Subject: SR-NASD-2004-183

September 16, 2005

Jonathan G. Katz
United States Securities and Exchange Commission
450 Fifth Street, NW
Washington DC 20549-0609

RE: File Number SR-NASD-2004-183; NASD proposal to adopt a new Rule 2821

Dear Mr. Katz:

We are pleased to respond to the request for comments on the above referenced rule changes proposed by NASD (“the Rule”) and published for comment by the Securities and Exchange Commissions (“SEC”) relating to new requirements specifically tailored to deferred variable annuities (“Annuities”) concerning recommendations, suitability, principal review and approval, supervision and training.

Waterstone Financial Group, Inc. (“WFG”) is a broker-dealer member firm of the National Association of Securities Dealers, Inc. (“NASD”) and is a subsidiary of Pacific Life Insurance Company. WFG services and supervises independent contractor registered representatives who provide financial planning and investment advisory services to their clients.

WFG agrees that these products have many features that make them complex investments. We applaud the NASD’s effort to enhance investor education and protection. We support in principal the concept of adapting the existing best practices guidelines into a rule that would uniformly apply across the industry. However, the Proposed Rule would go further than the present rules by imposing significant new burdens on registered representatives and broker-dealers. We do not feel that the additional requirements that are being proposed will increase the understanding that clients will have concerning this product.

In conclusion, we believe the SEC should reject Rule 2821 as presented. We believe that the NASD should be asked to provide to its members an updated sales practice advisory regarding Annuities transactions. Further, we believe that the NASD should continue to aggressively enforce existing NASD Rules on suitability and supervision as they relate to all investment transactions including Annuities. Finally, we strongly suggest that an industry/regulatory task force be formed to address any outstanding regulatory issues relating to Annuities.

Thank you again for the opportunity to comment on these issues.


Stephen F. Anderson, CLU ChFC CFP
Waterstone Financial Group