[Federal Register Volume 88, Number 197 (Friday, October 13, 2023)]
[Proposed Rules]
[Pages 71088-71259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21986]



[[Page 71087]]

Vol. 88

Friday,

No. 197

October 13, 2023

Part II





Securities and Exchange Commission





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17 CFR Parts 230, 232, 239, and 274





Registration for Index-Linked Annuities; Amendments to Form N-4 for 
Index-Linked and Variable Annuities; Proposed Rule

  Federal Register / Vol. 88, No. 197 / Friday, October 13, 2023 / 
Proposed Rules  

[[Page 71088]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 232, 239, and 274

[Release No. 33-11250; 34-98624; IC-35028; File No. S7-16-23]
RIN 3235-AN30


Registration for Index-Linked Annuities; Amendments to Form N-4 
for Index-Linked and Variable Annuities

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
proposing rule and form amendments to provide a tailored form to 
register the offerings of registered index-linked annuities 
(``RILAs''). Specifically, the Commission is proposing to amend the 
form currently used by most variable annuity separate accounts, Form N-
4, to require issuers of RILAs to register offerings on that form as 
well. To facilitate this amendment, the Commission is also proposing to 
amend certain filing rules and make other related amendments. These 
changes would, if adopted, implement the requirements relating to RILAs 
contained in Division AA, Title I of the Consolidated Appropriations 
Act, 2023. Further, the Commission is proposing other amendments to 
Form N-4 that would apply to all issuers that would use that form under 
the proposal. The Commission is also proposing to apply to RILA 
advertisements and sales literature a current Commission rule that 
provides guidance as to when sales literature is materially misleading 
under the Federal securities laws. The Commission is proposing a 
technical amendment to Form N-6 to correct an error from a prior 
Commission rulemaking. Finally, the Commission requests comment as to 
whether to require the registration of market-value adjustments 
associated with certain annuities on Form N-4 as well.

DATES: Comments should be submitted on or before November 28, 2023.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/2023/09/rila); or
     Send an email to [email protected]. Please include 
File Number S7-16-23 on the subject line.

Paper Comments

     Send paper comments to Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number S7-16-23. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method of submission. The Commission will post all 
comments on the Commission's website (https://www.sec.gov/rules/2023/09/rila). Comments are also available for website viewing and printing 
in the Commission's Public Reference Room, 100 F Street NE, Washington, 
DC 20549, on official business days between the hours of 10 a.m. and 3 
p.m. Operating conditions may limit access to the Commission's public 
reference room. Do not include personal identifiable information in 
submissions; you should submit only information that you wish to make 
available publicly. We may redact in part or withhold entirely from 
publication submitted material that is obscene or subject to copyright 
protection. Retail investors seeking to comment on their experiences 
with annuities generally and RILAs in particular may want to submit a 
short Feedback Flyer, available at Appendix D.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the Commission's website. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notifications by email.
    A summary of the proposal of not more than 100 words is posted on 
the Commission's website (https://www.sec.gov/rules/2023/09/rila).

FOR FURTHER INFORMATION CONTACT: Christian Corkery, Michael Khalil, 
Rachael Hoffman, James Maclean, Amy Miller, or Laura Harper Powell, 
Senior Counsels; Bradley Gude, Branch Chief; Amanda Hollander Wagner, 
Senior Special Counsel; or Brian McLaughlin Johnson, Assistant 
Director, Investment Company Regulation Office, at (202) 551-6792; 
Elisabeth Bentzinger or Min Oh, Senior Counsels; Michael Kosoff, Senior 
Special Counsel, Disclosure Review and Accounting Office, at (202) 551-
6921, Division of Investment Management, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to 
the following rules and forms:
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    \1\ 15 U.S.C. 77a et seq.

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                   Commission reference                                     CFR citation (17 CFR)
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Securities Act of 1933 (``Securities Act''): \1\
    Rule 156..............................................  Sec.   230.156
    Rule 172..............................................  Sec.   230.172
    Rule 405..............................................  Sec.   230.405
    Rule 415..............................................  Sec.   230.415
    Rule 424..............................................  Sec.   230.424
    Rule 456..............................................  Sec.   230.456
    Rule 457..............................................  Sec.   230.457
    Rule 485..............................................  Sec.   230.485
    Rule 497..............................................  Sec.   230.497
    Rule 498A.............................................  Sec.   230.498A
Regulation S-T:
    Rule 313 of Regulation S-T............................  Sec.   232.313
    Rule 405 of Regulation S-T............................  Sec.   232.405
Forms:
    Form N-4..............................................  Sec.   239.17b and 274.11c
    Form N-6..............................................  Sec.   239.17c and 274.11d

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    Form 24F-2............................................  Sec.   239.66 and Sec.   274.24
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Table of Contents

I. Introduction and Background
    A. Typical RILA Features
    B. Current Registration Process
    C. Evidence of Investor Views and Areas of Potential Confusion
    D. Overview of Proposal
II. Discussion
    A. Use of Form N-4
    B. Contents of Form N-4
    1. Front and Back Cover Pages (Item 1)
    2. Key Information Table (Item 3)
    3. Principal Disclosure Regarding RILAs (Items 2, 6, and 17)
    4. Principal Risks of Investing in the Contract (Item 5)
    5. Addition of Contract Adjustments and Other Amendments to Fee 
and Expense Disclosures (Items 4, 7, and 22)
    6. Information About Contracts With Index-Linked Options (Item 
31A)
    7. Other Amendments and Provisions
    8. Remaining Form N-4 Items
    9. Inline XBRL
    C. Option To Use a Summary Prospectus
    D. Accounting (Items 16 and 26)
    E. Filing and Prospectus Delivery Rules
    1. Fee Payment Method and Amendments to Form 24F-2
    2. Post-Effective Amendments and Prospectus Supplements
    3. Prospectus Delivery
    F. Materially Misleading Statements in RILA Sales Literature
    G. Existing Commission Letters
    H. Registered Market-Value Adjustment Annuities
    I. Technical Amendment to Form N-6
    J. Compliance Period
    K. General Request for Comment From Retail Investors
III. Economic Analysis
    A. Introduction
    B. Baseline
    1. Affected Parties
    2. Current Regulatory Requirements
    3. Market Practice
    C. Benefits and Costs
    1. Benefits
    2. Costs
    D. Effects on Efficiency, Competition, and Capital Formation
    E. Reasonable Alternatives
    1. Creating an Entirely New Registration Form for RILAs
    2. Alternatives to Specific Form N-4 Amendments
    3. Require the Use of Form N-4 for Registered MVAs
    4. Limiting Scope of Structured Data Requirements
    F. Request for Comment
IV. Paperwork Reduction Act
    A. Rule 498A
    B. Form N-4
    C. Form 24F-2
    D. Investment Company Interactive Data
    E. Request for Comment
V. Regulatory Flexibility Certification
VI. Consideration of Impact on the Economy
Statutory Authority

I. Introduction and Background

    An annuity contract (``annuity'' or ``contract'') is a type of 
insurance product in which an investor makes a lump-sum payment or a 
series of payments in return for future payments from the insurance 
company to meet retirement and other long-term financial goals. A RILA 
is one of several types of annuity contracts offered by insurance 
companies. An investor in a RILA allocates purchase payments to one or 
more investment options under which the investor's returns (both gains 
and losses) are based at least in part on the performance of an index 
or other benchmark (collectively, ``indexes''), over a set period of 
time (``crediting period'').\2\ In some cases, insurance companies 
offer RILAs on a standalone basis with various index-linked investment 
options (``index-linked options'') for investors to choose from. In 
other cases, insurance companies offer ``combination'' annuity 
contracts that provide index-linked options together with other 
investment options, such as mutual funds (``portfolio companies'') 
offered as investment options under a variable annuity (``variable 
options'').\3\ An investor purchasing a combination contract, for 
example, may have the ability to allocate purchase payments under the 
contract to index-linked options; variable options that pass on the 
returns of mutual funds selected by the investor; and/or fixed account 
options for which the insurance company promises to pay a fixed and 
stated minimum rate of interest. The market for RILAs has grown 
significantly in recent years, with annual RILA sales of $41.1 billion 
in 2022 alone, more than tripling since 2017.\4\ We understand that 
RILAs are predominantly sold by broker-dealers, although investment 
advisers may also provide advice on RILAs, and insurance companies also 
may offer RILAs directly.
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    \2\ Insurance companies frequently refer to crediting periods as 
``investment terms'' or sometimes simply ``terms.'' See, e.g., 
Investor Testing Report on Registered Index Linked Annuities, Office 
of Investor Advocate Division (``OIAD Report'') at Section 2, RILAs: 
Structure of Contracts and Investment Options, Investment Terms. As 
noted in OIAD's report, investor testing suggested that investors 
consistently struggled with this terminology, and a number of 
participants seemed to equate ``investment term'' or ``term'' with 
the length of the insurance contract rather than the length of the 
investment product options within the RILA contract, leading them to 
misunderstand the operation of the RILA. Id. at Section 5, 
Qualitative Testing, Results from Round 1. In an effort to mitigate 
that confusion, we have opted to use the term crediting period in 
this release and in the proposed amendments to Form N-4. The most 
common crediting periods are one, three, and six years. See id. at 
Section 3, Overview of the RILA Market and Simulated Performance 
over Historical Periods, RILA Indexes, Investment Terms, and 
Insurance Features, Figure 2.
    \3\ Variable annuity contracts and variable life insurance 
contracts (together, ``variable contracts'') combine both investment 
and insurance features. Investors generally allocate their purchase 
payments to a range of investment options, typically mutual funds 
which are separately registered and have their own prospectuses. The 
investor's account value changes depending on the performance of the 
investment options selected. Variable annuities allow investors to 
receive periodic payments for either a definite period (e.g., 20 
years), or for an indefinite period (e.g., the life of the 
investor). See Updated Disclosure Requirements and Summary 
Prospectus for Variable Annuity and Variable Life Insurance 
Contracts, Investment Company Act Release No. 33814 (Mar. 11, 2020) 
[85 FR 25964 (May 1, 2020)] (``VASP Adopting Release'') at nn.4-5 
and n.8 and accompanying text.
    \4\ See LIMRA, ``LIMRA: Record Annuity Sales in 2022 Expected to 
Continue Into First Quarter 2023,'' news release, Mar. 8, 2023 
(reporting 2022 RILA sales of $41.1 billion), https://www.limra.com/en/newsroom/news-releases/2023/limra-record-annuity-sales-in-2022-expected-to-continue-into-first-quarter-2023/ and LIMRA, ``LIMRA 
Secure Retirement Institute: Total Annuity Sales Continued to 
Decline in 2017,'' news release, Feb. 21, 2018 (reporting 2017 sales 
of structured annuity products, i.e., RILAs, of $9.2 billion), 
https://www.limra.com/en/newsroom/news-releases/2018/limra-secure-retirement-institute-total-annuity-sales-continued-to-decline-in-2017/.
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    RILAs are securities for purposes of the Securities Act of 1933 
(``Securities Act'').\5\ Unlike variable annuity contracts for which 
the Commission has adopted a specific registration form tailored to 
those products, insurance companies currently register offerings of 
RILAs on Securities Act registration

[[Page 71090]]

Forms S-1 or S-3.\6\ In 2022, Congress enacted Division AA, Title I of 
the Consolidated Appropriations Act, 2023 (``RILA Act''), directing the 
Commission to adopt a new registration form for RILAs within 18 months 
of enactment.\7\ The RILA Act requires the Commission to design the 
form to ensure that a purchaser using the form receives the information 
necessary to make knowledgeable decisions, taking into account (1) the 
availability of information; (2) the knowledge and sophistication of 
that class of purchasers; (3) the complexity of the RILA; and (4) any 
other factor the Commission determines appropriate. The RILA Act also 
requires the Commission to engage in investor testing as part of its 
rulemaking process and to incorporate the results of the testing in the 
design of the form, with the goal of ensuring that key information is 
conveyed in terms that a purchaser is able to understand. If the 
Commission fails to adopt the form within 18 months of enactment, the 
RILA Act provides that RILA issuers can begin registering RILA 
offerings on existing Form N-4.
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    \5\ Depending on the context, ``RILA'' is also used in this 
release to collectively refer to both stand-alone RILAs and the 
index-linked options available in a combination contract. When 
referring to the entity registering the RILA, we use the term ``RILA 
issuer'' or ``insurance company.'' Index annuities that meet the 
requirements of section 989J of the Dodd-Frank Wall Street Reform 
and Consumer Protection Act (Pub. L. 111-203) or section 3(a)(8) of 
the Securities Act are treated as exempt securities for purposes of 
the Securities Act, but RILAs do not fall within this exemption due, 
in large part, to the shifting of a significant level of investment 
risk from the RILA issuer to the investor. RILAs and index-linked 
option, as used in this release, refer only to those index annuities 
that are securities for the purposes of the Securities Act. See, 
e.g., sections 101(a)(5) and (6) of Division AA, Title I of the 
Consolidated Appropriations Act, 2023.
    \6\ The registration forms for variable annuity contracts are 
Form N-3 (for variable annuity separate accounts structured as 
management companies) and Form N-4 (for variable annuity separate 
accounts structured as unit investment trusts). The separate account 
established by the sponsoring insurance company is the legal entity 
that registers its securities. Separate accounts are typically 
registered as investment companies under the Investment Company Act. 
See section 2(a)(37) of the Investment Company Act. The Commission 
first adopted the registration form for variable annuities over 30 
years ago. See Registration Forms for Insurance Company Separate 
Accounts that Offer Variable Annuity Contracts, Investment Company 
Act Release No. 14575 (June 14, 1985) [50 FR 26145] (June 25, 
1985)]. In this release, we focus only on Form N-4, and not Form N-
3, because Form N-4 is the registration form identified in the RILA 
Act and the form used to register the majority of variable annuity 
contracts.
    \7\ Public Law 117-328; 136 Stat. 4459 (Dec. 29, 2022).
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    We are proposing to amend Form N-4 to require RILA issuers to 
register RILA offerings, including associated features of the RILA such 
as any contract adjustments, on that form and to tailor the form's 
requirements accordingly.\8\ We also are proposing to amend other rules 
related to the securities offering process to allow these issuers to 
conduct RILA offerings in the same way issuers conduct offerings of 
variable annuities. Consistent with the RILA Act, these proposed 
amendments collectively are designed to provide investors disclosures 
tailored to RILAs and highlight key information about these complex 
products, building on the Commission's layered disclosure framework in 
place for variable annuities. We are also proposing certain amendments 
to Form N-4 that would apply to offerings of variable annuities, based 
on our experience with the form since its last amendment and the 
investor testing conducted in connection with this rulemaking.\9\ In 
addition, we are proposing to apply a current Commission rule that 
provides guidance as to when sales literature is materially misleading 
under the Federal securities laws to RILA advertisements and sales 
literature. Finally, we are proposing a technical amendment to Form N-6 
to correct an error from a prior Commission rulemaking.
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    \8\ Under this proposal, the amended Form N-4 will not register 
the RILA issuers themselves, only the offering of RILA securities. 
Unlike separate accounts which register variable annuities, RILA 
issuers are not investment companies, and thus need not register 
with the Commission as an investment company as separate accounts 
do.
    \9\ See VASP Adopting Release.
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A. Typical RILA Features

    RILAs are complex financial products that are sold to retail 
investors. The following are some of the most prevalent features that 
contribute to this complexity, and that might make it challenging for 
an investor to assess the features, risks, and possible return profile 
of a RILA. These features also are important ones for financial 
professionals to consider when recommending that an investor purchase a 
RILA.
     Bounded Return Structure. Under a RILA, the insurance 
company will credit positive or negative ``interest'' to the investor's 
contract value at the end of each crediting period. The amount credited 
is based, in part, on the performance of the specified index (e.g., the 
S&P 500).\10\ The amount of any positive interest credited will also 
depend on whether the contract includes provisions such as a ``cap 
rate'' or ``participation rate.'' A cap rate places an upper limit on 
an investor's ability to participate in the index's upside performance 
directly (e.g., with a current cap rate of 5%, if the index is up 10% 
at the end of the crediting period, the investor's contract value will 
be credited with only 5% positive interest). A ``participation rate'' 
sets an investor's return to some specified percentage of the index's 
return (e.g., an 80% participation rate would result in an investor 
receiving positive interest of 80 cents on the dollar of gains in the 
index). The contract generally will include one of these limits on how 
much the insurance company will credit the investor if the performance 
of the index goes up in value by the end of the crediting period 
(collectively ``limits on gains''). Similarly, the contract generally 
will include terms limiting the investor's losses to some extent if the 
performance of the index goes down in value. This might include a 
``buffer'' (which limits the investor's exposure to losses up to a 
fixed percentage), or a ``floor'' (which places a lower limit on the 
investor's exposure to loss) (collectively ``limits on losses''). For 
example, with a ``buffer'' of -5%, if the index is down 2%, that 
investor will not lose anything, but if the index is down 7% the 
investor will lose 2% (the difference between the loss and the buffer 
rate). With a ``floor'' of -5%, if the index is down 2%, the investor 
will lose 2%, but if the index is down 7%, the investor will only lose 
5%. These limits can be complex and overlapping, and may change at the 
beginning of each new crediting period, subject to certain minimum 
guarantees stated in the contract. Over time, the investor's contract 
value will increase or decrease, depending on the performance of the 
index and the particular contract provisions (such as the bounded 
return structure). Despite the bounded return structure, a RILA is not 
necessarily a low-risk investment product as the investor could lose a 
significant amount of money if the index performs poorly.
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    \10\ Insurance companies typically choose indexes for the RILA 
contract where any gains in the value of the index do not include 
dividends paid on the securities that make up the index.
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     Fees and Expenses. For many RILAs, the investor pays no 
direct or explicit ongoing fees and expenses under the RILA, and this 
is sometimes a feature disclosed in RILA marketing materials. However, 
the RILA's bounded return structure requires investors to agree to 
tradeoffs that come with their own economic costs. In exchange for some 
protection against losses if the index goes down in value, investors 
must also agree to contractual provisions limiting the amount of gains 
they will receive if the index goes up in value. A RILA's upside limits 
on gains can reduce an investor's return in the same way that a direct 
fee can and can help make the RILA more profitable to the insurance 
company.
     Charges and Penalties for Early Withdrawals. Investors 
also can lose significant money if they withdraw their money early from 
an investment option or from the contract. This can arise in several 
circumstances. First, a RILA typically will specify a period of time 
during which a ``surrender charge'' will apply, for example nine years 
following an investor's last premium payment. Typically, this charge is 
greatest in the first year of the surrender period, decreasing each 
year until the end of the surrender period. An investor who

