The United States’ Securities and Exchange Commission (SEC) has proposed rule changes to improve the disclosure of information in contract for variable annuities and life insurance.
The changes would require clearer and more substantial details on fees, features and risks to be set out in contracts in order to allow investors to make informed decisions.
The proposals are aimed at ensuring contracts are more “reader-friendly” by requiring a concise summary of key facts about the contract be disclosed to investors and future investors. Contracts would also have to be available in both paper and electronic format with further information offered online.
“This proposal is another important step in the Commission’s efforts to provide Main Street investors with better information to make informed investment decisions” said SEC chairman Jay Clayton.
“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.
“Providing key summary information about variable annuities and variable life insurance contracts to investors is particularly important in light of the long‑term nature of these contracts and their potential complexity,” Clayton said.
A similar approach has been used for mutual fund investors since 2009, where investors receive a detailed prospectus with more information available on request.
The SEC has also opened the proposal to feedback from investors seeking their input and suggestions on further improvements for the proposed changes and what type of information should be included in the contract’s summaries.
The deadline for feedback is 15 February 2019.
The Commission also updated the list of firms using inaccurate information to solicit investors. It appears that these unregistered firms target predominantly non-US investors. New entries to the list include 16 soliciting entities, four impersonators of genuine firms and eight bogus regulators.
According to Jennifer Diamantis, chief of the SEC’s office of market intelligence, the updates to the list “are part of the agency’s continuing effort to help investors protect themselves and be better informed when making investment decisions”.
