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November 03, 2011 at 09:44 AM
The Securities and Exchange Commission’s Office of Investment Management is currently conducting two studies with the SEC’s Office of Investor Education and Advocacy: one to assess the effectiveness of mutual fund shareholder reports and the other to examine financial literacy among investors as mandated under Dodd-Frank, Eileen Rominger, director of the agency’s Investment Management office, said Thursday.
Rominger (left), speaking at a conference held by the American Law Institute-American Bar Association in Washington, also said that the agency continues progress on its variable annuity summary prospectus and warned lawyers as well as insurance practitioners to pay particular attention to disclosures around “living benefit” riders to variable annuities, because the SEC is focused on disclosure issues surrounding these riders.
The mutual fund shareholder reports study is designed to gather feedback from investors in order to help the SEC “determine how mutual fund shareholder reports could more effectively communicate information to individual investors,” Rominger said. The study, she said, will also “generate a baseline assessment of mutual fund shareholder reports, providing a way to measure potential improvements over time.”
The study on financial literacy, Rominger continued, will be particularly useful as it relates to the SEC’s responsibilities under a separate provision of the Dodd-Frank Act, “which expressly authorizes the commission to designate information to be provided by a broker or dealer to a retail investor before the purchase of an investment product or service–that is, at the point of sale,” Rominger noted.
Specifically, she said, “I hope that the study will be useful to the commission in considering any potential rulemaking with respect to point of sale disclosure for investment products and services, including variable insurance products.”
As to living benefit riders, which have been an important selling point for variable annuities since the market decline in 2008, Rominger noted that these benefits “include promised minimum contract values regardless of investment performance of the underlying funds, as well as withdrawal privileges that provide for a stream of income during retirement years, again regardless of investment performance of the underlying funds.”
