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Regulation and Compliance > Federal Regulation > SEC

IRI: VA summary prospectus rule from SEC may finally be coming

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The Securities and Exchange Commission may issue a long-awaited variable annuity summary prospectus rule this year, while the Department of Labor’s redraft of its rule to amend the definition of fiduciary on retirement accounts could be released in the first two weeks of April.

Lee Covington, senior vice president and general counsel for the Insured Retirement Institute, said Thursday at IRI’s Marketing conference held at National Harbor, Maryland, just outside Washington, that part of the holdup on a VA summary prospectus can be attributed to the SEC’s Investment Management division changing directors three times since IRI started pressing the agency to issue such a rule seven years ago.

However, Covington added that the current SEC commissioners, as well as SEC Chairwoman Mary Jo White, support a VA summary prospectus, which would be similar to a mutual fund prospectus.

Cathy Weatherford, IRI’s president and CEO, queried James Shorris, executive vice president and deputy general counsel at LPL Financial, as to why it has taken the SEC so long to agree on a VA summary prospectus, which would be good for investors. “The SEC is a complicated beast,” Shorris replied. The SEC has had a “very loaded agenda,” he said, particularly under Dodd-Frank mandates. “It takes a long time for this stuff to move through, and they are very conservative when it comes to rulemaking.”

But Covington said that IRI remains “optimistic” that the SEC will “take action” on such a rulemaking this year.

As to the DOL’s redraft of its rule to amend the definition of fiduciary under the Employee Retirement Income Security Act — which the DOL has repackaged and remarketed as its conflicts of interest rule — Weatherford said that IRI sees the Office of Management and Budget completing its review of the plan and sending it to DOL “within the first or second week of April.”

DOL will then put the plan out for another comment period. Labor Secretary Thomas Perez said Wednesday that the DOL fiduciary redraft will be released “in the not-too-distant future” and that he “looked forward” to hearing the comments on it.

As to the SEC’s uniform fiduciary rulemaking for brokers and advisors, Shorris opined that such a rule would not impose the same fiduciary requirement on brokers that advisors adhere to. “It’s not necessarily going to be a fiduciary standard,” Shorris said, adding that “differential compensation could pose a problem under a new standard of care so the industry may want to think of creative ways to structure products under whatever new standard is passed.”

Shorris added that “it’s critical that DOL be working with the experts at the SEC” on its fiduciary rulemaking. DOL “has to be deferring to the SEC” as DOL “doesn’t understand a lot of the consequences” that could come of its rulemaking. “We’re planting our hopes on that.”

Sean Cassidy, vice president of government affairs at Voya Financial, who also sat on the panel, added that DOL wants to get its fiduciary redraft “finalized” before the fiscal year ends on Sept. 30 so that appropriations committees won’t be able to block funding for promulgating the rule. 

— Check out Lou Harvey: Obama Just Blew Up Your Business Model; Here’s What to Do 


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