SEC Proposes Amendments to Insurance Advertisement Rules
On May 19, the Securities and Exchange Commission (SEC) proposed significant amendments to its registration and communications rules. These changes aim to streamline the offering process for most issuers and reduce regulatory burdens, aligning with the goals of simplifying compliance requirements without compromising investor outcomes.
The SEC introduced amendments allowing insurance companies to market registered index-linked annuities (RILAs) and market value adjustment (MVA) annuities through broad-based advertisements. This move eliminates the need to fulfill prospectus delivery mandates. Currently, similar advertising options are available for variable annuities and life insurance products under Rule 482 of the Securities Act, but not for RILAs or MVAs unless they meet Form S-3 registration standards.
Rule 482 permits registered investment companies to advertise without a prospectus, applying to mutual funds and insurance accounts issuing variable annuities. However, this rule does not extend to RILAs and MVAs, currently requiring insurers to follow the free writing prospectus (FWP) rule, Rule 433, only when these products are eligible for Form S-3 registration, which involves rigorous periodic reporting.
The SEC's proposal suggests a uniform advertising framework for both variable and non-variable annuities. This would create informational parity regarding annuities and their issuers through common registration forms. Including RILAs and MVAs under Rule 482 would eliminate the current requirement for Exchange Act report filings for broad advertising, deemed unnecessary by the SEC.
Rule 482 will continue to enforce fair presentation requirements under Securities Act Rule 156 and mandate specific disclosures advising investors on objectives, risks, and expenses associated with RILAs and MVAs. The proposal outlines restrictions on using performance data in RILA advertisements but permits historical index performance data that adheres to Form N-4 standards.
Additional disclosures regarding fees and expenses will mirror those for mutual funds and variable products, indicating any maximum sales loads and potential maximum losses from contract adjustments. Advertisements must clarify that returns are capped and may be lower than index returns, although they include a level of loss protection.
A significant change includes a filing requirement for RILA and MVA advertisements with either the SEC or FINRA. The SEC proposes rescinding Rule 433(b)(1)(v), previously allowing qualifying issuers to advertise without a prospectus under Form S-3 registration. Notably, the SEC did not propose extending Rule 482 to other non-variable insurance products like registered contingent deferred annuities (CDAs) and registered index-linked universal life policies (RIULs). Comments on this proposal are open until July 27, 2026, as the SEC aims to alleviate marketing restrictions while ensuring adequate investor information, ultimately supporting a more efficient insurance market.