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withdraws money during this period will pay a fee, such as 9% of the 
amount withdrawn. Second, an insurance company may make an adjustment, 
either to the investor's contract value or to the amount paid to the 
investor, if amounts are withdrawn from an index-linked option before 
the end of its crediting period or from the contract before the end of 
a specified period. For example, when an investor in a RILA chooses a 
particular index-linked option, the RILA may provide that the index-
linked option's crediting period is one year. If amounts are removed 
from that index-linked option before the end of this one-year crediting 
period, typically for any reason, the insurance company will apply an 
``interim value adjustment'' or ``IVA.'' The IVA will adjust the 
contract value based, generally, on a complex formula where the IVA may 
change daily and can be positive or negative.\11\ As a result, the 
investor could lose a significant amount of money, even if the index 
has a gain at the time of the withdrawal.
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    \11\ Common methods of calculating this adjustment include 
prorating the crediting method based on the number of days that have 
elapsed since the start of the crediting period, employing a market-
based formula designed to approximate the present value of the index 
and/or employing interest-rate-based MVAs to offset certain insurer 
losses and costs, or some combination of these two. See Clifford E. 
Kirsch, Variable Annuities and Other Insurance Investment Products 
(Third Edition 2022) at 29-8, available at https://plus.pli.edu/Details/Details?start=0&rows=50&fq=%7e2B%7etitle_id%7e3A282B22%7e240085%7e2229%7e&fq=%7e2B%7eid%7e3A282B22%7e240085-CH29%7e2229%7e&sort=s_date+desc&origin=title.
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    Similarly, the insurance company might apply a positive or negative 
``market value adjustment'' or ``MVA'' (collectively with IVAs, a 
``contract adjustment'') to the contract value if the investor 
partially or fully withdraws amounts from the contract. Contract 
adjustments could be made in response to a number of contract 
transactions, such as a surrender, withdrawal, payment of the death 
benefit, or the start of annuity payments, and an investor could 
experience a negative contract adjustment even when the investor takes 
an otherwise permissible withdrawal, such as under a guaranteed living 
benefit.\12\ These adjustments can also negatively impact other values 
under the contract, such as the surrender value and death benefit. 
Moreover, these fees and adjustments are not always mutually exclusive. 
Indeed, under the terms of certain RILA contracts, an investor could 
experience a decrease in contract value from a negative interim value 
adjustment and a negative market value adjustment, depending on the 
timing of the withdrawal, and also pay a surrender charge. An investor 
may also be subject to income taxes and face a Federal income tax 
penalty if the investor withdraws money before a certain age.\13\
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    \12\ Id. at 29-13. Under these benefits, RILA investors are 
permitted to take a certain amount of guaranteed withdrawals from 
their contract each year without reducing the value of guaranteed 
withdrawals for future years. These can be a standard feature or an 
optional rider chosen by an investor. Id. at 29-12.
    \13\ See Updated Investor Bulletin: Indexed Annuities, SEC's 
Office of Investor Education and Advocacy, July 31, 2020, https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_indexedannuities. 
Staff reports and other staff documents (including those cited 
herein) represent the views of Commission staff and are not a rule, 
regulation, or statement of the Commission. The Commission has 
neither approved nor disapproved the content of these documents and, 
like all staff statements, they have no legal force or effect, do 
not alter or amend applicable law, and create no new or additional 
obligations for any person.
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     Changes by Insurer. Crediting periods for an index-linked 
option in a RILA contract generally range from one to six years. The 
insurance company may change or remove key features of index-linked 
options, such as the cap rates, floors, or even change the index. These 
changes may often be made at the insurance company's discretion and 
renewal provisions can and do change over time. Also, RILA contracts 
typically state that an investor will be automatically renewed at the 
end of a crediting period into the same or substantially similar index-
linked option, often with a new limit on gains. If the same index-
linked option is unavailable, the terms of the contract generally 
provide that the insurance company may place the investor into a more 
conservative investment option as a default, such as a fixed account or 
an index-linked option with a 0% floor.
     Taxes. Special tax rules generally apply to RILAs and 
other annuities, with both tax advantages and potential adverse tax 
impacts in certain circumstances. For example, assets within a RILA 
generally grow tax-deferred. As discussed above, however, investors may 
face a Federal income tax penalty if money is withdrawn before the 
investor reaches a certain age.\14\
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    \14\ For these and other reasons, insurance companies generally 
advertise RILAs as a long-term investment. This is similar to the 
treatment of variable annuities. See VASP Adopting Release at n.14 
and accompanying text.
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    Providing investors with key information is particularly important 
in the context of RILAs, since their features are typically complex and 
their risks may not be apparent or easily understood by prospective 
investors absent clear disclosure. Form N-4's existing disclosure 
requirements regarding features of annuities would complement the 
proposed RILA-specific disclosures, such that the amended Form N-4 
would provide investors with key information both about the annuity 
contract and the associated registered index-linked or variable 
investment options.

B. Current Registration Process

    The current requirements for issuers offering RILAs and variable 
annuities differ in many respects, both in terms of the disclosure 
issuers must provide, and with respect to the registration process. We 
highlight here some of these key differences.
    On required disclosure, because the Commission currently does not 
have a specific registration form for RILAs, insurance companies 
register the offerings of RILAs on Forms S-1 or S-3.\15\ Although 
specific disclosure requirements apply for certain securities such as 
capital stock or debt, the forms' disclosure requirements are not 
specifically tailored to particular kinds of securities given the wide 
range of securities offerings that can be registered on the forms.\16\ 
Forms S-1 and S-3 thus do not include specific line-item requirements 
addressing disclosures about RILAs and their complex features, such as 
how limits on gains operate or the application of contract adjustments. 
These forms also require issuers to disclose information about the 
offering itself as well as extensive information about the registrant 
issuing the securities that may be less material to a RILA investor 
than information about the contract's features. Required information 
about the registrant includes, for example, management's discussion and 
analysis of financial condition and results of operations (``MD&A''), 
which requires a narrative discussion of the registrant's financial 
statements, and disclosure about executive compensation. Domestic 
registrants also must include financial statements prepared in 
accordance with U.S. generally accepted accounting principles 
(``GAAP'').\17\
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    \15\ See, e.g., General Instruction I of Form S-1 (``This Form 
shall be used for the registration under the Securities Act of 1933 
(`Securities Act'); of securities of all registrants for which no 
other form is authorized or prescribed'').
    \16\ See Item 9 of Forms S-1 and S-3 and 17 CFR 229.202 
(providing specific disclosure requirements for certain securities 
such as capital stock, debt, warrants or rights, and directing 
issuers of other types of securities to include a brief description 
that is comparable to that required for the specified kinds of 
securities).
    \17\ See 17 CFR 210.4-01(a)(1) (stating that financial 
statements filed with the Commission which are not prepared in 
accordance with GAAP will be presumed to be misleading or inaccurate 
unless the Commission has otherwise provided). See also infra 
footnote 20.

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[[Page 71092]]

    Most variable annuities, in contrast, are registered on Form N-
4.\18\ This form is designed for variable annuities and has disclosure 
requirements tailored to these investments. Providing investors with 
key information in a reader-friendly format is particularly important 
in the context of variable annuity contracts because their structure is 
complex. Accordingly, Form N-4's disclosure requirements are designed 
to provide investors with key information relating to a variable 
contract's provisions, benefits, and risks in a concise and reader-
friendly presentation, along with targeted information about the 
insurance company and the offering. Form N-4's disclosure requirements 
thus focus more on the specific features of variable annuities than on 
the issuing insurance company. This presentation is designed to 
highlight the most important information for an investor in a variable 
annuity, so that the only matters included in the prospectus are those 
for which there is a substantial likelihood that a reasonable investor 
would consider them important in deciding whether to invest.\19\ This 
focus on the provisions of the variable contract itself, rather than 
certain details about the operation of the insurance company, reflects 
that a variable annuity contract is not a direct investment in the 
capital stock or debt of the insurance company, but rather a contract 
with the insurance company under which the investor's exposure to the 
insurance company generally is limited to the company's ability to 
honor any guarantees associated with the contract. In addition, rule 
498A together with Form N-4 implements a layered disclosure approach 
for variable annuities by permitting insurance companies and others to 
use a summary prospectus framework for variable annuities while making 
the more-detailed statutory prospectus, as well as the contract's 
statement of additional information (``SAI''), available online. Form 
N-4 also provides a limited exception for insurance companies to file 
financial statements prepared in accordance with statutory accounting 
principles (``SAP''), referred to as ``statutory requirements'' in the 
form instructions, rather than GAAP. Specifically, insurance companies, 
which act as the depositors of variable annuity separate accounts 
registered on Form N-4, may use SAP financials solely when the 
insurance company does not otherwise prepare GAAP financial statements 
or GAAP financial information for use by a parent in the parent's 
Securities Exchange Act of 1934 (``Exchange Act'') reports or the 
parent's registration statements filed under the Securities Act.\20\
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    \18\ According to Form N-CEN filings received through March 23, 
2023, there were 419 variable annuity separate accounts registered 
as unit investment trusts (``UITs'') in 2022.
    \19\ The Commission has long sought to tailor disclosures for 
annuity products. See Registration Forms for Insurance Company 
Separate Accounts, Investment Company Act Release No. 13689 (Dec. 
23, 1983) [49 FR 614 (Jan. 5, 1984)] (``Form[] N-4 would permit 
shorter and simpler prospectuses than are required under current 
practice, . . . by incorporating many of the reduced disclosure 
requirements of Form N-1A. Separate account disclosure requirements 
that experience has shown are unnecessary also would be eliminated, 
as well as certain disclosure requirements that are holdovers from 
the requirements applicable to non-separate account unit investment 
trust.''); Registration Form Used By Open-End Management Investment 
Companies, Investment Company Act Release No. 12927 (Dec. 27, 1982) 
[48 FR 813 (Jan. 7, 1983)] (``In order to shorten and simplify the 
prospectus for mutual funds, the Commission has concluded that it is 
necessary to eliminate certain types of information from the 
prospectus, so that only matters of fundamental importance to most 
mutual fund investors will be included in the prospectus'').
    \20\ See, e.g., Instruction 1 to Item 31(b) in Form N-3 and 
Instruction 1 to Item 26(b) in Form N-4. In addition, although Form 
S-1 requires GAAP financial statements, exemptions have been granted 
pursuant to 17 CFR 210.3-13 that permit insurance companies to 
substitute SAP financials in lieu of GAAP financials when 
registering RILAs on Form S-1 in circumstances permitted by Form N-
4. See, e.g., Letter from Jenson Wayne, Chief Accountant, Division 
of Investment Management, to Stephen E. Roth, Eversheds Sutherland 
(US) LLP, regarding Fidelity & Guaranty Life Insurance Company and 
Fidelity & Guaranty Life Insurance Company of New York (Mar. 17, 
2023) (available at https://www.sec.gov/files/fidelity-guaranty-031723.pdf) (``F&G Life Letter'').
---------------------------------------------------------------------------

    With respect to the registration process, insurance companies 
registering an offering of RILA securities are required under the 
Securities Act to pay a registration fee to the Commission at the time 
of filing a registration statement.\21\ This means that they pay 
registration fees at the time they register the offer and sale of the 
securities, regardless of when (or if) they sell them. The registration 
statement for the RILA offering also must include current financial 
information, including any annual update required by section 10(a)(3) 
of the Securities Act.\22\ An insurance company registering a RILA 
offering on Form S-1 must provide any section 10(a)(3) update to the 
registration statement by filing a post-effective amendment which must 
be declared effective, typically by the staff acting pursuant to 
delegated authority.\23\
---------------------------------------------------------------------------

    \21\ Section 6(b)(1) of the Securities Act [15 U.S.C. 
77f(b)(1)]. Certain ``well-known seasoned issuers'' or ``WKSIs'' can 
use a different registration process than what is described here. 
See generally Securities Offering Reform, Investment Company Act 
Release No. 26993 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)] 
(``Offering Reform Release''). None of the insurance companies 
offering RILAs are WKSIs, however, and we generally do not 
anticipate that RILA issuers will meet the conditions to operate as 
a WKSI. We therefore do not generally discuss the WKSI registration 
process in this release. Even if a RILA issuer were to qualify as a 
WKSI, the Securities Act rules that provide a streamlined offering 
process for WKSIs generally would be inapplicable to RILA offerings 
on Form N-4, as proposed. For example, although a WKSI can file an 
automatic shelf registration statement, this would not be applicable 
under the proposal because Form N-4 does not permit a shelf 
registration statement and an automatic shelf registration statement 
must be filed on Forms S-3, F-3, or N-2. See rule 405 (definition of 
``automatic shelf registration statement''). As another example, 
WKSIs are permitted to use the ``pay-as-you-go'' method of paying 
securities registration fees, but the registration fees for RILA 
offerings would be paid annually in arrears under the proposal. See 
17 CFR 230.456(b).
    \22\ Section 10(a)(3) of the Securities Act provides that when a 
prospectus is used more than nine months after the effective date of 
the registration statement, the information contained therein shall 
be as of a date not more than sixteen months prior to such use. 15 
U.S.C. 77j.
    \23\ See Section 8(c) of the Securities Act [15 U.S.C. 77h(c)] 
and 17 CFR 230.462 (``rule 462'').
---------------------------------------------------------------------------

    If the offering is registered on Form S-3, the insurance company's 
annual report on Form 10-K containing audited financial statements will 
operate as a post-effective amendment to the registration statement for 
purposes of section 10(a)(3).\24\ The insurance company is required to 
provide a complete set of its financial statements, certain schedules, 
and executive compensation disclosures in a structured data format 
using Inline XRBL, but is not otherwise required to provide other 
information in the registration statement as structured data.\25\ 
Insurance companies offering RILAs also are not required to deliver 
prospectuses to investors because they can rely on the Commission's 
``access equals delivery'' framework in rule 172, although in practice 
we understand that insurance companies typically deliver prospectuses 
to accompany or precede other communications.
---------------------------------------------------------------------------

    \24\ An issuer filing a registration statement on Form S-3 will 
incorporate by reference information in reports under the Exchange 
Act filed after the registration statement has become effective, 
including the issuer's annual report on Form 10-K. Accordingly, 
certain information required to be included in the prospectus may be 
included directly in the prospectus or included in an Exchange Act 
report that is incorporated by reference into the prospectus.
    \25\ See rule 405(b) of Regulation S-T.
---------------------------------------------------------------------------

    When an insurance company registers a variable annuity separate 
account on Form N-4, in contrast, it pays registration fees based on 
the net issuance of securities, no later than 90 days after each fiscal 
year end.\26\ The insurance company can update its registration 
statement to include updated financial information required by section 
10(a)(3) by filing an immediately effective post-effective amendment 
under rule 485. These

[[Page 71093]]

provisions together are designed to allow insurance companies to 
efficiently conduct continuous offerings of variable annuities. The 
insurance company also must structure certain key information in Inline 
XBRL to enhance the utility of that information to investors and must 
deliver a prospectus to investors because the ``access equals 
delivery'' framework in rule 172 is not available for variable 
annuities.
---------------------------------------------------------------------------

    \26\ See 17 CFR 270.24f-2 (``rule 24f-2'').
---------------------------------------------------------------------------

C. Evidence of Investor Views and Areas of Potential Confusion

    Consistent with the RILA Act, the Commission received feedback on 
individuals' comprehension and views on RILA disclosure through 
investor testing. Specifically, we received feedback through 
qualitative investor testing interviews, as well as quantitative 
testing designed to assess whether the design of certain hypothetical 
RILA disclosure provided to participants affects their comprehension of 
the disclosed information. Each of these aspects of investor testing 
was designed by the Commission's Office of the Investor Advocate 
(``OIAD''). As described in more detail in section II.B below, this 
feedback helped us to identify areas of Form N-4 that we propose to 
amend to help ensure that a RILA purchaser receives key information 
that the purchaser is able to understand.
    OIAD conducted two rounds of qualitative interviews with a mix of 
investors across demographic characteristics, locations, and levels of 
financial literacy who either already owned annuities or had expressed 
interest in investing in an annuity product.\27\ These interviews aimed 
to generate hypotheses about certain content areas in RILA disclosure--
specifically, disclosure that could appear in select rows of the ``Key 
Information Table'' (or ``KIT'') in RILA registration statements, as 
discussed below--that may cause confusion and lead to impediments to 
investor understanding of key information.\28\ These interviews 
concentrated on assessing: (1) potential RILA disclosure, focusing on a 
hypothetical KIT, for areas of confusion or misunderstanding; and (2) 
participants' mental models regarding the way RILA products function, 
including potential benefits, drawbacks, and risks of a RILA 
investment. The interviews also included hypothetical scenarios.\29\
---------------------------------------------------------------------------

    \27\ OIAD's qualitative testing consisted of two rounds of in-
depth hour-long interviews with twenty participants, using a semi-
structured, open-ended format so that participants could express 
their reactions and beliefs, regardless of whether they are 
accurate, in order to assess the reasoning of a sampling of 
investors regarding RILA products, and their reactions to potential 
RILA disclosures. See OIAD Report at Section 5, Qualitative Testing, 
Methods.
    \28\ OIAD Report at Section 1, Introduction and Executive 
Summary.
    \29\ See OIAD Report at Section 5, Qualitative Testing, Methods.
---------------------------------------------------------------------------

    Feedback from both rounds of qualitative interviews generally 
showed that the interview participants did not have much, if any, 
familiarity with RILAs. Furthermore, interviews in both rounds 
illustrated that many participants struggled to understand the details 
of the RILA contract presented in sample KIT disclosure.\30\
---------------------------------------------------------------------------

    \30\ Several participants in Round 2 were ``significantly more 
sophisticated than the average investor,'' with some having worked 
in a financial field or had over $1 million in retirement assets, 
and these participants also ``struggled to correctly apply the 
concepts discussed in the KIT.'' OIAD Report at Section 5, 
Qualitative Testing, Results from Round 2.
---------------------------------------------------------------------------

    With regard to the first round specifically, participants indicated 
significant confusion about the features and fees associated with 
RILAs, and often cited certain specific terminology, such as ``index 
option,'' ``interim value adjustment,'' ``buffer,'' and ``investment 
term,'' as confusing to them.\31\ For example, many participants 
mistakenly conflated ``investment term'' with the length of the entire 
insurance contract, leading them incorrectly to conclude that they 
could avoid any fees or charges if they liquidated their investment at 
the end of an initial one-year investment period.\32\ Participants 
often did not appear to understand that there are multiple aspects of a 
typical RILA contract that could negatively affect an investor's 
contract value or the amounts an investor could withdraw from the 
contract (e.g., the fact that a withdrawal could be subject to a 
surrender charge, interim value adjustment, and tax penalty).\33\ Some 
participants expressed that a chart or graph would be useful to help 
them understand certain information presented about a RILA contract, 
such as surrender periods or how the contract's bounded return 
structure would function.\34\ Additionally, some participants indicated 
they would need more specific information--besides the information in 
the hypothetical KIT rows shared with them--to evaluate the 
appropriateness of a RILA.\35\
---------------------------------------------------------------------------

