One of the few aspects of the securities industry to escape significant regulatory intervention so far is the sale of variable annuity products. But that is about to change.

The NASD, responding to a complaint filed by the Massachusetts Securities Division against Citizens Financial Group, says it will propose “significant” regulatory changes to the way variable annuities are sold, claiming elderly clients are being “scared” into investing in products against their best interests.

“We have tried to address the growing problem in the industry, both through investor alerts and education and through examinations and enforcement programs,” said John Gannon, vice president of investor education for the NASD, in a statement.

Many believe older investors are being put in variable annuities improperly, considering the long-term nature of the investments. One similar suit, a class action brought against West Des Moines, Iowa-based Midland National Life Insurance, alleged that senior citizen clients were coerced into buying annuity products that would not appreciate until some investors were 115 years old.

The NASD has yet to announce what the regulations will be, but it says they are “upcoming.” The Massachusetts complaint charges Citizens Financial Group with civil fraud, claiming its Boston branch has put together “dishonest” annuity packages for senior citizens. Some firms have reported receiving letters from New York State Attorney General Eliot Spitzer's office regarding annuity sales as well.

Annuity sales were flat last year, according to Kenneth Kehrer & Associates, but the NASD says complaints are up 50 percent in the last five years. Some firms could be more affected by the regulations than others; Wachovia, for example, brings in only 1 percent of its total revenue from annuity product sales.

Still, a Wachovia rep, formerly from Prudential, says his firm has warned him to be careful about selling the products.

“We have to be extra aware of why we're putting anyone in them, and we have to document everything thoroughly,” he says.

One industry observer notes that the new regulatory scrutiny “is going to keep our compliance people busy — as if they weren't already.”