The NASD plans to slap tighter rules on exchange-traded funds and separately-managed accounts, in a move designed to put them at par with mutual funds.

Addressing the annual meeting of the Securities Industry Association in Boca Raton Friday afternoon, NASD Chairman and CEO Robert Glauber said correcting the imbalance in regulation would involve subjecting ETFs and SMAs to the same level of scrutiny afforded mutual funds (see the complete text of Glauber's remarks).

"I fully confess that we’ve made it harder to sell mutual funds," Glauber said. “Given all the chicanery that we and other regulators have discovered in the last few years, we've had no choice but to do so, in order to protect investors."

The heightened regulation, however, has prompted some registered reps to veer away from mutual funds and instead recommend similar products that aren’t as heavily regulated and therefore easier to sell.

Battered by the high costs associated with the increased regulation, some in the mutual fund industry have called on regulators to relax the rules. But Glauber ruled out any possibility of that sort.

"You may think the solution is to ease up on mutual fund regulation. I think it's the opposite," he said.

"What I think we need to do - and will do - is to raise the regulatory protections for these other products so that investors who are looking at them enjoy the same degree of protection as investors who are looking at mutual funds. Recommendations to investors should be based on what's best for them, not what's easiest to sell or generates the highest commissions," he added. 

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