    \31\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 1. As noted above, supra footnote 2, to alleviate the 
confusion generated by ``investment term,'' we use the term 
``crediting period'' in this release and in the proposed amendments 
to Form N-4.
    \32\ See, e.g., OIAD Report at Section 5, Qualitative Testing, 
Results from Round 1.
    \33\ See OIAD at Section 5, Qualitative Testing, Results from 
Round 1.
    \34\ OIAD Report at Section 5, Qualitative Testing, Results from 
Round 1.
    \35\ OIAD Report at Section 5, Qualitative Testing, Results from 
Round 1.
---------------------------------------------------------------------------

    While first-round interview participants may not have been able to 
understand RILA features and economic tradeoffs fully after reviewing 
sample KIT disclosure, some were able to identify certain potential 
drawbacks and explain certain aspects of RILA contracts following their 
review of this sample disclosure. This was demonstrated in 
participants' responses to sample scenarios, where the interview 
facilitator presented facts about a hypothetical investor's background, 
and participants were asked to provide their opinions about whether a 
RILA contract would be an appropriate investment option for those 
investors and discuss their reasoning. For instance, participants in 
the first-round interviews could generally identify that a RILA 
contract could present particular risks for individuals without a long 
time horizon.\36\ On the other hand, as noted above, these participants 
often identified only a single charge or penalty that would apply even 
in scenarios where, for example, a surrender charge, early withdrawal 
tax penalty, and interim value adjustment might all apply.\37\ Some 
participants were able to identify that a RILA contract could be 
appropriate for an individual in light of factors such as desire to 
protect against losses in the stock market, taking into account 
considerations such as age, investment time horizon, and other sources 
of liquid funds.\38\ Some interview participants also demonstrated that 
they could use the KIT disclosure to discern quickly that they would 
not be interested in purchasing a RILA contract, for example because of 
liquidity needs or relatively short investment time horizons.\39\
---------------------------------------------------------------------------

    \36\ OIAD Report at Section 5, Qualitative Testing, Results from 
Round 1. However, OIAD's report also notes that in the second round 
of testing, many participants did not understand that RILAs are 
intended as a retirement savings vehicle, and that there may be tax 
penalties for withdrawal prior to age 59\1/2\. See id., Results from 
Round 2. Similarly, only 12.6% of participants in the quantitative 
testing correctly identified that RILAs are investing vehicles that 
are intended purely as retirement savings vehicles. Id., Section 6, 
Quantitative Testing, Results, Summary of Quantitative Testing.
    \37\ OIAD Report at Section 5, Qualitative Testing, Results from 
Round 1.
    \38\ OIAD Report at Section 5, Qualitative Testing, Results from 
Round 1.
    \39\ OIAD Report at Section 5, Qualitative Testing, Results from 
Round 1.
---------------------------------------------------------------------------

    Commission staff used this feedback to update sample KIT disclosure 
in between qualitative interview rounds. In particular, in the second 
round, sample

[[Page 71094]]

KITs were modified to include: (1) the phrase ``investment term'' 
rather than ``term,'' (2) a table to show how investment term interacts 
with contract length, (3) graphics to provide more information about 
RILA loss limitation features such as floors and buffers, and (4) 
expanded links to additional information to indicate that more 
information could be available.\40\ Following these changes, 
participants demonstrated modestly improved comprehension in certain 
limited areas. For example, the sample KIT disclosure used in the 
second-round of qualitative testing emphasized that contract 
adjustments can substantially reduce the value of an investment if 
investors withdraw money before the end of an investment term. 
Participants who viewed this modified disclosure had greater success in 
identifying the potential financial impact of this feature, with some 
expressing concern about the potential magnitude of the contract 
adjustment.\41\ Additionally, some second-round participants who viewed 
the KIT contract adjustment disclosure also asked for more specific 
information about how the adjustment is calculated, which suggests that 
layered disclosure might be useful for these concepts.\42\ Even though 
these participants were unable to define certain terms relevant to 
contract adjustments (e.g., interim value adjustment), most second-
round participants seemed to understand that RILAs are not a short-term 
investment and should only be used if an investor will not need to make 
early withdrawals.\43\
---------------------------------------------------------------------------

    \40\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 1, and Appendix C.
    \41\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 2.
    \42\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 2.
    \43\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 2.
---------------------------------------------------------------------------

    The second round of testing also introduced a table in the sample 
KIT disclosure that attempted to help illustrate how fees were charged 
over the surrender period of the contract, the difference between the 
investment term (i.e., the crediting period) and the contract length, 
and how the surrender charge and potential contract adjustments could 
vary over different time frames.\44\ Nonetheless, participants in the 
second round of testing still had difficulty distinguishing between 
surrender charges and contract adjustments or understanding that both 
can apply cumulatively to reduce an investor's contract value in cases 
of early withdrawal.\45\ Most participants in the second round of 
testing also continued to struggle with the mechanics of ``buffers,'' 
despite the inclusion of graphics in the hypothetical KITs designed to 
illustrate how buffers work.\46\ There were a number of areas where 
participants wanted information that was not part of the KIT rows being 
tested, such as the specific index-linked options available under the 
contract, and some participants with more investing experience wanted 
information about past returns on the RILA, as well as additional 
information on fees and charges--particularly regarding caps on gains 
and other bounded return features--in order to understand the ways in 
which insurance companies profit from RILAs.\47\
---------------------------------------------------------------------------

    \44\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 1, and Results from Round 2.
    \45\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 2.
    \46\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 2.
    \47\ See OIAD Report at Section 5, Qualitative Testing, Results 
from Round 2.
---------------------------------------------------------------------------

    Following the qualitative interviews, OIAD conducted quantitative 
testing designed to assess comprehension of key concepts about RILAs 
and the extent to which the organization of disclosures affected 
participants' comprehension of the disclosed information.\48\ 
Approximately 2,500 participants completed OIAD's quantitative testing 
study, which was fielded over an eight-day period and targeted groups 
who were more likely to have some experience with financial 
products.\49\ Participants received focused portions of a hypothetical 
KIT to test disclosures. For example, participants were randomly 
assigned to one of two formats for the sample KIT disclosure, one with 
a Q&A format and one with a statement-based format.\50\ Overall, the 
results of OIAD's quantitative testing suggest that most investors 
experience challenges in understanding RILAs.\51\ This round of testing 
reviewed overall comprehension of participants as well as whether 
participants were able to assess four sub-scores: (1) appropriateness 
of RILAs for investors based on their characteristics, (2) how a RILA 
works, (3) how the charges and penalties associated with RILAs affect 
liquidity, and (4) the insurance protections offered by RILAs.\52\ 
Across all participants, the average percentage of questions scored 
correct was 58%, which, while higher than the expected score for people 
randomly guessing (50%), was lower relative to what might be considered 
a well-informed purchaser of a RILA product.\53\ However, the results 
of the sub-scores varied, specifically 57% for appropriateness, 49% for 
how a RILA works, 57% for insurance, and 62% for liquidity.\54\ 
Comprehension varied depending on the particular concept tested. For 
example, 80.7% of participants were able to correctly identify that 
RILA investors cannot access their money whenever they need it at no 
cost, suggesting that the tested disclosures were sufficient to put 
participants on notice to the potential for contract adjustments and 
surrender charges.\55\ Conversely, only 12.6% of participants correctly 
identified that RILAs are intended purely as retirement savings 
vehicles, rather than a product appropriate for other, shorter-term 
investing goals (e.g., education and home purchasing), suggesting 
continued investor confusion on this topic.\56\ Additionally, 
participants in the quantitative testing were classified into three 
groups based on their experience with investing. Not surprisingly, 
increased investment experience correlated with greater overall 
comprehension, with non-investors (those with no existing investments) 
averaging slightly less than 50% correct, 11.7 percentage points lower 
than the average for the group with the most investment experience.\57\ 
The Q&A KIT format demonstrated a statistically significant, albeit 
quantitatively small, improvement over the non-Q&A KIT format, 
particularly with regard to the non-investor group, who saw a 5.7 
percentage points increase in comprehension in connection with the Q&A 
format with regard to overall comprehension.\58\
---------------------------------------------------------------------------

    \48\ OIAD Report at Section 6, Quantitative Testing.
    \49\ OIAD Report at Section 6, Quantitative Testing, Methods.
    \50\ OIAD Report at Section 6, Quantitative Testing, Study 
Design and Overview.
    \51\ OIAD Report at Section 6, Quantitative Testing, Summary of 
Quantitative Testing.
    \52\ OIAD Report at Section 6, Quantitative Testing, 
Comprehension Measures.
    \53\ OIAD Report at Section 6, Quantitative Testing, Results.
    \54\ OIAD Report at Section 6, Quantitative Testing, Results, 
Table 6.
    \55\ OIAD Report at Section 6, Quantitative Testing, Results.
    \56\ OIAD Report at Section 6, Quantitative Testing, Results.
    \57\ See OAID Report at Section 6, Quantitative Testing, 
Results, Subgroup Analysis, Investor Status.
    \58\ See OIAD Report at Section 6, Quantitative Testing, 
Results, Subgroup Analysis, Investor Status.
---------------------------------------------------------------------------

    Overall, investor testing successfully identified a range of 
barriers to investor understanding of RILAs and associated disclosures. 
However, with the few

[[Page 71095]]

exceptions noted above, variations in disclosures did not result in 
significant improvements in investor comprehension in the investor 
testing. Accordingly, while OIAD's investor testing has been successful 
in identifying specific areas of investor confusion regarding RILAs, 
those results were largely inconclusive in terms of determining 
specific disclosures that are relatively more successful in addressing 
the identified confusion.
    We have incorporated those results in our design of the proposed 
Form N-4 amendments, endeavoring to give particular attention to areas 
of identified investor confusion while leveraging existing disclosure 
requirements. Because investor testing did not, for the most part, 
provide persuasive evidence of superior disclosures, we are proposing 
to largely utilize the existing Form N-4 disclosures which have been 
developed over time, and with which staff, investors, and RILA issuers 
are already familiar. Building upon these existing disclosures has 
additional benefits, because combination contracts offering both 
variable and index-linked options will be required to comply with Form 
N-4, making it more efficient to build on the form's requirements for 
both types of investment options. We seek comment throughout this 
release on specific areas for improvement that can aid investor 
comprehension. Further, we are requesting specific input from the 
retail investor community, through a short Feedback Flyer, relating to 
their experiences with annuities generally and RILAs specifically.\59\
---------------------------------------------------------------------------

    \59\ See infra section II.K; Appendix D.
---------------------------------------------------------------------------

    Further, in addition to investor testing focused specifically on 
sample RILA disclosure, our proposal--and the current disclosure 
requirements in Form N-4 that we are building upon--also draw on the 
Commission's past investor testing efforts, outreach, and other 
empirical research concerning investors' preferences. This includes, 
for example, information about summary content and layered disclosure 
approaches.\60\ The Commission has historically received feedback 
showing that investors generally prefer concise, layered 
disclosure.\61\ Investors participating in certain past quantitative 
and qualitative investor testing initiatives on the Commission's behalf 
have also expressed preferences for, wherever possible, the use of a 
summary containing key information about an investment product or 
service written in clear, concise, and understandable language and 
presented in an accessible format.\62\ Each of these sources of 
evidence of investor preferences, understanding, and behaviors in 
response to disclosures specific to RILAs and other investment products 
more generally has provided important context and support for our 
proposal's approach to RILA disclosure.
---------------------------------------------------------------------------

    \60\ See Updated Disclosure Requirements and Summary Prospectus 
for Variable Annuity and Variable Life Insurance Contracts, 
Investment Company Act Release No. 33286 (Oct. 30, 2018) [83 FR 
61730 (Nov. 30, 2018)] (VASP Proposing Release) at paragraphs 
accompanying nn.38-43.
    \61\ See, e.g., Request for Comment on Fund Retail Investor 
Experience and Disclosure, Investment Company Act Release No. 33113 
(June 5, 2018) [83 FR 26891] (June 11, 2018] (``Investor Experience 
RFC''). Feedback in comment letters generally showed that retail 
investors prefer concise, layered disclosure and feel overwhelmed by 
the volume of information they currently receive. Multiple comment 
letters reflected a preference for shorter summary disclosures, with 
additional information available online or upon request. See, e.g., 
Comment Letter of C. Scott (July 26, 2018) (expressing preference 
for shorter summary disclosures, and suggesting disclosures ``trim 
the fat and replace the text-heavy disclosures with something that 
is clear, succinct, and transparent''); Comment Letter of Helena 
Krus (July 29, 2018) (noting a preference to receive shorter summary 
disclosures, with additional information available online or upon 
request, and suggesting that the option should be available for all 
documents over 5 pages).
    \62\ See supra footnote 61; see also, e.g., SEC Staff, Study 
Regarding Financial Literacy Among Investors (Aug. 2012). The key 
information that investors found useful and relevant before 
purchasing an investment product includes information on fees and 
expenses, investment performance, principal risks, and investment 
objectives. With respect to the presentation of disclosure, the 
study indicates that investors preferred disclosures being ``written 
in clear, concise, understandable language, using bullet points, 
tables, charts, and/or graphs.'' Materials relating to this study, 
including the staff's report, are available at http://www.investor.gov/publications-research-studies/sec-research.
---------------------------------------------------------------------------

D. Overview of Proposal

    We are proposing to modernize and enhance the registration and 
disclosure framework for RILAs by adapting the existing registration 
and disclosure framework that is familiar to investors and issuers for 
variable annuity separate accounts to accommodate RILAs.
     Use of Form N-4. We are proposing to amend Form N-4 so 
that issuers seeking to register the offering of RILAs must use that 
form. To accommodate this, we are also proposing amendments to that 
form that specifically address the features and risks of RILAs. For 
example, we are proposing amendments to the form's ``Key Information 
Table'' that highlight key features of RILAs that should be disclosed 
so that investors may determine whether a RILA is an appropriate 
investment for them. In particular, the KIT highlights key features of 
a RILA contract that may be substantially different from the features 
of investment products investors may be more familiar with, and that 
investor testing suggests may not be readily apparent to investors. 
Further, because the insurance company would register the offering of a 
RILA on Form N-4 under the proposal, it would be subject to the 
requirements in the form related to financial statements, including the 
form instruction that currently permits variable annuity issuers to 
file insurance company SAP financial statements in certain 
circumstances.
     Form N-4 Amendments for All Issuers. In addition to adding 
RILAs to Form N-4, we are also proposing amendments to the form that 
would be applicable to offerings of variable annuities. These proposed 
amendments are informed by the staff's historical experience in 
administering the form and respond to observations from investor 
testing relevant to variable annuity offerings. For example, one 
takeaway from investor testing was that the complicated jargon of RILA 
contracts was a consistent impediment to investor comprehension of KIT 
disclosures.\63\ To address this confusion, we are proposing to switch 
the order of the Key Information Table and Overview of the Contract 
items to introduce investors earlier to the terminology and concepts 
underlying annuity contracts, in the hopes that this context will 
improve investor comprehension of KIT disclosures. Because variable 
annuities are also complicated investment products, we are proposing to 
switch the order for these products as well, so that variable annuity 
investors also have the benefit of this additional context.
---------------------------------------------------------------------------

    \63\ See OIAD Report at Section 6, Quantitative Testing, Summary 
of Quantitative Testing.
---------------------------------------------------------------------------

     Summary Prospectus. Consistent with the inclusion of RILAs 
on Form N-4, we are proposing to permit RILA issuers to make use of the 
summary prospectus framework available to variable annuity registrants 
on Form N-4.
     Updates to the Filing Rules. To accommodate RILA 
registrations on Form N-4, we are proposing to require RILA issuers to 
pay fees in arrears on Form 24F-2 and we are proposing amendments to 
address RILAs in the rules that variable annuities use to file post-
effective amendments and to update prospectuses.
     Materially Misleading Statements in Sales Literature. The 
proposed amendments would require RILA issuers to comply with rule 156, 
which provides guidance as to when sales literature is materially 
misleading under the Federal securities laws.
    Our proposal, if adopted, would implement the RILA Act's mandate.

