Another year and still no variable annuity summary prospectus proposal from the Securities and Exchange Commission.
While Norm Champ, director of the SEC’s Division of Investment Management, expressed his optimism during a skyped speech on Thursday before the American Law Institute (ALI) that the agency is working toward the goal of releasing a VA summary prospectus proposal, Susan Nash, associate director of the Division of Investment Management, told the same group that there is still “no timing” on when such a prospectus proposal would surface. Nash also said she “couldn’t predict” where such a rule proposal falls among the SEC’s priorities.
Noting the recent SEC study showing that investors lack basic financial literacy skills, Champ said the study "identified methods to improve the timing, content and format of disclosures, as well as useful and relevant information for investors to consider when either selecting a financial intermediary or purchasing an investment product."
Champ added that the financial literacy study also "provides grounds for optimism that a variable annuity summary prospectus, if designed and implemented effectively, could provide significant benefits for investors in your products." The framework that was designed for mutual funds, he said—"that is, the provision of key information in a summary prospectus, together with online delivery of the statutory prospectus and paper delivery upon request—may provide a useful model for improving the disclosure that variable annuity investors receive."
Lee Covington, senior vice president and general counsel for the Insured Retirement Institute (IRI), noted during the ALI event in Washington that “while it’s taking some time” for the SEC to issue a VA summary prospectus proposal, IRI’s “resolve remains steadfast” in ensuring there is one.
Covington reiterated previous IRI and Cogent Research findings, which show that 95% of investors prefer a shorter paper summary prospectus to the current documents, which can run 150 to 300 pages.
The survey also found that 59% of investors stated that having a short summary prospectus written in easy-to-understand language would have a positive impact on their decision to consider a variable annuity as part of their investment portfolio.