Recently, the Securities and Exchange Commission adopted a new final rule, 498A, and form amendments which intend to modernize disclosure requirements and allow investors to make more informed decisions about variable annuity and variable life insurance contracts. The new disclosures will provide investors essential information about a contract’s terms, benefits, and risks in a reader friendly presentation, much like the summary prospectuses already delivered by mutual funds.
KEY TAKEAWAYS FOR ADOPTING THE SUMMARY PROSPECTUS
- Variable contracts can provide the summary prospectus to satisfy the prospectus delivery obligation.
- Variable contracts can make the prospectuses and related documents for underlying mutual funds available online to satisfy the prospectus delivery obligation.
Summary Prospectus Requirements
- The summary prospectus, statutory prospectus, and statement of additional information must be made available online and provided to investors upon request at no cost.
- An “Initial Summary Prospectus” must be provided to new investors, including:
- A table summarizing key information about the contract.
- Key information related to underlying investment options.
- A URL referencing the online availability of documents.
- In addition to the key information required, an “Updated Summary Prospectus” must be provided to existing contract owners that contains a brief description of changes from the previous summary prospectus.
OTHER IMPORTANT REQUIREMENTS OF THE RULE
- Registration statements filed on Forms N-3, N-4, and N-6 are being amended to:
- Enhance disclosures to investors in variable contracts.
- Facilitate implementation of the new summary prospectus process.
- Variable contracts will be required to file Inline XBRL for submission of certain prospectus disclosures.
- Issuers that discontinue a variable contract before July 1, 2020 will not be required to update the registration statement with the new amendments, pending that appropriate alternative disclosures are provided to investors.
- July 1, 2020: Summary prospectus option available, if registrant complies with amendments to Forms N-3, N-4, or N-6 (as applicable)
- January 1, 2022: All registration statements on Forms N-3, N-4, and N-6 (including post-effective amendments) must comply with the new amendments
- January 1, 2023: Inline XBRL required for the submission of certain required disclosures
THE FILEPOINT SOLUTION
FilePoint works to be the most efficient, accurate, and cost-effective solution for investment management products. If your business maintains variable contracts, FilePoint can help you comply with the new rule. We are available to answer questions about compliance with rule 498A. Reach out to us for assistance with the creation, printing, filing, and web posting of the summary prospectus and related documents.