Excessive swapping of variable annuity contracts has now become a focus among securities regulators. who say the activities potentially amount to a form of churning, Dow Jones Newswires reports.

According to statistics compiled by Financial Research Corp., a Boston-based consultant, roughly 60% of variable annuity gross sales last year were generated by exchanges of one contract for another, a significant jump from 15% in 1996.

The National Association of Securities Dealers has handed out nearly 80 sanctions against variable annuity distributors and warned investors repeatedly since 2001 that salesmen occasionally seek commissions through questionable trades during volatile market periods.

The National Association for Variable Annuities, the industry trade group, said in a statement that its constituents behave honorably with a few exceptions. NAVA also hopes that strong net sales figures – barring exchanges, which climbed 50% to $46 billion last year from $30.7 billion during 2002 – will help alleviate pressure on intermediaries to consider unsavory trades. But regulators are narrowing their focus on the alarming trend of exchanges that may be unsuitable for investors.

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