[[Page 71096]]

II. Discussion

A. Use of Form N-4

    We propose to require insurance companies to use Form N-4 to 
register the offering of RILAs, as well as amendments to the form to 
require disclosures specific for these securities.\64\ As discussed 
above, the registration forms currently used by RILA issuers do not 
include line-item disclosure requirements addressing the unique aspects 
of RILAs, like limits on gains or the application of contract 
adjustments. They also require information about the issuer, such as 
MD&A, that may be less important to annuity investors, given that they 
are not making a direct investment in the insurance company, and that 
the Commission has not determined to require for variable annuities. 
Conversely, most variable annuity issuers already use Form N-4 to 
register their securities and the form is designed to provide investors 
with product-specific information about annuity contracts.\65\ 
Requiring insurance companies to register RILA offerings on Form N-4 
therefore leverages the form's existing insurance-product specific 
disclosure requirements, including disclosure requirements that help 
effectuate the relatively new summary prospectus layered disclosure 
framework the Commission adopted in 2020 for variable contracts. With 
the RILA-specific disclosures we are proposing to add to Form N-4, we 
intend that the form will provide investors with the information 
necessary to make informed decisions about RILAs.
---------------------------------------------------------------------------

    \64\ See proposed General Instruction B.1 of Form N-4. Form N-4, 
as we propose to amend it, would provide that Form N-4 is ``to be 
used by insurance companies to register index-linked annuity 
contracts under the Securities Act of 1933.'' Insurance companies 
therefore would not be permitted to register RILA offerings on Forms 
S-1 or S-3, as they do today.
    \65\ Variable annuities register on Form N-3 if they are issued 
by separate accounts that are organized as management investment 
companies. However, most variable annuities are issued by separate 
accounts that are organized as unit investment trusts and therefore 
use Form N-4. See supra footnote 6.
---------------------------------------------------------------------------

    Including RILAs on Form N-4 also could provide further benefits to 
investors by facilitating not only investor comparison among RILAs, but 
also the comparison of index-linked options to variable options in the 
same annuity contract. For example, investors would be able to review 
summary information of all the available investment options of an 
annuity contract--index-linked options, variable options, and fixed 
options--and compare these options in one place in the prospectus 
appendix required by Form N-4.\66\ Currently, we understand that 
approximately 44% of the RILAs offered in the marketplace are offered 
as index-linked options through combination products.\67\ Registering 
the offerings of RILAs on Form N-4, rather than a new or different 
form, also would be more efficient for insurance companies and 
Commission staff. In this regard, insurance companies would benefit 
from using a single form, with tailored disclosure requirements, to 
register the offerings of both RILAs and combination contracts with 
index-linked options. In addition, many of the insurance companies 
issuing RILAs also issue variable annuity contracts and therefore are 
familiar with the requirements of Form N-4. Using Form N-4 for RILAs 
also would be efficient for our staff because the disclosure 
requirements for variable contracts and RILAs would be consolidated in 
one place. Further, because Congress has authorized RILA issuers to use 
Form N-4 if the Commission fails to adopt a registration form for RILAs 
within 18 months of the RILA Act's enactment, we believe that requiring 
insurance companies to use the form is consistent with congressional 
intent.
---------------------------------------------------------------------------

    \66\ See infra section II.B.3(c).
    \67\ Based on an informal Commission staff review of RILA 
filings on the EDGAR system as of May 2, 2023.
---------------------------------------------------------------------------

    Requiring insurance companies to register RILA offerings on Form N-
4 under the proposal would result in changes to RILA disclosure, in 
that they would have to comply with the current Form N-4 disclosure 
requirements in addition to the proposed new RILA-specific disclosure 
requirements. While Form N-4 contains some of the issuer- and offering-
specific disclosures required by Forms S-1 and S-3, it does not contain 
them all. Specifically, Form N-4 does not include many of the 
disclosures relating to the mechanics of the offering (e.g., use of 
proceeds, dilution, etc.); offering participants other than the issuer, 
such as selling securities holders; and certain details of the issuer 
(e.g., descriptions of property, executive compensation, etc.). These 
disclosures may be more useful to an investor considering an investment 
in the capital stock or debt securities of the insurance company rather 
than an investment in a RILA issued by the insurance company. Unlike an 
investor in the insurance company itself, a RILA investor's direct 
investment exposure to the insurance company is limited to the 
insurance company's claims-paying ability, which also is supported by 
State insurance regulations and supervision designed to ensure that 
insurance companies are able to satisfy their obligations under their 
insurance contracts. Requiring insurance companies to register RILA 
offerings on Form N-4 would leverage that form's annuity-focused 
requirements to ensure that investors receive those disclosures that 
would be the most important in the RILA context.
    To accommodate the offering of RILAs on Form N-4 and to provide a 
consistent framework for all offerings registered on the form, we are 
proposing, as discussed in more detail below, changes to certain rules 
and requirements such that RILA issuers would be subject to the same 
process requirements as variable annuities.\68\ For example, similar to 
the current offering processes for issuers of variable annuities, 
insurance companies registering RILA offerings would be permitted to 
use a streamlined summary prospectus and required to pay fees to 
register their securities annually rather than at the time of filing a 
registration statement.\69\ These changes would provide efficiencies 
for insurance companies and Commission staff in establishing consistent 
requirements for offerings registered on Form N-4. It would, however, 
result in some trade-offs for RILA issuers. For example, insurance 
companies currently registering RILA offerings on Form S-3 would lose 
the ability to update their registration statement by incorporating by 
reference their annual report but would be able to update their 
registration statement annually with an immediately effective 
amendment. On balance, and as discussed in more detail throughout this 
release, requiring insurance companies registering RILA offerings to 
follow the offering processes proposed in this release should result in 
efficiencies for insurance companies and our staff. We anticipate that 
requiring RILA offerings to be registered on Form N-4 will also benefit 
investors by leveraging the form's annuity-specific disclosure 
requirements and extending the variable annuity summary prospectus to 
RILAs. Having a common registration form also should make it easier for 
investors deciding between an investment in a RILA or a variable 
annuity to compare the offerings.
---------------------------------------------------------------------------

    \68\ See infra sections I.C and II.E.
    \69\ See also infra section II.E.3 (discussing proposed changes 
to rule 172).
---------------------------------------------------------------------------

    We request comment on the proposed requirement to register RILA 
offerings on Form N-4.
    1. As proposed, should we require RILA issuers to use Form N-4? Is 
another existing registration form more

[[Page 71097]]

appropriate for RILAs? If so, which registration form and why?
    2. Given that any existing registration form would require RILA-
specific amendments, should the Commission instead develop a new form 
specifically for RILAs?
    3. Is it appropriate to require an annuity that offers different 
types of investment options (e.g., variable options as well as index-
linked options) to address these different types of investment options 
on the same registration form? Would requiring different registration 
forms for annuities offering different types of investment options be 
more or less efficient for insurance companies that offer variable 
annuities, RILAs, and combination contracts?
    4. Is there any information currently required by Forms S-1 or S-3 
that we should also require RILA issuers to disclose?
    5. Would requiring RILAs to follow the same filing and other 
process requirements as variable annuities (such as requirements for 
paying registration fees, and the ability to use a summary prospectus) 
be efficient for insurance companies because they could use the same 
processes to pay registration fees and update registration statements 
for variable annuities, RILAs, and combination contracts?
    6. Do commenters believe that there are any disclosures from Forms 
S-1 and S-3 we are not including in the proposed Form N-4, particularly 
the MD&A and executive compensation disclosures, that could be of 
material relevance to RILA investors? If so, please explain their 
relevance to RILA investors.
    7. Do commenters agree with our estimate that approximately 44% of 
RILA securities offered in the marketplace are offered as index-linked 
options through combination products? If not, what percentage do 
commenters think more accurately reflects RILA securities offered as 
index-linked options through combination products, and what is the 
basis for this estimate?
    8. Should Form N-4, as amended, be the only form that insurance 
companies could use to register RILA offerings? Should we permit the 
continued use of Forms S-1 and S-3 in addition to the amended Form N-4? 
Would this be appropriate, given that RILA issuers can already use 
those forms? How would we ensure that investors receive the information 
necessary to make informed decisions through use of those forms, 
including the benefit of the proposed RILA-specific disclosure 
requirements informed by investor testing?
    9. Do commenters expect that any RILA issuers will meet the 
conditions to operate as a WKSI, and if so, what is the basis for this 
expectation?
    10. Do commenters agree that leveraging Form N-4's annuity specific 
disclosure requirements and summary prospectus regime would benefit 
investors? Would registering RILA offerings on Form N-4 make it easier 
for RILA investors to compare RILA offering with variable annuity 
offerings? Are there any other potential benefits or disadvantages to 
investors in registering RILA offerings on Form N-4 as compared to 
other forms?

B. Contents of Form N-4

    As proposed, many items of current Form N-4 would apply to RILAs. 
We are also proposing updates to Form N-4 to include disclosures 
specific to RILAs. In certain circumstances, we propose changing the 
disclosures provided on the form that would apply to both RILAs and 
variable annuities. The chart in Table 1 below outlines these items and 
any substantive changes we are proposing.\70\ We discuss these changes 
in more detail in the sections that follow.
---------------------------------------------------------------------------

    \70\ Some proposed changes entail a non-substantive change such 
as a change to a defined term or specifying that the provision would 
continue to be applicable only to a registered separate account or 
variable option. These are not flagged in the following table but 
are instead discussed in section II.B.7 supra.

                                     Table 1--Overview of Proposed Form N-4
----------------------------------------------------------------------------------------------------------------
                Item                       Description           Substantive changes            Discussion
----------------------------------------------------------------------------------------------------------------
                                               Prospectus (Part A)
----------------------------------------------------------------------------------------------------------------
1..................................  Front and Back Cover    Adding new legends and       Section II.B.1.
                                      Pages.                  other standardized
                                                              disclosures applicable to
                                                              all issuers.
2..................................  Overview of the         New RILA-specific            Section II.B.3(a).
                                      Contract.               disclosures; moving order
                                                              of appearance up.
3..................................  Key Information.......  New RILA-specific            Section II.B.2.
                                                              disclosures; changing to a
                                                              question-and-answer
                                                              format; moving order of
                                                              appearance down; change
                                                              discussion of restrictions
                                                              on optional benefits to
                                                              cover all benefits.
4..................................  Fee Table.............  New contract adjustment      Section II.B.5.
                                                              disclosure.
5..................................  Principal Risks of      Providing more detailed      Section II.B.4.
                                      Investing in the        disclosures applicable to
                                      Contract.               all issuers.
6..................................  Description of the      New RILA-specific            Section II.B.3(a).
                                      Insurance Company,      disclosures and one new
                                      Registered Separate     item regarding variable
                                      Account, and            options.
                                      Investment Options.
7..................................  Charges...............  New disclosures related to   Section II.B.5.
                                                              contract adjustments.
8..................................  General Description of  No substantive change......  Section II.B.8(b).
                                      Contracts.
9..................................  Annuity Period........  No substantive change......  Section II.B.8(b).
10.................................  Benefits Available      No substantive change......  Section II.B.8(b).
                                      Under the Contract.
11.................................  Purchases and Contract  No substantive change......  Section II.B.8(b).
                                      Value.
12.................................  Surrenders and          No substantive change......  Section II.B.8(b).
                                      Withdrawals.
13.................................  Loans.................  No substantive change......  Section II.B.8(b).
14.................................  Taxes.................  No substantive change......  Section II.B.8(b).
15.................................  Legal Proceedings.....  No substantive change......  Section II.B.8(c).
16.................................  Financial Statements..  No substantive change (but   Section II.D.
                                                              see Item 26).

[[Page 71098]]

 
17.................................  Investment Options      New RILA-specific            Section II.B.3(b).
                                      Available Under the     disclosures.
                                      Contract.
----------------------------------------------------------------------------------------------------------------
                                  Statement of Additional Information (Part B)
----------------------------------------------------------------------------------------------------------------
18.................................  Cover Page and Table    No substantive change......  Section II.B.8(b).
                                      of Contents.
19.................................  General Information     No substantive change......  Section II.B.8(c).
                                      and History.
20.................................  Non-Principal Risks of  No substantive change......  Section II.B.8(b).
                                      Investing in the
                                      Contract.
21.................................  Services..............  No substantive change......  Section II.B.8(b).
22.................................  Purchase of Securities  New disclosure of specific   Section II.B.5.
                                      Being Offered.          contract adjustment
                                                              information.
23.................................  Underwriters..........  No substantive change......  Section II.B.8(c).
24.................................  Calculation of          Clarifying only applies to   Section II.B.7.
                                      Performance Data.       variable options.
25.................................  Annuity Payments......  No substantive change......  Section II.B.8(b).
26.................................  Financial Statements..  Providing that RILA issuers  Section II.D.
                                                              can use the relevant
                                                              instructions and adding
                                                              requirements relating to
                                                              changes in and
                                                              disagreements with
                                                              accountants for RILAs.
----------------------------------------------------------------------------------------------------------------
                                           Other Information (Part C)
----------------------------------------------------------------------------------------------------------------
27.................................  Exhibits..............  Adding power of attorney     Section II.B.7(d).
                                                              for all issuers and
                                                              accountant letters for
                                                              RILA issuers as exhibits.
28.................................  Directors and Officers  No substantive change......  Section II.B.8(c).
                                      of the Insurance
                                      Company.
29.................................  Persons Controlled or   No substantive change......  Section II.B.8(c).
                                      Under Common Control
                                      with the Insurance
                                      Company or the
                                      Registrant.
30.................................  Indemnification.......  No substantive change......  Section II.B.8(c).
31.................................  Principal Underwriters  No substantive change......  Section II.B.8(c).
31A................................  Information about       New disclosure of RILA       Section II.B.6.
                                      contracts with Index-   specific information.
                                      Linked Options.
32.................................  Location of Accounts    No substantive change......  Section II.B.7.
                                      and Records.
33.................................  Management Services...  No substantive change......  Section II.B.8(b).
34.................................  Fee Representation and  Adding new RILA              Section II.B.7(d).
                                      Undertakings.           undertakings.
----------------------------------------------------------------------------------------------------------------

1. Front and Back Cover Pages (Item 1)
    We propose to require RILA issuers to include the information Form 
N-4 currently requires on the front and back cover pages of the 
prospectus. Currently, issuers are required to include on the front and 
back cover pages basic identifying information about the issuer and the 
contract, information on how to review the document (e.g., what the SAI 
is and where to find it), as well as certain legends, for example, one 
relating to the ability for an investor to cancel the contract within 
10 days.\71\ The table below outlines these existing disclosures that 
RILAs would be required to include if applicable.
---------------------------------------------------------------------------

    \71\ One change specific to this legend would be to indicate 
whether the insurance company will apply a contract adjustment on 
any money returned during this period. Contract adjustments are a 
defining element of a RILA, but can apply in other circumstances. 
Nonetheless, given the context of this legend, we believe that it is 
important for investors to know whether they will be subject to this 
charge if they elect to have their money returned. See supra 
sections II.B.5 (discussing contract adjustments generally) and II.F 
(discussing that it could be materially misleading to advertise that 
investors can receive their money back during a period of time 
without indicating that a contract adjustment could apply).

      Table 2--Existing Information Required by Item 1 of Form N-4
                       [With proposed adjustments]
------------------------------------------------------------------------
           Item No.                   Disclosure              Cover
------------------------------------------------------------------------
                         Identifying Information
------------------------------------------------------------------------
Item 1(a)(2)..................  Insurance company's     Front.
                                 name.
Item 1(a)(3)..................  Types of contracts      Front.
                                 offered (e.g., group,
                                 individual, etc.).
Item 1(a)(4)..................  Name and class of       Front.
                                 contract.
Item 1(a)(9)..................  Date of prospectus....  Front.
Item 1(b)(4)..................  EDGAR identifier        Back.
                                 number.
------------------------------------------------------------------------

[[Page 71099]]

 
                                 Legends
------------------------------------------------------------------------
Item 1(a)(10).................  Statement that the      Front.
                                 Commission has not
                                 approved or
                                 disapproved of the
                                 securities or passed
                                 upon the accuracy or
                                 adequacy of the
                                 disclosure in the
                                 prospectus and that
                                 any contrary
                                 representation is a
                                 criminal offense (as
                                 required in 17 CFR
                                 230.481(b)(1)).
Item 1(a)(11).................  Statement that          Front.
                                 additional
                                 information about the
                                 contract is available
                                 on Investor.gov.
Item 1(a)(12).................  A legend that states    Front.
                                 that if you are a new
                                 investor, you may
                                 cancel your contract
                                 within 10 days of
                                 receiving it with
                                 some details about
                                 the operation of this
                                 process.
------------------------------------------------------------------------
                            Other Information
------------------------------------------------------------------------
Item 1(b)(1)..................  Statement that the SAI  Back.
                                 contains additional
                                 information, that it
                                 is available to
                                 investors, and how
                                 investors may obtain
                                 the SAI or make
                                 inquiries about their
                                 contracts.
Item 1(b)(2)..................  Statement about         Back.
                                 whether and from
                                 where information is
                                 incorporated by
                                 reference.
------------------------------------------------------------------------

    In addition, we are proposing to add several new disclosures to the 
cover page to accommodate RILAs. The first proposed amendment would 
require the insurance company to identify the types of investment 
options offered under the contract and cross-reference the prospectus 
appendix that provides additional information about each option.\72\ 
Given the addition of investment options beyond variable options to the 
form, this would help investors better understand what investment 
options are available under the contract.
---------------------------------------------------------------------------

    \72\ See proposed Item 1(a)(5) of Form N-4.
---------------------------------------------------------------------------

    The other proposed amendments to the cover page would require 
additional new disclosures that highlight RILAs' complexities and 
certain associated risks. These include RILA's limitation on gains and 
potential for loss, that they are not short-term investments, and that 
payments under the contract are subject to the insurance company's 
financial strength and claims-paying ability. The proposed legends 
would require issuers to include statements on the front cover 
disclosing the following:
    (1) The contract is a complex investment and involves risks, 
including the potential loss of principal;
    (2) For contracts that include index-linked options, a prominent 
statement that the insurance company limits the amount the investor can 
earn, the potential for investment loss could be significantly greater 
than the potential for investment gain, an investor could lose a 
significant amount of money if the index declines in value, and a 
prominent statement disclosing as a percentage the maximum amount of 
loss from negative index performance that an investor could experience 
after taking into account the minimum guaranteed limit on index loss 
provided under the contract;
    (3) The contract is not a short-term investment and is not 
appropriate for an investor who needs ready access to cash, and 
withdrawals could result in surrender charges, negative contract 
adjustments, taxes, and tax penalties as applicable with a prominent 
statement of the maximum potential loss resulting from a contract 
adjustment, if applicable; and
    (4) The insurance company's obligations under the contract are 
subject to its financial strength and claims paying ability.\73\
---------------------------------------------------------------------------

    \73\ See proposed Item 1(a) of Form N-4.
---------------------------------------------------------------------------

    This cover page disclosure is designed to put an investor on notice 
of these key considerations to help the investor make informed 
decisions.
    While these proposed additional disclosures are important for 
investors in RILAs, they are also relevant in many cases to investors 
in variable annuities. For example, while RILAs are complex 
investments, variable annuities are complex as well. Variable 
annuities, like RILAs, also are not short-term investments. As a 
result, we are proposing to apply the proposed new disclosures to all 
Form N-4 issuers to ensure that investors in both RILAs and variable 
annuities receive appropriate disclosures.
    We request comment on the requirement of RILAs to include the 
information in Item 1 of Form N-4 on their registration statement and 
the inclusion of new legends for all Form N-4 filers, as applicable, on 
the front cover of the registration statement.
    11. Would the new legends be effective in helping investors make 
informed decisions with regards to RILAs? Do commenters agree that it 
is appropriate to require the legends for variable annuities? Are the 
disclosures in the Overview of the Contract, Key Information Table, and 
elsewhere in the prospectus--as discussed later in this release--
sufficient such that these legends are not necessary? Conversely, are 
legends effective in alerting investors to key concepts for a RILA or 
variable annuity on the cover page of the prospectus? Are there 
additional legends that are appropriate in light of the complexity of 
RILAs and variable annuities? For example, should a legend be required 
that specifically discloses a contract's upside limitation, such as due 
to a participation rate or cap rate?
    12. Are there any examples or illustrations of how RILAs operate 
that we should require on the front or back cover pages? Are examples 
or illustrations more effective communication tools than legends on the 
cover page of the prospectus? Should examples or illustrations be 
provided in addition to legends?
    13. Is there any other information we should require on the front 
or back cover pages?

