of principles and rules.

In related news, the NASD has posted a link to a Web seminar concerning use of life settlements at Document Link