Staying Ahead Of The Scam Artists

NASD's new chief is zeroing in on ways to prevent retirees from being bilked

Warning to Wall Streeters angling to make big bucks from the coming wave of boomer retirees: Mary L. Schapiro is watching you. On Sept. 1, Schapiro, one of the Street's most steadfast enforcers, became chief executive of NASD, a watchdog that's become tougher of late. And her top concern is that many retirees are ill-prepared to evaluate increasingly complicated investment products, not to mention spot the seamier tricks of the trade. "We have to think about how we are arming these people," says Schapiro, "and make sure that they have a secure retirement."

Schapiro, who is both soft-spoken and direct, knows what she's up against. For 10 years at NASD she has honed an ability to win firms' cooperation while stamping out wrongdoing. Schapiro has been "a strong regulator," says Barbara Roper, head of investor protection at the Consumer Federation of Americas. "NASD regulation has made enormous strides."

The spark for Schapiro's interest in regulation stems from 1980, when the daughter of an antiques dealer and a librarian graduated from law school. Nelson Bunker Hunt and William Herbert Hunt were front-page news for attempting to corner the silver market. Schapiro was fascinated "that a couple of people thought they were rich and powerful get away with manipulating markets that affected millions of people." Law firms dangled big bucks, but she signed on in enforcement at the Commodity Futures Trading Commission.


Schapiro soon displayed her dogged nature. When she built up the CFTC's enforcement division as its chairman in 1994, the then-head of the Chicago Board of Trade, Thomas R. Donovan, said he wouldn't be intimidated by a "blonde 5-ft.-2-in. girl." Schapiro shot back that she was 5-ft.-5. And when rogue trades in Singapore had Barings Bank on the brink of collapse, she called all over the country at 3 am to locate its top monetary authority and urge him to reassure the markets.

A move to NASD in 1996 coincided with the agency's darkest hour. It was being probed for its role in a price-fixing scandal. Schapiro overhauled enforcement and, as vice-chairman since 2002, spoke out against shenanigans involving sales of everything from college savings plans to mutual funds. She also launched a task force to get ahead of potential problems.

Now, Schapiro is zeroing in on ways retirees are being roped into inappropriate investments. On her hit list: stocks of companies that fraudulently claim to have devised revolutionary energy solutions, investments with risky futures and options, and some hyped insurance products. Recently, Schapiro sent staffers to seminars financial firms hold for senior citizens to evaluate sales pitches and products. "I'd be surprised if some enforcement actions didn't come out of the sweep," she says.

NASD is also creating educational brochures for seniors, and hopes to simplify the disclosure statements firms provide. For that, Schapiro needs support from the companies she oversees, which foot her budget. Some are grousing about regulatory overreach, even proposing NASD adopt a "bill of rights." So Schapiro recently went on a "listening tour," and stresses that NASD will be more transparent. But, she adds: "We are a regulator. That's our reason for existing."

By Emily Thornton

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