[[Page 71100]]

2. Key Information Table (Item 3)
    RILA issuers, like variable annuities issuers currently, would be 
required to provide a Key Information Table in their registration 
statements under the proposal. We also are proposing amendments to the 
KIT's disclosure requirements to address key RILA features, as well as 
other amendments that would apply to all Form N-4 issuers.
    The KIT provides summary prospectus disclosure, including a brief 
description of key facts about a variable annuity in a specific 
sequence and in a standardized presentation.\74\ Specifically, the KIT 
currently includes a summary of five topic areas: (1) fees and 
expenses; (2) risks; (3) restrictions; (4) taxes; and (5) conflicts of 
interest. The KIT functions as an integral part of the layered 
disclosure approach in Form N-4 by identifying key considerations 
upfront, with more detail to follow later in the prospectus. The 
proposed amendments to the KIT, which are informed by investor testing, 
are intended to build on this framework and highlight important 
considerations related to RILAs, including certain aspects of RILAs 
that our investor testing observed are difficult for investors to 
understand and thus require clear disclosure in order to help investors 
make informed investment decisions.\75\
---------------------------------------------------------------------------

    \74\ See VASP Adopting Release at section II.A.1.c.ii; see also 
infra section II.C.
    \75\ See, e.g., OIAD Report at Section 5, Qualitative Testing 
(following two rounds of in-depth interviews to assess potential 
RILA KIT disclosure for areas of confusion or misunderstanding, 
qualitative interviews suggested confusion with RILA terms and 
concepts relating to, for example, contract adjustments such as 
interim value adjustments and loss limiting features such as 
buffers); OIAD Report at Section 6, Quantitative Testing, Results, 
Subgroup Analysis (noting 5.7 percentage point effect of the Q&A KIT 
structure on overall comprehension for ``non-investors'' during 
quantitative testing).
---------------------------------------------------------------------------

    Form N-4 currently prescribes format requirements for the KIT to 
enhance the readability and comparability of the disclosure that also 
would apply to RILA offerings under the proposal.\76\ Specifically, 
RILA issuers would be required to disclose the required information in 
the tabular presentation reflected in the instructions, in the order 
specified, without any modification or substitution with alternate 
terminology of the title, headings, and sub-headings for the tabular 
presentation, unless otherwise provided. Consistent with the form's 
current requirements, RILA issuers, however, would be permitted to 
exclude any disclosures (other than the title, headings, and sub-
headings for this tabular presentation) in the KIT that are not 
applicable, or modify any of the statements required to be included, so 
long as the modified statement contains comparable information. RILA 
issuers also would be required to provide cross-references to the 
location in the statutory prospectus where the subject matter is 
described in greater detail, either accessed by direct electronic link 
or through equivalent methods or technologies, as required for variable 
annuity KIT disclosure. Consistent with current requirements, RILA 
issuers would include these cross-references adjacent to the relevant 
disclosure, either within the table row, or presented in an additional 
table column. As currently is required, all disclosures for the KIT 
should be short and succinct, consistent with the limitations of a 
tabular presentation.
---------------------------------------------------------------------------

    \76\ See proposed instruction 1 to Item 3 of Form N-4.
---------------------------------------------------------------------------

    We are proposing three modifications that would apply to 
registration statements both for RILAs and for variable annuities. 
These changes are designed to provide investors with a better 
understanding of these products, and are informed in part by the 
results of investor testing. First, we are proposing to require issuers 
to present the information in the KIT in a question-and-answer 
(``Q&A'') format.\77\ As a result of this change, the various line 
items of the KIT would be rephrased as questions (e.g., ``Are there 
charges for early withdrawals?'' instead of ``Charges for Early 
Withdrawals''). The instructions would further require that, unless the 
context otherwise requires, issuers should begin the response with a 
``Yes'' or ``No'' in bold text when answering a question presented in a 
given row of the KIT. Consistent with the directional results of the 
quantitative investor testing, we anticipate that the Q&A format may 
improve investor comprehension of RILA-specific topics. Because the 
effect of the Q&A KIT structure on overall comprehension was larger for 
non-investors than independent investors, this format may particularly 
improve comprehension for less-experienced investors.\78\ We also 
expect that rephrasing the current line items in a Q&A format would 
more clearly convey the importance of the KIT information to help RILA 
and variable annuity investors make informed investment decisions.\79\
---------------------------------------------------------------------------

    \77\ Proposed instruction 1(d) to Item 3 of Form N-4.
    \78\ For purposes of investor testing, participants were 
classified into three groups: those with no investments in stocks, 
bonds, mutual funds, or other securities (non-investors); those with 
investments exclusively in retirement savings accounts (retirement 
only); and those with investments outside of retirement accounts 
(independent investors). See OIAD Report at Section 6, Quantitative 
Testing, Subgroup Analysis, Investor Status. The report noted a 5.7 
percentage point effect of the Q&A KIT structure on overall 
comprehension for ``non-investors''. Id.
    \79\ The Commission's proposed Q&A format is consistent with 
previous rulemaking experience. See Form CRS Relationship Summary; 
Amendments to Form ADV, Investor Act Release No. 5247 (June 5, 2019) 
[84 FR 33492 (June 12, 2019)] (adopting question-and-answer format 
in response to feedback from surveys and studies and commenters who 
noted that ``the question-and-answer format is a more effective 
design for consumer disclosures because it focuses on questions to 
which a consumer wants answers and allows a consumer to skim quickly 
and understand where to get more information.''). The proposed 
format is also supported by prior surveys and studies to help design 
effective disclosures to retail investors. See, e.g., Angela A. 
Hung, et al., RAND Corporation, Investor Testing of Form CRS 
Relationship Study (2018), available at https://www.sec.gov/about/offices/investorad/investor-testing-form-crs-relationship-summary.pdf, at p. 23 (reporting that about 60% of respondents 
favored a question-and-answer format over the sample relationship 
summary format presented in the survey); Kleimann Communication 
Group, Inc., Report on Development and Testing of Model Client 
Relationship Summary, Presented to AARP and Certified Financial 
Planner Board of Standards, Inc. (Dec. 5, 2018), available at 
https://www.sec.gov/comments/s7-07-18/s70718-4729850-176771.pdf, at 
p. 4 (``Readers ask questions when they read, especially of 
functional documents. . . . For good design, we want to build upon 
this tendency by identifying key questions investors should or are 
likely to ask and featuring them prominently in the text, thus 
easing the cognitive task for readers. As a result, we used 
questions in the headings to introduce each section's major 
topic.''); Susan Kleimann, Making Disclosures Work for Consumers, 
Presentation to the SEC's Investor Advisory Committee (June 14, 
2018), available at https://www.sec.gov/spotlight/investor-advisory-committee-2012/iac061418-slides-by-susan-kleimann.pdf (encouraging 
the use of question-and-answer format, the use of headings to make 
structure clear, and a strong design grid to organize elements, 
among other disclosure design principles, to promote readability), 
cited in VASP Adopting Release at n.112 and accompanying text. See 
also Office of Investor Education and Assistance, U.S. Securities 
and Exchange Commission, A Plain English Handbook (Aug. 1998) (``You 
can make complex information more understandable by giving your 
readers an example using one investor. This technique explains why 
`question and answer' formats often succeed when a narrative 
abstraction fails.'').
---------------------------------------------------------------------------

    Second, we propose to change the order in which the KIT (current 
Item 2) appears relative to the Overview of the Contract (current Item 
3) disclosures.\80\ The Overview of the Contract disclosures provide 
general information about the contract and important context about the 
information summarized in the KIT. Based on our observations of 
investor testing, we believe RILA investors may generally benefit from 
more context to understand

[[Page 71101]]

the KIT disclosures. For example, interview participants generally 
found certain RILA-specific terminology confusing, such as ``index,'' 
``investment term,'' ``interim value adjustment,'' and ``buffer.'' \81\ 
Further, investor testing indicated that investors had difficulty in 
understanding the basic features and concepts of RILA contracts.\82\ 
The proposed Overview of the Contract disclosures would require 
descriptions and examples to help investors understand these RILA 
features and provide a basis for better understanding the issues 
flagged by the KIT disclosures.\83\ Thus, based on investor testing, we 
propose to change the location of the KIT so that it appears after 
(rather than before) the Overview of the Contract section. Placing the 
Overview of the Contract section first may similarly provide context of 
the issues flagged in variable annuity KITs.
---------------------------------------------------------------------------

    \80\ The current instructions to Form N-4 require that, 
notwithstanding 17 CFR 230.421(a), the KIT, Overview, and Fee Table 
must be disclosed in numerical order. General instruction C.3(a) of 
Form N-4. The proposal would change this instruction to reflect the 
change in order.
    \81\ See, e.g., OIAD Report at Section 5, Qualitative Testing, 
Results from Round 1, Summary of Qualitative Testing, Section 6, 
Quantitative Testing, Summary of Quantitative Testing.
    \82\ See, e.g., OIAD Report at Section 5, Qualitative Testing, 
Summary of Qualitative Testing, Section 6 and 7 Quantitative 
Testing, Summary of Quantitative Testing, Section 7, Conclusions, 
Summary of Findings.
    \83\ See, e.g., proposed Item 2(b)(2) of Form N-4.
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    Third, we propose to delete Form N-4's general instruction stating 
that where the discussion of information required by the Overview of 
the Contract (currently Item 3) or KIT (currently Item 2) also responds 
to the disclosure requirements in other items of the prospectus, 
registrants need not include additional disclosure in the prospectus 
that repeats the information disclosed in the Overview of the Contract 
or the KIT.\84\ In administering Form N-4, we have observed that this 
instruction has led to confusion on the part of registrants. For 
example, while both the KIT and Item 5 require disclosures about 
principal risks, the KIT expressly contemplates that more detailed 
information will be repeated later in the prospectus, specifically 
requiring registrants to provide cross-references to the more detailed 
prospectus discussion.\85\ Item 5 requires registrants to summarize the 
principal risks of the contract in one place, and was not intended to 
permit an insurance company to omit principal risks from that section 
if those risks were also disclosed in the KIT.\86\ Moreover, the 
layered disclosure framework requires a degree of repetition to ensure 
both that the KIT contains key disclosures and that the detailed 
sections that follow contain all of the key information about the given 
topic. We believe this is particularly important for RILAs in light of 
the challenges our investor testing suggests investors have in 
understanding these products. This way, investors will see the key 
risks regardless of whether they review targeted sections of the 
prospectus.
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    \84\ General Instruction C.3.(a) of Form N-4.
    \85\ See instruction 1(b) to Item 2 of Form N-4.
    \86\ See Item 5 of Form N-4; VASP Adopting Release at text 
following n.689 (``The principal risks section is designed to 
provide a consolidated presentation of principal risks which can be 
cross-referenced by registrants to reduce repetition that might 
otherwise occur if the same principal risks are repeated in 
different sections of the prospectus.'').
---------------------------------------------------------------------------

    The proposed overall format of the KIT is depicted below:

                 Table 3--Proposed Key Information Table
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Fees and Expenses:
    Are There Charges for Early
     Withdrawals?
    Are There Transaction Charges?
    Are There Ongoing Fees and Expenses?
Risks:
    Is There a Risk of Loss From Poor
     Performance?
    Is this a Short-Term Investment?
    What are the Risks Associated with the
     Investment Options?
    Is There Any Chance the Insurance
     Company Won't Pay Amounts Due to Me
     Under the Contract?
Restrictions:
    Are There Restrictions on the
     Investment Options?
    Are there any Restrictions on Contract
     Benefits?
Taxes:
    What are the Contract's Tax
     Implications?
Conflicts of Interest:
    How are Investment Professionals
     Compensated?
    Should I Exchange My Contract?
------------------------------------------------------------------------

(a) Fees and Expenses
    RILA contracts typically have implicit fees, expenses, and charges 
for early or mid-term withdrawals that can be confusing or surprising 
to investors, as observed in our investor testing.\87\ We anticipate 
that investors would benefit from tailored disclosure about certain 
unique features of a RILA contract's fee and expense structure as 
described below to help them make informed decisions.
---------------------------------------------------------------------------

    \87\ See, e.g., OIAD Report at Section 5, Qualitative Testing, 
Results from Round 1, Results from Round 2.
---------------------------------------------------------------------------

    Early Withdrawal Charges. As RILAs may have surrender charges, we 
propose to require RILA issuers to provide the existing KIT surrender 
charge disclosure in this first line item under the ``Fees and 
Expenses'' heading so that RILA investors understand how surrender 
charges are assessed (e.g., that if they make a withdrawal within a 
specified period after their last premium payment, they may pay a 
significant surrender charge that will reduce the value of their 
investment).\88\ This disclosure must include the maximum surrender 
charge, the maximum number of years that a surrender charge may be 
assessed, and an example of the maximum surrender charge an investor 
could pay in dollars based on a $100,000 investment. In a change to the 
current form requirements, we also are proposing to require that 
offerings of both variable annuities and RILAs disclose that this loss 
will be greater if there is a negative contract adjustment, taxes, or 
tax penalties, to make clear that an investor may lose more than just 
the surrender charge upon an early withdrawal.
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    \88\ Proposed instruction 2(a) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    We also are proposing to require specific disclosure on contract 
adjustments, which can result in investor losses if the investor 
withdraws

[[Page 71102]]

money from an index-linked option, or withdraws money from the RILA 
entirely before the end of a specified period.\89\ Specifically, if the 
contract includes contract adjustments, the insurance company would be 
required to include a statement that if all or a portion of account 
value is removed from an index-linked option or from the contract 
before the expiration of a specified period, the insurance company will 
apply a contract adjustment, which may be negative. Similar to the 
disclosures relating to surrender charges, this statement would include 
the maximum potential loss (as a percentage of the investment) 
resulting from a negative adjustment (e.g., ``[y]ou could lose up to 
XX% of your investment due to the contract adjustment''). The insurance 
company also would be required to provide an example of the maximum 
negative adjustment that could be applied (in dollars) assuming a 
$100,000 investment (e.g., ``[i]f you allocate $100,000 to an 
investment option with a 3-year crediting period and later withdraw the 
entire amount before the 3 years have ended, you could lose up to 
$90,000 of your investment. This loss will be greater if you also have 
to pay a surrender charge, taxes, and tax penalties.''). We also 
propose to require the insurance company to provide a brief narrative 
description of the contract transactions subject to a contract 
adjustment (e.g., withdrawals, surrender, annuitization, etc.) as part 
of the response to this item to make clear to investors the range of 
transactions that could result in a contract adjustment.
---------------------------------------------------------------------------

    \89\ As noted above, contract adjustments include adjustments 
made when amounts are removed prematurely from an index-linked 
option, often referred to as interim value adjustments, as well as 
adjustments made when amounts are removed prematurely from the 
contract, often referred to as market value adjustments. Thus, a 
specified period would include index-linked option crediting periods 
(which again, are typically referred to by insurance companies as 
``investment terms'' or ``terms''), as well as any specified period 
relating to a market value adjustment.
---------------------------------------------------------------------------

    Transaction Charges. The second line item in the ``Fees and 
Expenses'' section of the proposed amended KIT, ``Are there transaction 
charges?,'' would require registrants to disclose that the investor may 
also be charged for other transactions in addition to surrender charges 
(and now contract adjustments), along with a brief narrative 
description of the types of such charges (e.g., front loads, charges 
for transferring cash value between investment options, etc.).\90\ This 
line item is designed to provide a simple narrative description to 
alert investors that surrender charges and contract adjustments are not 
the only transaction charges they could pay. We are proposing to 
require RILA issuers to provide this disclosure.
---------------------------------------------------------------------------

    \90\ Proposed instruction 2(b) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    Ongoing Fees and Expenses. The third line item in the ``Fees and 
Expenses'' section, ``Are there ongoing fees and expenses?,'' is 
designed to alert investors that they also will bear recurring fees on 
an annual basis. This item currently requires the insurance company to 
disclose (1) a minimum and maximum annual fee table and (2) a lowest 
and highest annual cost table, both along with applicable legends.\91\ 
The minimum and maximum annual fee table is designed to consolidate the 
more detailed information in the Fee Table that appears later in the 
prospectus, in order to minimize the need for investors to perform 
complex calculations to understand the fees they will pay.\92\ The 
lowest and highest annual cost table is designed to provide investors 
with a high-level cost illustration that will give investors a tool to 
understand the basic cost framework of the contract.\93\ We are 
proposing to require RILA issuers to provide this disclosure.\94\
---------------------------------------------------------------------------

    \91\ See instruction 2(c) to Item 2 of Form N-4. The minimum and 
maximum annual fee table requires a tabular description of the fees 
and expenses that an investor may pay each year, depending on the 
investment options chosen. This includes minimum and maximum 
percentages for: base contract fees; portfolio company fees and 
expenses; and optional benefits available for an additional charge. 
The lowest and highest annual cost table requires a tabular 
description of the lowest and highest cost an investor could pay 
each year, based on current charges and a set of standardized 
assumptions (e.g., $100,000 investment and 5% annual appreciation).
    \92\ See VASP Adopting Release at section II.A.1.c.ii.(i), n.144 
and accompanying text; see also Item 4 of Form N-4.
    \93\ See VASP Adopting Release at section II.A.1.c.ii.(i), n.147 
and accompanying text.
    \94\ See proposed instruction 2(c) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    We also are proposing to require that where a contract imposes 
limits on gains on the amount an investor can earn on an index-linked 
option, insurance companies disclose that they impose these limits on 
gains and that they serve as an implicit ongoing fee.\95\ In other 
words, as a result of limits on gains imposed under a contract, an 
investor is sacrificing the potential for investment gains that exceed 
the cap or other limit on upside performance. Specifically, insurance 
companies would prominently state that they impose an implicit ongoing 
fee on index-linked options by limiting, through the use of a cap, 
participation rate, or some other rate or measure, the amount an 
investor can earn on an index-linked option. Further, insurance 
companies would state that imposing this limit helps the insurance 
company make a profit on the index-linked option, and that, in return 
for accepting this limit on index gains, an investor will receive some 
protection from index losses. This disclosure would be required to 
precede the minimum and maximum annual fee table. If the contract 
offers an index-linked option subject to limits on gains but does not 
impose any explicit ongoing fees or expenses under the contract, and 
thus there would be no need to include the minimum and maximum annual 
fee and lowest and highest cost tables, the insurance company would 
include this disclosure in lieu of such tables.\96\ Where there are no 
explicit ongoing fees, minimum and maximum annual fee and cost tables 
showing zero fees could mislead investors because an index-linked 
option imposing limits on gains has implicit fees inherent in limiting 
upside index participation.
---------------------------------------------------------------------------

