Disclosure Improvements Proposed by SEC for Variable Annuities and Variable Life Insurance Contracts

In an Oct. 30, 2018, press release, the Securities and Exchange Commission (SEC) has announced that a proposal for updated disclosure agreements involving the complicated arena of variable annuities and variable life insurance contracts has been approved for public comment.

SEC Chairman Jay Clayton says, “This proposal is another important step in the Commission’s efforts to provide Main Street investors with better information to make informed investment decisions. I have participated in many roundtables with retail investors over the last several months, and investors have emphasized their preference for clear and concise disclosure.”

Improvements to the disclosure rules have been recognized as necessary due to the long-term and complex nature of variable annuities and variable life insurance contracts.

Read the SEC Press Release in full — click here.

SEC Proposed Disclosure Requirements

Under the conditions of the October proposal, these contracts could better meet the disclosure requirements of the Securities Act in the following ways:

  • Utilizing a summary prospectus to meet some disclosure requirements (similar to the layered approach to disclosure used by mutual funds since 2009)
  • Relaying more detailed information on the contracts online
  • Providing full documents in paper or electronic documents by request only


In addition to these updated requirements, amendments to Forms N-3, N-4, and N-6 have also been proposed in order to improve the disclosure processes for these investment products, specifically aimed at improving the content, format, and methods used to present information to investors, including industry developments.

These updates are intended to leverage technology and the layered approach (mentioned above) to help investors understand complex contracts and make more fully informed investment decisions regarding variable annuity and variable life insurance contracts.

The Commission has requested public comment through February 15, 2019, on the proposed changes and hypothetical summary prospectus samples it has published.

The Commission also seeks investor input regarding additional improvements.

Read the full SEC Press Release here.

Take Advantage of Your Opportunity to Impact Industry Standards

The SEC has clearly reached the conclusion that the complex nature of the products themselves (variable annuities and variable life insurance contracts) and the language used within the agreements has created something of a minefield for misunderstanding that has led to troublesome and costly disagreements, arbitration, as well as various other problems.

In an effort to address these issues and reduce complications, the SEC has opened up a discussion on these proposed changes to the industry as a whole.

It is strongly encouraged that anyone dealing with variable annuities and variable life insurance contracts educates themselves on the proposed changes and make their opinions known through the feedback channels being made available.

Such efforts represent an investment of time and energy that could pay off in the future by reducing commonly occurring misunderstandings through more effective methods of the disclosure.

Contact Us for Assistance With Your Disclosure Needs

The consultants at Core Compliance & Legal Services, Inc., have extensive experience in the investment advisory industry and understand the complexities of disclosure at all levels. For assistance with any and all disclosure needs, contact us here.

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