SEC headquarters in Washington. (Photo: Diego M. Radzinschi/ALM)
Dalia Blass, director of the Securities and Exchange Commission's Investment Management Division, issued a request on Thursday to insurance industry executives and attorneys on how to weigh in on the agency's recently released variable annuity summary prospectus proposal: "Please do not approach your comment letters as a legal exercise."
Speaking at the American Law Institute Continuing Legal Education life insurance products conference in Washington, Blass said that if the long-awaited rule gets adopted, "it could be on the books for a very long time. I don't want a rule that is going to be out of date the minute it's adopted. We want to future-proof it."
How? Blass urged attendees to start by asking their designers, marketing, disclosure and product development teams "to pick up a pen, click a mouse, tap a keyboard … and actually try out the rule."
She asked: "What would your summary prospectus look like? What should it look like? How will you deliver it? Can it work across platforms like email, paper and mobile?"
Does anything in the plan, Blass continued, interfere "with you giving the clearest, effective, most useful disclosure that you can?"
Noting that the variable products market is a $2 trillion industry, Blass said that investors "often turn to these investments for their capital markets exposure and insurance guarantees that they can't get elsewhere."
Investors "benefit from diversity of choices," Blass said. "The companion to that choice is information."
Breaking Down the Plan
The VA summary prospectus proposal the securities regulator voted to issue for public comment on Oct. 31, Blass said, is designed to reform the disclosure framework for variable contracts.
"What started out as a process to propose a summary prospectus became so much more," Blass told attendees. The proposal offers layered disclosure to insurance products, updates registration forms, and takes a fresh look at addressing discontinued contracts and leverages technology, she explained.
Blass said a "core feature" of the proposal is the layered disclosure framework. "It would permit issuers to provide investors with a summary prospectus for the variable contracts while making the full prospectus and related materials available online," she explained.
The process is similar to the layered disclosure that mutual funds have had since 2009, she said, but "it is tailored to variable contracts."