    \95\ See proposed instruction 2(c)(i)(G) to Item 3 of Form N-4.
    \96\ Proposed instruction 2(c)(iii) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    Lastly in this line item, we propose to revise the last sentence in 
the required legend in the lowest and highest annual cost table to 
include the underlined language: ``This estimate assumes that you do 
not take withdrawals from the Contract, which could add surrender 
charges and negative Contract Adjustments that substantially increase 
costs.'' \97\ This would further alert investors to the cost impact of 
a contract adjustment if they withdraw money early.
---------------------------------------------------------------------------

    \97\ See proposed Instruction 2(c)(ii)(A) to Item 3 of Form N-4. 
Currently, this legend only refers to surrender charges, not 
negative contract adjustments.
---------------------------------------------------------------------------

(b) Risks
    Risk of Loss. Under the first line item in the amended KIT under 
the heading ``Risks,'' ``Is there a risk of loss from poor 
performance?,'' we would, as required by an existing instruction in the 
form, require RILA issuers to state that an investor can lose money by 
investing in the contract. RILAs, like variable annuities, are subject 
to the risk of investment loss. We also are proposing to amend this 
instruction to provide that, if an annuity contract offers an index-
linked option, the insurance company must disclose, as a percentage, 
the maximum amount of loss an investor could experience from negative 
index performance, after taking into account the minimum guaranteed 
limit on index loss provided under the

[[Page 71103]]

contract.\98\ For example, with a guaranteed buffer of -10%, a 
registrant would disclose that investors could lose up to 90% of their 
investment in an index-linked option due to poor index performance even 
with the loss limitation feature. This amendment is designed to make 
clear to investors investing in an index-linked option that they can 
still lose money even though index-linked options typically include 
features designed to limit investment loss.
---------------------------------------------------------------------------

    \98\ See proposed Instruction 3(a) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    Short-Term Investment. The second line item under the Risks 
heading, ``Is this a short-term investment?,'' currently requires a 
statement that the contract is not a short-term investment and is not 
appropriate for an investor who needs ready access to cash along with a 
brief explanation. This statement and an accompanying brief explanation 
is equally applicable to RILAs and we therefore would require RILA 
issuers to make the same disclosure.\99\ We also are proposing to amend 
this item to require issuers of RILAs and variable annuities to state 
that (1) amounts withdrawn from the contract may result in surrender 
charges, taxes, and tax penalties; and (2) if applicable, that amounts 
removed from an index-linked option or the contract before a specified 
period may also result in a negative contract adjustment and loss of 
positive index performance. These disclosures are designed to make 
clear to investors some of the key reasons why these investments are 
not short-term investments. These disclosures are particularly 
important for an investor considering a RILA in light of the potential 
negative consequences if the investor withdraws money early from a 
particular index-linked option or the contract. We are not limiting 
these disclosures to contracts with index-linked options, however, 
because these disclosures may be equally material for a variable 
annuity. To further illustrate that index-linked options are not short-
term investments even though they may have a short crediting period, we 
also propose new risk disclosure for index-linked options that would 
require issuers offering such investment options to state that contract 
value will be reallocated at the end of the crediting period according 
to the investor's instructions, and to disclose the default 
reallocation in the absence of such instructions.
---------------------------------------------------------------------------

    \99\ See proposed instruction 3(b) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    Risks Associated with Investment Options. The third line item under 
the Risk heading, ``What are the risks associated with the investment 
options?,'' is intended to focus on the general risk of poor investment 
performance.\100\ Currently, the KIT therefore requires the insurance 
company to state that: (1) an investment in the contract is subject to 
the risk of poor investment performance and can vary depending on the 
performance of the investment options available under the contract; (2) 
each investment option will have unique risks; and (3) the investor 
should review these investment options before making an investment 
decision. We are proposing conforming changes to the required statement 
to refer to index-linked options now that RILAs are included on Form N-
4.\101\
---------------------------------------------------------------------------

    \100\ VASP Adopting Release at the text accompanying n.170.
    \101\ See proposed instruction 3(c) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    We also are proposing to require the insurance company to provide 
additional information about any index-linked options offered under the 
contract to highlight how the insurance company limits the investor's 
participation in gains and losses of the index. For the risk of limited 
upside, the insurance company would be required to (1) state that the 
cap, participation rate, or some other rate or measure, as applicable, 
will limit positive index returns (e.g., limited upside), (2) provide 
an example for each type of limit imposed under the contract (e.g., if 
the index return is 12% and the cap rate is 4%, the insurance company 
will credit the investor 4% in interest at the end of the term), and 
(3) prominently state that this may result in the investor earning less 
than the index's return.\102\
---------------------------------------------------------------------------

    \102\ See proposed instruction 3(c)(A) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    For the risk of limited protection in the case of market decline, 
the insurance company would be required to (1) state that the floor, 
buffer, or some other rate or measure, as applicable, will limit 
negative index returns (e.g., limited protection in the case of market 
decline), (2) provide an example for each type of limit imposed under 
the contract (e.g., ``if the Index return is -25% and the buffer rate 
is -10%, we will credit -15% (the amount that exceeds the buffer rate) 
at the end of the crediting period''), and (3) prominently state that 
even after limiting a negative index return, investors could still lose 
up to XX% of their investment.\103\ The disclosure in this row of the 
KIT is designed to highlight that each investment option, including an 
index-linked option, will have unique risks. The proposed disclosure on 
index-linked options would highlight one of the central economic 
tradeoffs index-linked options present: that an investor will sacrifice 
the potential for returns if the index goes up in exchange for some 
protection from loss if the index goes down.
---------------------------------------------------------------------------

    \103\ See proposed instruction 3(c)(B) to Item 3 of Form N-4.
---------------------------------------------------------------------------

    Insurance Company Risks. The fourth line item under the Risk 
heading, ``Is there any chance the insurance company won't pay amounts 
due to me under the contract?,'' is meant to alert investors that any 
obligations, guarantees, or benefits under the contract that may be 
subject to the claims-paying ability of the insurance company will 
depend on the financial solvency of the insurance company.\104\ Form N-
4 therefore currently requires the insurance company to include a 
statement to this effect in this row of the KIT and either to provide 
the insurance company's financial strength ratings or state, if 
applicable, that they are available upon request. We propose to require 
a RILA issuer to provide the same statement, with a conforming change 
to include index-linked options as an obligation of the insurance 
company.\105\
---------------------------------------------------------------------------

    \104\ See VASP Adopting Release at section II.A.1.c.ii.(ii); see 
also proposed Instruction 3(d) to Item 2 of Form N-4 (``State that 
an investment in the Contract is subject to the risks related to the 
Insurance Company, including that any obligations (including under 
any Fixed Options and Index-Linked Options), guarantees, or benefits 
are subject to the claims-paying ability of the Insurance 
Company.'').
    \105\ See proposed instruction 3(d); see also infra section 
II.B.7(b) (discussing changes of Form N-4's defined terms, including 
replacing ``depositor'' with ``insurance company,'' to facilitate 
inclusion of RILAs on the form).
---------------------------------------------------------------------------

(c) Restrictions
    Investments. We propose to require RILA issuers to include the 
disclosure required by the first line item under the heading 
``Restrictions,'' ``Are there limits on the Investment Options?'' This 
current item would be modified to require the insurance company to 
state whether there are any restrictions that may limit the investment 
options that an investor may choose, as well as any limitations on the 
transfer of contract value among investment options.\106\ As these 
limitations can exist for RILAs, we propose to require RILA issuers to 
make

[[Page 71104]]

this disclosure so that investors can assess that disclosure in 
determining whether the RILA is an appropriate investment for them.
---------------------------------------------------------------------------

    \106\ See proposed instruction 4(a) to Item 3 of Form N-4. The 
current item requires the insurance company to state whether there 
are any restrictions that may limit the investments that an investor 
may choose, as well as any limitations on the transfer of contract 
value among portfolio companies. Consistent with the corresponding 
changes made to defined terms, we would also clarify that this item 
applies to any investment option, not just the portfolio companies 
available as investment options under a variable option. See infra 
section II.B.7.
---------------------------------------------------------------------------

    Currently, the form also generally requires the insurance company 
to state that it reserves the right to remove or substitute portfolio 
companies as investment options, if applicable. Insurance companies 
typically reserve the right to change the index-linked options that are 
available under a contract as well as key features of available index-
linked options. To alert investors that the available index-linked 
options and key terms of those index-linked options may change in the 
future we are proposing to require the insurance company to state any 
reservation of its rights under the contract, including, if applicable, 
the right to (1) add or remove index-linked options, (2) change the 
features of an index-linked option from one crediting period to the 
next, including the changes to the index and the current limits on 
gains and limits on index losses (subject to contractual minimum 
guarantees), and (3) substitute the index of an index-linked option 
during its crediting period. We are also proposing to require that 
insurance companies disclose any right to stop accepting additional 
purchase payments, which may be significant to investors given the 
impact this reservation can have on investors' ability to accumulate 
contract value for retirement, grow the death benefit, and increase 
optional benefit values.
    Contract Benefits. The second line item under ``Restrictions,'' 
``Are there any restrictions on contract benefits?'' requires a 
statement about whether there are any restrictions or limitations 
relating to benefits offered under the contract, and/or whether a 
benefit may be modified or terminated by the insurance company. It also 
requires a statement that withdrawals that exceed limits specified by 
the terms of a contract benefit may affect the availability of the 
benefit by reducing the benefit by an amount greater than the value 
withdrawn and/or could terminate the benefit. We are proposing that 
this item be broadened to include disclosure on restrictions or 
limitations relating to any benefit under the contract, not just 
optional benefits (as currently required). While a benefit under the 
contract might be characterized as standard, it could have restrictions 
that should be disclosed in the KIT because of the benefit's importance 
to the investor's rights under the contract, such as a proportionate 
withdrawal calculation under a standard death benefit.\107\ We propose 
to require RILA issuers to include this disclosure, as such disclosure 
is equally applicable to RILAs as it is to variable annuities.
---------------------------------------------------------------------------

    \107\ See proposed instruction 4(b) to Item 3 of Form N-4. 
Similarly, we are proposing a change to the discussion in the 
overview of the contract item about contract features that would 
broaden that discussion to cover both optional and standard contract 
benefits. See proposed Item 2(c) of Form N-4.
---------------------------------------------------------------------------

(d) Taxes
    We also propose to require RILA issuers to include the line item 
under the heading ``Taxes,'' ``What are the Contract's tax 
implications?'' \108\ This line item is designed to alert investors to 
the tax implications of variable contracts and, as we propose to amend 
this item, of RILAs. It currently requires a statement that an investor 
should consult with a tax professional to determine the tax 
implications of an investment in, and purchase payments received under, 
the contract. The insurance company must also state that there is no 
additional tax benefit to the investor if the contract is purchased 
through a tax-qualified plan or individual retirement account 
(``IRA''), and that withdrawals will be subject to ordinary income tax 
and may be subject to tax penalties. We propose to subject RILAs to 
this requirement because the same tax considerations apply.
---------------------------------------------------------------------------

    \108\ See proposed instruction 5 to Item 3 of Form N-4.
---------------------------------------------------------------------------

(e) Conflicts of Interest
    Investment Professional Compensation. We propose to require RILA 
issuers to include the first line item under the heading ``Conflicts of 
Interest,'' ``How are investment professionals compensated?'' \109\ 
This current line item for variable contracts is designed to alert 
investors to the existence of compensation arrangements for investment 
professionals and the potential conflicts of interest arising from 
these arrangements.\110\ It requires issuers to disclose that an 
investment professional may be paid for selling the contract to 
investors. An issuer must describe the basis upon which such 
compensation is typically paid (e.g., commissions, revenue sharing, 
compensation from affiliates and third parties). An issuer providing 
the required disclosure also must state that investment professionals 
may have a financial incentive to offer or recommend the contract over 
another investment. The same compensation arrangements and potential 
conflicts are relevant for RILAs, and we therefore are proposing to 
require an insurance company registering a RILA to provide the same 
disclosure.
---------------------------------------------------------------------------

    \109\ See proposed instruction 6(a) to Item 3 of Form N-4.
    \110\ See VASP Adopting Release at section II.A.1.c.ii.(v).
---------------------------------------------------------------------------

    Exchanges. We propose to require RILA issuers to include the second 
line item under the heading ``Conflicts of Interest,'' ``Should I 
exchange my Contract?,'' with conforming changes.\111\ This current 
line item for variable contracts is designed to alert investors to 
potential conflicts of interest that may arise from contract sales that 
stem from exchanges.\112\ It requires issuers to state that some 
investment professionals may have a financial incentive to offer a new 
contract in place of the one owned by the investor. An issuer must 
further state that investors should only exchange their contract if 
they determine, after comparing the features, fees, and risks of both 
contracts, that it is preferable to purchase the new contract rather 
than continue to own the existing contract. These same considerations 
apply to an investor considering an exchange involving a RILA. In a 
change that would apply to variable annuities and RILAs, and to put 
investors on notice that there may also be costs or charges associated 
with terminating an existing contract, we are also proposing that 
issuers disclose in this legend that investors should consider any fees 
or penalties to terminate the existing contract in considering whether 
to exchange a contract.
---------------------------------------------------------------------------

    \111\ See proposed instruction 6(b) to Item 3 of Form N-4; see 
also infra section II.B.7.
    \112\ See VASP Adopting Release at section II.A.1.c.ii.(v).
---------------------------------------------------------------------------

(f) Requests for Comment on Key Information Table
    We request comment generally on the proposed amendments to the KIT, 
and specifically on the following issues.
    14. Should we require all issuers to provide the ``Overview of the 
Contract'' disclosure before the KIT, as proposed? Would this provide 
relevant context for an investor to help understand the KIT disclosure 
or, conversely, would it detract from the KIT's efficacy in conveying 
key information about the contract up front in a consistent format? Are 
there other reasons to precede the KIT disclosure with the current 
``Overview of the Contract'' disclosure? Alternatively, should we allow 
issuers to maintain the current order of disclosure and include new 
rows in the KIT to provide contract overview disclosure to investors? 
Would this be a more effective way to provide context for investor to 
understand the KIT, or

[[Page 71105]]

would it lead to disclosure that is too lengthy for the KIT format and 
potentially duplicate disclosure in the Overview of the Contract 
section of the prospectus? Alternatively, should we require the 
Overview of the Contract to precede the KIT only in prospectuses 
offering annuity contracts with index-linked options, rather than for 
all issuers?
    15. Should we add disclosure to the KIT regarding whether index-
linked options offered under the contract are based on a price return 
index (i.e., an index that only reflects price movements of the 
security) or a total return index (i.e., one that includes additionally 
factors like dividends), so that, where appropriate, investors 
understand whether or not they can expect their account value to 
increase as a result of dividends?
    16. Should we add any additional headings and sub-headings to the 
KIT, for example, a new heading ``Contract Overview,'' with related 
line items or sub-headings ``What is the purpose of the contract?,'' 
``What is the time period for measuring growth (or loss) on my contract 
value?,'' and/or ``Who may the contract be appropriate for?''? Would 
this information be helpful to an investor in providing context for the 
KIT disclosure or, conversely, would these requirements lead to lengthy 
disclosure that makes the KIT less investor friendly?
    17. Would rephrasing the topics of the KIT line items in a question 
format and requiring the descriptions in the right-hand column of the 
KIT to be presented in an answer format, as proposed, be helpful for 
investors making an initial purchase of an annuity contract? Should we 
make the Q&A format mandatory for all issuers that use Form N-4? Or 
should we instead require that issuers state the line items in the 
left-hand column as brief descriptions of the topics to be detailed in 
the right-hand column of the KIT, as is currently required? Should any 
of the required line items or sub-headings be worded in a different 
way, or using different terminology, than the proposal would require?
    18. Should we allow issuers to change the wording of the line item 
questions in circumstances where the changes would not impede investor 
comprehension and clear, consistent disclosure? Could this undermine 
standardized disclosures and investors' ability to make comparisons of 
certain disclosure topics among RILA and variable annuity prospectuses, 
or would issuers' ability to customize the disclosure lead to more 
informed investor decisions about that particular RILA?
    19. Should we require issuers to add a new column in the KIT 
labeled ``Location in the Prospectus'' or similar caption, and place it 
next to the relevant disclosure presented in the table to provide 
hyperlinked cross-references directly to the location in the statutory 
prospectus where the investor can find more detailed information about 
the subject matter or should we, as proposed, continue to permit 
issuers to provide cross-references either within the table row or 
presented as an additional column? Are there any particular sub-
headings or captions that would help investors identify where to find 
information?
    20. Should we mandate particular examples or illustrations in the 
KIT? For example, should we require a chart of historical index 
performance with the guaranteed minimum cap overlaid? Should we require 
a table showing examples of the dollar amounts of losses and gains, 
without fees, an investor would face in a variable annuity as compared 
to RILAs with various floors, buffers, and caps over a four-year period 
assuming various index movements? \113\ Are there other useful examples 
or illustrations currently provided by RILAs that help to illustrate 
their structure effectively to investors that we should include in the 
KIT? For example, should we require a graphic in the KIT to illustrate 
surrender charges and contract adjustments during different time 
periods of the contract? If so, what should the requirements for these 
graphics or illustrations be? Should we require illustrations in the 
KIT showing how caps, floors, and/or buffers could affect an investor's 
returns across different market scenarios? If so, what should these 
scenarios be? As another example, we request comment below on requiring 
insurance companies to disclose the difference between a hypothetical 
$100,000 investment in an index-linked option and the value, or the 
cost to assemble, the economic components underlying the index-linked 
option.\114\ Should that disclosure be required in the KIT?
---------------------------------------------------------------------------

    \113\ See N.Y. Comp. Codes R. & Regs. tit. 11, App. 28.8 (2023).
    \114\ See Section II.B.3.b.
---------------------------------------------------------------------------

