New SEC Variable Contract Summary Prospectus Rules: An Implementation Project Plan
July 22, 2020 by W. Thomas Conner, John M. Sanders, Nathaniel Segal
The Securities and Exchange Commission recently adopted Rule 498A, the long-awaited variable contract summary prospectus rule. Rule 498A not only allows your company to use a new concise and brief selling document, it can begin generating very significant cost savings as soon as May 1, 2021. Importantly, though, regardless of whether your company chooses to use summary prospectuses, new prospectus disclosure requirements adopted by the SEC contemporaneously with Rule 498A will require your company to make extensive revisions to existing prospectuses by May 1, 2022.
With a coordinated project implementation plan, your company can make the requisite statutory prospectus revisions and prepare and obtain SEC approval of summary prospectuses by May 1, 2021. While this date may seem far off, your company may want to start thinking now about a project plan to implement the necessary disclosure and operational changes.
In March 2020, the Securities and Exchange Commission (the “SEC” or the “Commission”) adopted Rule 498A under the Securities Act of 1933 (the “1933 Act”) — the long-awaited variable contract summary prospectus rule. The new rule (together with related rule and form amendments, collectively, the “Rule”) represents the culmination of years of coordinated and hard work by the SEC staff and variable contract industry participants to provide variable contract investors with the same type of summary prospectuses that mutual fund investors have enjoyed for years. The Rule is intended to help investors make informed investment decisions regarding variable annuity and variable life insurance contracts.
The Rule does not require insurers to use summary prospectuses, but there are several compelling reasons for doing so. The Rule not only allows insurers to use a new concise and brief selling document, it can begin generating very significant cost savings as soon as May 1, 2021.
Click HERE to read the full story via The National Law Review
