The

National Association of Securities Dealers

came down hard on five securities firms and one individual today, announcing it charged them with improperly selling variable annuities. Separately, NASD also issued an

investor alert, telling investors to be wary of exchanging variable annuity contracts, particularly bonus annuities.

Four of the firms --

Prudential Securities

,

First Union Brokerage Services

,

Allmerica Investments

and

Lutheran Brotherhood Securities

-- settled with NASD while neither admitting nor denying charges. Also cited was Ralph C. Evans, an individual broker who was a registered representative with

Morgan Stanley Dean Witter

at the time of the allegation. Evans, too, settled the charges while neither admitting nor denying them; Morgan Stanley was not charged in the matter.

The five paid NASD a total of $112,000 in restitution and fines. Allegations against

American United Life Insurance Company

are still unsettled.

Officials at American United couldn't immediately be reached for comment.

NASD accused the brokers of misleading investors into thinking that variable contracts purchased in tax-deferred plans offer additional tax benefits. The brokers also failed to consistently determine whether variable annuities were suitable for customers, the NASD charged.

NASD indicated it would bring similar charges against other companies in the future, saying that the enforcement actions were the first cases to result from special variable annuity examinations in 1999 and 2000.

Separately, NASD also issued an investor alert warning investors that exchanging annuities is generally not a good idea. Even though bonus annuities may promise a 1% to 5% premium on a contract value, they typically carry higher fees that offset this benefit, NASD warned. Also, investors should note that they are committing to another contract period when they make such an exchange, NASD said.

"You should exchange your annuity only when you determine, after knowing all the facts, that it is better for you and not just better for the person who is trying to sell the new contract to you," according to the NASD alert.