    21. We have proposed that insurance companies include disclosures 
in the KIT regarding any limits on gains the RILA imposes, including an 
illustrative example demonstrating the operation of those limits. Would 
this disclosure be improved by requiring that the example conform to 
any specific parameters? Would other examples be helpful? For example, 
should we require that the example use the most common limit on gains 
offered under the RILA for the previous year? Should we require that 
the example disclose the amount of gains an investor would have given 
up due to the limit over the prior ten years, based on the index's 
performance during that time and assuming the limit on gains discussed 
in the example applied during each of those ten years? Should we 
require that the example use only round numbers?
    22. Should we allow or require issuers to provide cross-references 
to charts or other graphics designed to facilitate investor 
understanding of RILAs, including, e.g., educational resources designed 
by the Commission staff? Should we require issuers to provide these 
hyperlinked cross-references in the current right-hand column of the 
KIT directly after the relevant sentence of disclosure? Would the KIT 
be more succinct and easier to read if the hyperlinked cross-references 
were placed on the cover page of the prospectus instead of the KIT? 
Would requiring the registrant to state ``More information can be found 
at:'' before or after these cross-references help investors easily find 
the information they may need to make an informed investment decision? 
Should we require cross-references to other prospectus sections to 
include a specific page number in the prospectus where an investor 
could find the information?
    23. Besides hyperlinks, are there other technological tools that 
would help an investor find information that is cross-referenced in the 
KIT or on the cover page of the prospectus, such as QR codes or other 
technological tools?
    24. Is the level of detail of the disclosure that we propose in 
each line item of the KIT appropriate? Does it strike the right balance 
between providing enough information to alert an investor to the most 
salient facts (including ongoing implicit fees, expenses, risks, and 
conflicts) of the RILA contract, but not too much, or too detailed 
information? If not, how should we modify the table and/or the 
instructions? Are there other key features of RILA contracts that RILA 
issuers should disclose in the KIT to help investors make an informed 
investment decision?
    25. RILAs are frequently marketed as a way to protect against 
investment losses through loss-limiting features such as buffers and 
floors. Should we require RILA issuers to provide more detailed 
disclosures about how these loss-limiting features have affected RILA 
investors historically? For example, would investors be better 
positioned to

[[Page 71106]]

make informed decisions if we were to require RILA issuers to disclose: 
(a) the total number of investor crediting periods (across all 
investors and index-linked options) that utilized a loss-limiting 
feature for a certain historical period (e.g., the past five years); 
(b) the percentage of those investor crediting periods where an 
investor's contract value benefited from a loss-limiting feature 
(because the feature eliminated or reduced a negative credit resulting 
from the performance of the index-linked option); and (c) the 
percentage of those investor crediting periods where an investor's 
contract value was not impacted by a loss-limiting feature. Should a 
RILA issuer have experience with a certain minimum number of crediting 
periods in order to be subject to this disclosure? What should a RILA 
issuer disclose if their experience with loss-limiting features does 
not meet the minimum threshold? Where in the prospectus would be the 
appropriate location for this information? For example, if we require 
this disclosure, do commenters feel it would be best positioned as part 
of the KIT, in Item 6 (in the Limits on Index Losses section), or in 
the Contract Overview? Are there other disclosures that commenters 
would recommend in the alternative as a way to increase investor 
knowledge about the utility of loss-limiting features and their ability 
to positively affect investors' contract values? Whether or not we 
require more detailed disclosures about the historical effects of loss-
limiting features, should we require similar disclosure about the 
historical effects of limits on gains (i.e., upper limits on an 
investor's ability to participate in an index-linked option's upside 
performance)? Should we require disclosure comparing the economic 
effects of the limits on gains to the limits on losses? For example, 
should we require disclosure of the number of periods in which each 
limit would have actually limited an investor's losses or capped an 
investor's gains? Should we require disclosure of the dollar value of 
losses an investor would be protected against compared to gains an 
investor would give up over a prescribed period of time, such as the 
past 10 years?
    26. Are there any particular legends that should be included in the 
KIT, e.g., ``We will not return your money at the end of the crediting 
period unless you tell us to,'' ``The contract adjustment applies in 
addition to any surrender charge,'' ``You may earn less than the 
index's return,'' and/or ``You may lose up to [X]% of your investment 
if you withdraw your money before the end of a crediting period. This 
loss can be greater if there is a surrender charge, taxes, and/or tax 
penalties''? If so, what legends and why?
    27. Is the process of what happens at the end of the crediting 
period adequately highlighted in the proposed KIT? Should insurance 
companies be required to provide more specific details, either in the 
KIT or elsewhere in the prospectus, about how investors can choose an 
investment option at the end of the crediting period and the 
limitations on those choices?
    28. Would the disclosure that a RILA issuer would provide in 
response to the proposed ``Fees and Expenses'' line items convey the 
appropriate amount of information to investors and concisely alert 
investors to the most important fees, charges, penalties, and expenses 
associated with the RILA contract?
    29. Should the proposed ``Fees and Expenses'' line item, ``Are 
there charges for early withdrawals?,'' include disclosure both about 
the surrender charges and contract adjustments, as proposed? Would this 
disclosure sufficiently alert investors to the typical contract 
adjustment of a contract and its impact in reducing contract value (in 
addition to any surrender charge) if the investor withdraws money 
before the expiration of a specified period? Alternatively, should we 
sub-divide this line item into two line items, with the one focused on 
surrender charges and the other titled (for example) ``Are there 
penalties for mid-term withdrawals?,'' focused on contract adjustments? 
Would this help an investor to understand both concepts better? Or 
would sub-dividing the line item cause confusion, for example by making 
it seem as if a surrender charge and a contract adjustment could not 
apply simultaneously? If so, should we require an explicit disclosure 
that they could apply simultaneously?
    30. Would the Minimum and Maximum Annual Fee and Lowest and Highest 
Cost tables assist investors in understanding the costs of their 
investment and help them compare the costs of different investment 
options and optional benefits in the RILA context? Should we modify the 
proposed disclosure or require other additional information to 
accompany the tables?
    31. Would the proposed disclosure that an issuer would provide 
about contracts that do not impose ongoing fees and expenses adequately 
convey the implicit ongoing fees of contracts with index-linked options 
that have features that limit positive index return? If not, should we 
modify the proposed disclosure or require additional information from 
issuers?
    32. Would the disclosure that a RILA issuer would provide in 
response to the proposed ``Risks'' line items adequately convey an 
overview of the risks of investing in a contract with an index-linked 
option? Are there other risks of investing in these contracts that we 
should require a registrant to disclose in the proposed KIT? For 
example, should we require RILA issuers to state that an investor can 
lose money by investing in these contracts including a loss of 
principal? Alternatively, should we require all issuers to state this, 
not just RILA issuers?
    33. Would the disclosure that a RILA issuer would provide in 
response to the proposed ``Restrictions'' line items convey the 
appropriate amount of information about certain restrictions that 
various contract options may entail, in light of the goals of the 
proposed KIT and the unique nature of a RILA? Should an issuer be 
required to disclose information about restrictions in the KIT other 
than those associated with the contract's investment options and 
benefits? If so, what? Instead, should we provide flexibility by 
permitting issuers to disclose other restrictions at their discretion? 
Do commenters agree that our proposal to require disclosure about 
restrictions on contract benefits generally (as opposed to the current 
requirement which is limited to optional benefits) is appropriate?
    34. Is the disclosure that a RILA issuer (along with other issuers 
that use Form N-4) would be required to provide in response to the 
proposed ``Taxes'' line item appropriate, in light of the goals of the 
proposed KIT? Given that some investors in these products may not have 
the means or ability to consult a tax professional, should we require 
additional disclosures in addition to the required statement that 
investors should consult a tax professional? For example, should a RILA 
issuer be required to consider which tax consequences are most likely 
be faced by retail investors and to provide general information 
regarding those consequences? For example, should an issuer be required 
to emphasize more prominently that withdrawals will be subject to 
ordinary income tax, and not the capital gains rates? Should the line 
item require disclosure of the specific tax penalties and requirements 
that investors in annuity contracts may incur (e.g., penalties for 
withdrawal before age 59\1/2\, or that purchases through a tax-
qualified plan may be subject to required minimum distribution each 
year beginning at age 70\1/2\)?

[[Page 71107]]

    35. Are the disclosures that a RILA issuer (along with other 
issuers that use Form N-4) would be required to provide in response to 
the proposed ``Conflicts of Interest'' line items appropriate, in light 
of the goals of the proposed KIT? Would these disclosures adequately 
apprise investors of the potential conflicts that arise when their 
investment professional is compensated for recommending an investment 
into a new, or an exchange from, an existing RILA contract or variable 
annuity contract? Should we revise these proposed disclosure 
requirements, and if so, how?
    36. Do the instructions associated with each of the proposed line 
items clearly explain what an issuer would be required to disclose? In 
keeping with the structured format of a tabular presentation, we sought 
to promote concise disclosure by largely directing issuers to state, 
rather than to explain, certain information in response to the required 
line items. Should the instructions prescribe specific language or 
should issuers have flexibility in drafting their responses? Are there 
any particular instructions that we should include or modify in any 
way, for clarity or for any other reason?
    37. Should we require particular terms in the KIT (e.g., those that 
are defined in a related glossary or list of definitions that the 
insurance company chooses to include) to be formatted in a way that 
will emphasize them, or indicate that they are defined elsewhere in the 
prospectus, for example by using bold and/or italic font?
    38. Should we apply the structural changes we are proposing to the 
KIT in other variable insurance contract registration forms, that is, 
Forms N-3 and N-6? The principles we outlined above regarding the 
potential efficacy of these changes could be just as applicable in the 
context of those forms as in the context of Form N-4. For example, 
should we apply the proposed requirements for Forms N-3 and N-6 issuers 
to present all disclosures in the KIT in a Q&A format and to begin each 
response with a ``yes'' or ``no'' in bold text when answering a 
question presented in a given row of the KIT, unless the context 
otherwise requires? Similarly, should we require in those forms that 
issuers include in their required legends on contract exchanges that 
investors consider any fees or penalties to terminate the existing 
contract before exchanging their contracts?
3. Principal Disclosure Regarding RILAs (Items 2, 6, and 17)
    We are proposing amendments to Form N-4 to provide investors with 
the principal disclosures regarding RILAs and the index-linked options 
available under the contract in three items of the form. First, 
investors would receive a concise description of the basic information 
about any index-linked option available under the contract as well as 
any contract adjustments in Item 2 (Overview of the Contract), which, 
as discussed above, would appear before the KIT.\115\ Second, investors 
would be provided with detailed information about the index-linked 
options available under the contract in Item 6 (Description of the 
Insurance Company, Registered Separate Account, and Investment 
Options). Lastly, investors would be provided with a summary 
information table, with legends highlighting risks, that outlines the 
available index-linked options in Item 17 (Investment Options Available 
Under the Contract). These amendments build on the existing disclosure 
requirements in each item to help ensure that investors have key 
information about the annuity contract and available investment 
options, regardless of whether the contract is a variable annuity, a 
RILA, or combination contract offering both variable and index-linked 
options.
---------------------------------------------------------------------------

    \115\ Because we propose to require the KIT to appear before the 
Overview of the Contract, current Item 3 (Overview of the Contract) 
would be renumbered as Item 2.
---------------------------------------------------------------------------

(a) Overview of the Contract (Item 2)
    We are proposing to amend Item 2 (Overview of the Contract) to 
include information about RILAs generally and require the insurance 
company to provide an overview of certain key elements of any index-
linked options offered under the contract and to highlight any contract 
adjustments. This item is designed to describe certain basic and 
introductory information about the contract and its benefits.\116\ It 
currently requires a concise description of the contract. This 
description must include information about (1) the contract's purpose 
(e.g., to help the investor accumulate assets through an investment 
portfolio), (2) the phases of the contract (the accumulation (savings) 
and annuity (income) phases) including a discussion of the investment 
options available under the contract, and (3) the primary features of 
the contract (such as death benefits).
---------------------------------------------------------------------------

    \116\ See VASP Adopting Release at text accompanying n.207.
---------------------------------------------------------------------------

    We would require insurance companies to provide this existing 
disclosure when registering RILA offerings, adjusted to account for the 
specifics of RILAs, because it is equally relevant for these types of 
annuity contracts. In particular, in addition to the general 
information about the contract already required by Form N-4, the 
following information would be required with respect to any index-
linked option offered under the contract:
     A statement that the insurance company will credit 
positive or negative interest at the end of a crediting period to 
amounts allocated to an index-linked option based, in part, on the 
performance of the index;
     A statement that an investor could lose a significant 
amount of money if the index declines in value and prominent disclosure 
of the maximum amount of loss (as a percentage) an investor could 
experience from negative index performance, after taking into account 
the minimum guaranteed limit on index loss provided under the contract; 
and
     An explanation that the insurance company limits the 
negative or positive index returns used in calculating interest 
credited to an index-linked option at the end of its crediting period, 
accompanied by a brief description of the manner in which such returns 
may be limited, along with an example and disclosure of the minimum 
limit on index losses guaranteed for the life of the contract for any 
index-linked option.\117\
---------------------------------------------------------------------------

    \117\ See proposed Item 2(b)(2)(i) through(iv) of Form N-4.
---------------------------------------------------------------------------

    We also are proposing to require the insurance company to state, if 
applicable, that an investor could lose a significant amount of money 
due to the contract adjustment if amounts are removed from an index-
linked option or from the contract prior to the end of a specified 
period.\118\ The issuer would also provide a brief description of the 
transactions subject to a contract adjustment. We would require a 
prominent statement, as a percentage, of the maximum amount of loss an 
investor could experience from a negative contract adjustment and that 
this loss could be greater due to surrender charges and tax 
consequences.
---------------------------------------------------------------------------

    \118\ See proposed Item 2(d) of Form N-4.
---------------------------------------------------------------------------

    These disclosures, together, are designed to highlight upfront some 
of the key elements of a RILA. The required disclosure about any index-
linked option offered under the contract would highlight for investors 
the key

[[Page 71108]]

features of these investment options in general: that returns are based 
in part on an index, that investors could still lose a significant 
amount of money under the contract, and that there are limits on both 
positive and negative index performance. The required disclosure on 
contract adjustments would highlight a separate but important 
consideration for an investor considering investing in a RILA: that in 
addition to any losses from poor index performance, the investor also 
can lose a significant amount of money if the investor takes money out 
of an index-linked option or the contract early. These disclosures 
collectively also would provide context for the KIT, which immediately 
follows this item under the proposal, as well as context for more 
detailed disclosures that would appear elsewhere in the prospectus.
    In addition to these items that are specific to RILAs, we also are 
proposing to expand the current requirements for disclosures regarding 
optional benefits in Form N-4. Currently, when summarizing a contract's 
primary features, the form requires a discussion of any optional 
benefits.\119\ A benefit under the contract, such as a non-optional 
guaranteed living benefit, might be characterized as a standard (i.e., 
not optional) benefit but nonetheless be a key feature of the contract 
that should be highlighted for investors in the overview section of the 
prospectus. We are therefore proposing to require that the discussion 
of benefits cover all of the primary contract benefits, not just 
optional benefits.\120\ This requirement would apply to all contracts 
registered on the form.
---------------------------------------------------------------------------

    \119\ See current Item 3(c) of Form N-4.
    \120\ See proposed Item 2(c) of Form N-4; see also supra 
footnote 107 and accompanying text.
---------------------------------------------------------------------------

    We request comment on the proposed summary disclosures contained in 
Item 2.
    39. Is the proposed information on index-linked options and 
contract adjustments appropriate? Is there other or different 
information we should require? For example, we are proposing to require 
RILA issuers to include examples of how limits on gains and downside 
protection operate but do not mandate a form of presentation. Should we 
require these examples be provided in a graphical presentation, or 
require only a narrative example? Should we require the examples be 
converted into a dollar amount? Would investors understand the examples 
more readily if we did this? As another example, should we require RILA 
issuers to briefly summarize the index crediting methodologies 
available under the contract?
    40. Should we require the proposed disclosures for index-linked 
options and contract adjustments in Item 2, including the existing 
disclosure to be provided in the context of a RILA? Is this information 
necessary for investors to understand the other disclosures in the 
prospectus?
    41. Should we, as proposed, broaden the current discussion of the 
primary contract features to include a discussion of contract benefits 
generally, not just optional benefits (the current focus of the 
disclosure requirement)?
(b) Description of Insurance Company, Registered Separate Account, and 
Investment Options (Item 6)
    We propose to amend Item 6 of Form N-4 to modify certain existing 
disclosure requirements and to expand the item to include new 
disclosures for RILAs. Proposed Item 6(d), discussed further below, 
would set forth most of the substantive new disclosure requirements for 
contracts that include index-linked options. We would also include new 
disclosures for any fixed options provided as part of the contract. The 
information that would be required by the proposed amendments is 
designed to convey key aspects of each index-linked option offered 
under the contract to investors.
    As an initial matter, the proposed amendments to Item 6 would 
largely retain the existing requirement to provide a concise discussion 
about the insurance company, registered separate account, and variable 
options, subject to certain modifications in nomenclature to implement 
definitional changes and minor restructuring to accommodate the 
addition of RILAs to the form.\121\ Specifically, these changes would 
incorporate the proposed changes to certain defined terms and revise 
existing disclosures to clarify the entities that should be associated 
with certain disclosures (e.g., because the insurance company would be 
obligated to pay all amounts promised to investors under the contracts 
subject to its financial strength and claims-paying ability, we would 
require disclosure about this topic to be framed in terms of the 
insurance company, not the registered separate account, as the 
requirement is currently worded).\122\
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    \121\ See proposed Item 6(a) through (c) of Form N-4.
    \122\ We also propose to add an instruction requiring the 
insurance company to indicate whether it is relying upon the 
exemption provided by 17 CFR 240.12h-7 (``rule 12h-7''), consistent 
with the requirements of that rule. See proposed Instruction to Item 
6(a) of Form N-4; see also rule 12h-7(f) (requiring issuers of 
securities subject to insurance regulation that rely on the 
exemption from the duty to file section 13(a) reports with respect 
to securities registered under the Securities Act to provide a 
statement indicating that fact in the relevant prospectus).
---------------------------------------------------------------------------

    We are proposing to require one new disclosure item for contracts 
that offer variable options, which would be similar to a proposed 
disclosure for index-linked options, discussed below. Specifically, the 
prospectus for such contracts would be required to include a statement 
indicating that ``contract value allocated to a Variable Option will 
vary based on the investment experience of the corresponding Portfolio 
Company in which the Variable Option invests,'' and ``there is a risk 
of loss of the entire amount invested.'' \123\ The risk of loss 
inherent in a variable annuity is currently disclosed in the form's 
``Key Information Table,'' and we are proposing to mandate this 
disclosure in Item 6 as well to warn that an investor can lose the 
entire amount invested in a variable option. In addition to informing 
investors about investment risks in a variable option generally, where 
an annuity contract offers both variable and index-linked options, this 
disclosure also would help to explain the different nature of the 
investment risks posed by each kind of investment option. In that case 
the prospectus would disclose the maximum loss associated with the 
index-linked options while also disclosing that, for the variable 
options, the investor could lose the entire amount invested.
---------------------------------------------------------------------------

    \123\ See proposed Item 6(c)(1) of Form N-4.
---------------------------------------------------------------------------

