SEC Extends Comment Period on VA Summary Prospectus Plan

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.

Dennis Kelleher, president and CEO of Better Markets, a consumer advocacy group that supports increasing financial regulation, told the SEC on Thursday in a comment letter that from an investor perspective, those who buy variable contracts "are exclusively retail and often older and of modest investable means."

The average age of investors at first purchase of a variable contract is 51, Kelleher stated. "It is shocking and, we believe, telling that 60% of annuity investor households have incomes (note, NOT investable assets) under $75,000 and 35% are below $50,000."

From investors' perspective, he continued, "the key questions are: Is the summary disclosure a meaningful improvement over the status quo? Or, will it become yet another handout that will be long, confusing, and easily overwhelmed by the strong incentives of the broker who is eager to sell a variable contract that will generate thousands of dollars in commissions and residual income for herself while the investor is left with a financial product that is potentially unsuitable (or worse, dangerous for his financial well-being)."

Bottom line, according to Kelleher: "The commission has an opportunity to offer bold and effective solutions that would help retail investors make informed investment decisions relating to two of the most complex and potentially harmful investment products: variable life insurance and variable annuities contracts. Instead of offering untested and ineffective new disclosures, the commission must first thoroughly test, and only then propose for comment new summary disclosures."

— Related on ThinkAdvisor:

• DOL, SEC Fiduciary-Related Rules to Be a 'Heavy Lift': Attorney Choi
• SEC's Blass Looks to 'Future-Proof' Proposed VA Summary Prospectus