DONOHUE EXPRESSES SUPPORT FOR SHORT-FORM VA DISCLOSURE DOCUMENT
In a recent speech to NAVA, Andrew Donohue, Director of the SEC’s Division of Investment Management, expressed support for a short form disclosure document for variable annuity contracts similar to the recently proposed short-form prospectus for mutual funds. He also expressed support for XBRL data tagging to allow for a regime of layered disclosure similar to the system to be required for mutual funds. With respect to a short form disclosure document, Mr. Donohue indicated that any such document “must be able to stand alone so that its effectiveness does not rely on information incorporated from other documents.” Mr. Donohue also addressed how a re-working of Rule 12b-1 could affect insurance providers by properly labeling the purpose of the fees received by insurance companies as shareholder servicing fees rather than sales loads.
OUR TAKE: Support for a short form disclosure document helps the insurance industry by reducing the sheer volume of paper to be delivered to customers. It also should help to simplify the disclosure of a relatively complicated product and possibly reduce suitability claims.