Description of Index-Linked Options
    We are proposing to require the insurance company to disclose 
information about the key features of the index-linked options 
currently offered under the contract.\124\ These proposed disclosures 
are designed to complement other proposed disclosures in the prospectus 
about index-linked options generally by providing investors specific 
information about each index-linked option's features and risks, akin 
to the information that is currently available to investors about 
variable options in the prospectuses for the mutual funds underlying 
those options. Specifically, the insurance company would be required to 
describe the index-linked options currently offered under the contract 
as well as information about how interest is calculated and credited 
for each index-linked option, specifically: (1) limits on index losses; 
(2) limits on index gains; (3) crediting period; (4) crediting 
methodology and

[[Page 71109]]

examples; (5) relevant indexes; (6) maturity; and (7) other material 
features of the index-linked option. These disclosures are intended in 
part to address points that investors found to be confusing in investor 
testing.\125\ Further, some investors in the qualitative interviews 
indicated that they would prefer more information about these points 
relative to the KIT disclosures.\126\
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    \124\ See proposed Item 6(d) of Form N-4.
    \125\ See OIAD Study at Section 7, Conclusions, Summary of 
Findings and Discussion.
    \126\ See OIAD Study at Section 5, Qualitative Testing, Summary 
of Qualitative Testing.
---------------------------------------------------------------------------

Description of the Index-Linked Options Currently Offered
    Under the proposed amendments, RILA issuers would be required to 
describe the index-linked options currently offered under the contract, 
including statements indicating that the insurance company will credit 
positive or negative interest at the end of a crediting period to 
amounts allocated to an index-linked option based, in part, on the 
performance of the index.\127\ To dispel potential investor confusion 
relating to the reference to an index, we are proposing to require RILA 
issuers to state that an investment in an index-linked option is not an 
investment in the index or in any index fund.
---------------------------------------------------------------------------

    \127\ See proposed Item 6(d)(1) of Form N-4.
---------------------------------------------------------------------------

    Other cautionary statements regarding the index-linked options 
offered would include that the potential for investment loss could be 
significantly greater than the potential for investment gain, and that 
an investor could lose a significant amount of money if the index 
declines in value. To illustrate the potential scope of such a loss, 
RILA issuers would have to prominently state (as a percentage) the 
maximum amount of loss an investor could experience from negative index 
performance over a crediting period, after taking into account the 
minimum guaranteed limit on index loss provided under the contract. 
Because index-linked options are often marketed as a way to limit 
investment losses, this disclosure is designed to convey to investors 
that they could still lose a significant amount on an index-linked 
option, despite having a floor or buffer.
    To emphasize the substantial risks associated with an early 
withdrawal from an index-linked option, RILA issuers would be required 
to state that an investor could lose a significant amount of money due 
to the contract adjustment if amounts are removed from an index-linked 
option prior to the end of its crediting period. To further underscore 
the risk, RILA issuers would also prominently state (as a percentage) 
the maximum amount of loss an investor could experience from a negative 
contract adjustment, and that this loss could be greater due to 
surrender charges and tax consequences.
    To inform investors of the possibility that their investment 
options could be unilaterally changed without action on their part, the 
insurance company would be required to state, if applicable, that it 
can add or remove index-linked options and change the features of an 
index-linked options from one crediting period to the next, including 
the index and current limits on gains and limits on index losses, 
subject to contractual minimum guarantees.
    Similar to the current requirement for prospectuses for contracts 
that offer variable options, the insurance company would be required to 
state that certain information regarding the features of each currently 
offered index-linked option is available in an appendix to the 
prospectus,\128\ and to provide a cross-reference to that appendix. An 
instruction would permit this statement to be modified if needed to 
conform to the corresponding table in the appendix.\129\ As described 
further below, the appendix would also be amended to include a table 
listing the index-linked options currently available under the 
contract.\130\
---------------------------------------------------------------------------

    \128\ See proposed Item 17 of Form N-4.
    \129\ See infra footnote 164 and accompanying text.
    \130\ See infra at section II.B.3(b) (describing proposed 
amendments to Item 17 (Portfolio Companies Available Under the 
Contract) to include parallel provisions for RILAs).
---------------------------------------------------------------------------

How Interest Is Calculated and Credited
    To aid investors in making informed investment decisions, we 
propose to require RILA issuers to describe how interest is calculated 
and credited for each index-linked option.\131\ As part of this 
description, the insurance company would be required to disclose any 
limits on index losses and/or index gains, the crediting periods 
available under the contract (e.g., 1, 3, and 6 years), a description 
of an index-linked option's index crediting methodology, information 
about each index, what happens when an index-linked option matures, and 
any other material features associated with index-linked options. We 
discuss each of these requirements in turn.
---------------------------------------------------------------------------

    \131\ See proposed Item 6(d)(2) of Form N-4.
---------------------------------------------------------------------------

How Interest Is Calculated and Credited--Limits on Index Losses and 
Gains
    We are proposing to require the insurance company to describe, as a 
primary element of a RILA contract, the limits on index losses and 
gains for each index-linked option.\132\ In each case, and as 
applicable, the insurance company would be required to state that such 
limits apply and describe how index losses and gains would be limited 
(for example, through the use of a floor or buffer to limit losses, or 
a cap or participation rate to limit gains). We also are proposing to 
require the insurance company to provide examples to help investors 
understand how these limits work in practice. To illustrate the limits 
on index losses, the prospectus would include an example showing how 
the limit on index losses could operate to limit a negative return 
(e.g., if the index return is -25% and the buffer is -10%, the 
insurance company will credit -15% (the amount that exceeds the buffer) 
at the end of the term, meaning the investor's contract value will 
decrease by 15%). The prospectus similarly would include an example of 
how the limit on gains could operate to limit a positive return (e.g., 
if the index return is 12% and the cap rate is 4%, the insurance 
company will credit 4% in interest at the end of the term, meaning the 
investor's contract value will increase by 4%).
---------------------------------------------------------------------------

    \132\ See proposed Item 6(d)(2)(i) and (ii) of Form N-4.
---------------------------------------------------------------------------

    We also propose to require the insurance company to disclose, for 
each index-linked option, current limits on index losses and gains, as 
well as the minimum limits on losses and gains that are guaranteed for 
the life of the contract.\133\ The guaranteed minimum limits tend to be 
lower than those currently provided for in the contract but will not 
change for the life of the contract, whereas the actual limits for an 
index-linked option will vary from crediting period to crediting 
period. However, at no point will these limits be lower than the 
guaranteed minimums. Both pieces of information are important to 
understanding the potential returns of an index-linked option because 
one of the central economic tradeoffs a RILA presents is an investor's 
consideration of whether to sacrifice potential gains in exchange for 
protection against potential losses. An investor therefore will not 
only need to consider the guaranteed limits, but also understand that 
the actual limits can vary over the life of the contract.\134\

[[Page 71110]]

We also propose to require the insurance company to state that current 
limits on gains and limits on index losses will not change during the 
index-linked option's crediting period. This would help investors 
understand that although the current limits on gains and limits on 
losses--unlike the minimum guaranteed limits--can change from crediting 
period to crediting period, they will not change during any given 
crediting period.
---------------------------------------------------------------------------

    \133\ Proposed Items 6(d)(2)(i)(B) and 6(d)(2)(ii)(B) of Form N-
4.
    \134\ This information about minimum guaranteed index gain 
limits is also set forth in the appendix, which is part of the 
summary prospectus. See proposed Instruction 7 to Item 17(b); 
proposed rule 498A(b)(5)(ix). We are also proposing to require RILAs 
to publish online limits on gains. See infra section II.B.3.c. 
Although changes to an index-linked option, including current limits 
on gains, are material, we recognize that these limits in particular 
can change from time to time. Therefore, insurance companies may 
update current limits on gains using a prospectus supplement filed 
pursuant to rule 497 under the Securities Act. See infra section 
II.E.2.
---------------------------------------------------------------------------

    Because an insurer can generally set rates at its discretion and 
may take into account a number of factors in setting those rates, we 
are proposing that the insurance company explain how it selects rates 
for limiting index losses and gains to help investors understand how 
the features of a particular index-linked option will impact that 
option's risk/return profile. In particular, we are proposing to 
require the insurance company to describe the factors it considers in 
determining the current limits on losses and gains for an index-linked 
option (e.g., long-term interest rates, market volatility, the cost of 
option contracts supporting the index-linked option guarantees, 
etc.),\135\ and how that choice may impact other features of the option 
set by the insurance company.
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    \135\ Similar disclosure has been required in other contexts. 
See, e.g., Item 9(a) of Form N-4 (requiring disclosure of material 
factors that determine the level of annuity benefits); see also 
Instruction 2 to Item 7(a) of Form N-6 (requiring the identification 
of factors that determine the applicable cost of insurance rate).
---------------------------------------------------------------------------

    Giving investors information about the factors the insurer 
considers in determining current limits--which are key features of an 
index-linked option--may help manage their expectations regarding how 
the product operates. If an investor sees that last year's cap on an 
index-linked option was 22% and this year the cap is 17%, the proposed 
disclosure may help them understand why the insurer's rates have 
changed.\136\ If an insurer discloses that it takes various specified 
factors into consideration, but ultimately sets rates at its own 
discretion, the investor should know that as well.
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    \136\ For example, an insurer might disclose that caps and 
participation rates may vary depending on factors such as market 
volatility, hedging strategies and investment performance, the 
investor's index effective date, or interest rates, among others.
---------------------------------------------------------------------------

    The proposed disclosure about how the current limits on index gains 
or losses may impact other aspects of the index-linked option is 
designed to explain the inverse relationship between various features 
of the index-linked option. For example, the insurance company could 
include an explanation regarding how the limit on index losses for an 
index-linked option could impact the current limit on index gains. This 
could help an investor understand, for example, that if the insurance 
company determines to increase the extent to which the index-linked 
option will protect against loss, the insurance company may then reduce 
the amount of upside index participation the investor could receive. 
The prospectus would also require an explanation of the factors an 
investor should consider regarding limits on index losses or gains 
before selecting an index-linked option for investment. This disclosure 
should assist an investor in choosing among the index-linked options 
available under the contract, such as by explaining the difference 
between a floor and a buffer, or by highlighting index-linked options 
with features that assume more risk in return for higher potential 
return, or vice versa.
How Interest Is Calculated and Credited--Crediting Period
    We are proposing to require the insurance company to generally 
describe the crediting periods of the index-linked options available 
under the contract (e.g., 1, 3, and 6 years), along with the factors an 
investor should consider regarding different crediting period lengths 
before selecting an index-linked option.\137\ An example of one such 
factor an insurance company could include as part of this disclosure 
would be that crediting periods introduce timing risk that forces 
investors to take losses at the end of a crediting period, and shorter 
crediting periods might increase this risk.\138\ The insurance company 
also would be required to prominently state that amounts must remain in 
an index-linked option until the end of its crediting period to be 
credited with all or partial interest, as applicable, and to avoid a 
possible contract adjustment in addition to potential surrender charges 
and tax consequences. This discussion would also include a description 
of the transactions subject to a contract adjustment (e.g., living 
benefits), with appropriate cross-references to related disclosures in 
the prospectus. These disclosures collectively are designed to help an 
investor make an informed investment decision when selecting an index-
linked option, taking into account that withdrawing money before the 
end of the applicable crediting period can have adverse consequences.
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    \137\ See proposed Item 6(d)(2)(iii) of Form N-4.
    \138\ See OIAD Report at Section 2, RILAs: Structure of 
Contracts and Investment Options, Investment Terms (``The role of 
[crediting periods] also creates a situation that may be unique for 
RILA purchasers relative to other investments they hold. In 
particular, RILA investors periodically realize gains or losses at 
the end of each [crediting period]. In contrast, a mutual fund 
investor (for example) could wait to sell the fund during down 
markets, avoiding realizing those losses. Thus, the [crediting 
period] feature adds a 'timing risk` for RILA investors relative to 
certain other investments.'').
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How Interest Is Calculated and Credited--Methodology and Examples
    Each index-linked option has an ``index crediting methodology'' 
that explains how interest is calculated and credited to the contract. 
For example, one index crediting methodology is ``point-to-point,'' 
that is, the amount credited to the contract is based upon a comparison 
of the index's performance at two points in time (such as at the 
beginning and end of the crediting period). We- propose to require 
insurance companies to explain the index crediting methodologies used 
in the index-linked options available under the RILA contract, along 
with numerical examples about how these methodologies work. We further 
propose to require insurance companies to provide a bar chart that 
illustrates the annual total return of each index along with 
hypothetical examples of index return after applying standardized 
limitations on index gains and losses.
    Specifically, insurance companies would be required to describe, 
for each index crediting methodology,\139\ how interest is calculated 
and credited at the end of a crediting period based on the interest 
crediting formula or performance measure.\140\ Form N-4, as we propose 
to amend it, would provide examples of common crediting methods that 
the insurance company would describe if applicable, such as point-to-
point, step-up calculations, and enhanced performance.\141\ To help

[[Page 71111]]

investors understand how these crediting methods work, we also are 
proposing to require the insurance company to include a numeric example 
to illustrate the mechanics of each index crediting methodology.\142\ 
The examples would be required to show, in a clear, concise, and 
understandable manner, how each crediting method functions when the 
index has positive returns as well as negative returns to help 
investors understand how the crediting method functions in both 
circumstances.
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    \139\ We understand that many index-linked options use the same 
crediting methodology. If all index-linked options offered by a RILA 
contract use the same crediting methodology, the prospectus would 
only include one example of that crediting methodology. If, however, 
the index-linked options in a RILA contract offer more than one 
crediting method, or if different index-linked options in a RILA 
contract offer different crediting methods, this would affect the 
number of examples to be provided. The number of examples to be 
provided depends on the number of crediting methodologies, not the 
number of index-linked options.
    \140\ See proposed Item 6(d)(2)(iv)(A) of Form N-4.
    \141\ As noted above, a point-to-point crediting methodology 
compares the index's performance at two points in time (such as at 
the beginning and end of the crediting period). Step-up calculations 
guarantee a given rate if the index's returns are positive, 
regardless of the index's actual performance, subject to certain 
conditions. ``Enhanced performance'' increases a positive index 
return, such as by offering a participation rate of more than 100%.
    \142\ See proposed Item 6(d)(2)(iv)(C) of Form N-4.
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    Specifically, we would require numeric examples that reflect a 
positive return above the limit on index gains, and a negative return 
below the limit on index losses for each methodology. The examples also 
would be required to assume hypothetical returns and limits that are 
reasonable based on current and anticipated market conditions and sales 
of the contract, and to reflect any charges subtracted from interest 
credited to or deducted from contract value in the index-linked option 
to allow investors to understand the impact of these charges on their 
return. Additional examples, charts, graphs, or other presentations 
would be permitted if they are clear, concise, understandable. Any 
additional presentations that assume hypothetical returns and limits 
also should assume hypothetical returns and limits that are reasonable 
based on current and anticipated market conditions and sales of the 
contract. We would also require insurance companies to include a 
legend, in the format specified in the form, that (1) these examples 
illustrate how the insurance company calculates and credits interest 
under each index crediting methodology assuming hypothetical index 
returns and hypothetical limits on index gains and losses and (2) the 
examples assume no withdrawals.
    We also are proposing to require a bar chart for each index 
available under the currently-offered index-linked options showing the 
index's annual return for the last 10 calendar years (or for the life 
of the index, if less than 10 years), with the corresponding numerical 
performance adjacent to each bar.\143\ Further, insurance companies 
would be required to provide a hypothetical example alongside each 
index return that reflects the return after applying a 5% cap and a -
10% buffer. If there are no caps or buffers offered under the contract 
(if, for example, the contract includes a floor rather than a buffer), 
insurance companies would be permitted to reflect a rate or measure 
used to limit index gains or losses under the contract that is 
comparable. Insurance companies would not be permitted to include 
additional performance presentations, or historical index performance 
that precedes the inception of the index. Further, insurance companies 
would be required to provide two footnotes to this table, if 
applicable, that disclose (1) that the index return does not reflect 
dividends paid on the assets in the index, and (2) that the index 
provider deducts fees and costs when calculating index return.
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    \143\ See proposed Item 6(d)(2)(iv)(B) of Form N-4.
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    These bar charts would also be accompanied by the following legend 
in the format specified in the form:

    The bar chart shown below provides the Index's annual returns 
for the last 10 calendar years (or for the life of the Index if less 
than 10 years), as well as the Index returns after applying a 
hypothetical 5% cap and a hypothetical -10% buffer. The chart 
illustrates the variability of the returns from year to year and 
shows how hypothetical limits on Index gains and losses may affect 
these returns. Past performance is not necessarily an indication of 
future performance.
    The performance below is NOT the performance of any Index-Linked 
Option. Your performance under the Contract will differ, perhaps 
significantly. The performance below may reflect a different return 
calculation, time period, and limit on Index gains and losses than 
the Index-Linked Options, and does not reflect Contract fees and 
charges, including surrender charges and the Contract Adjustment, 
which reduce performance.

    This information is intended to provide context for the index-
linked options that the RILA contract offers and would better inform an 
investor when deciding whether to invest in a RILA. For example, if an 
index-linked option provides that the investor will experience at least 
5% of the upside performance of an index, investors may view the 
tradeoffs of this investment differently if the index historically has 
returned, for example, 10% per year (thus capping gains at 5% during 
those past periods) or 1% per year. Similarly, if an index-linked 
option offers a -10% buffer, the investor could compare that against 
the index performance in the bar chart and assess the extent to which 
the buffer would have provided downside protection against market 
losses in negative return years.
    We appreciate, however, that historical index presentation alone, 
without the addition of hypothetical caps and buffers, may mislead 
investors into thinking that these historical rates of index 
performance are what investors would have received under the contract 
if they invested in a particular index-linked option. As we discuss in 
more detail below, we are concerned that presenting historical RILA 
performance without additional context can be potentially misleading 
given that investors cannot access the same RILA terms as were 
available historically. Relatedly, we are concerned that statements in 
RILA advertisements are being made without sufficient context so that 
investors can understand the qualifications to those statements.\144\ 
As an example of how historical index performance could confuse 
investors, consider an investor who has selected an index-linked option 
with performance based on the performance of XYZ Index and a one-year 
crediting period, and this investor has allocated contract value to 
that index-linked option over 10 consecutive crediting periods. This 
investor's RILA contract value after 10 years likely will differ from 
the XYZ Index's 10-year performance. Reasons for this likely difference 
include, for example, that the index-linked option only provides a 
portion of the performance of the index because of a cap rate, buffer, 
or floor.
---------------------------------------------------------------------------

    \144\ See also infra section II.F.
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    Accordingly, we are proposing to require insurance companies to 
provide historical index information to investors, but with important 
qualifications so that investors will not confuse this index 
information for the historical performance of the RILA itself. In 
particular, the overlay of hypothetical caps and buffers is designed to 
help investors understand better how those limits can cause RILA 
performance to differ from that of the index. Further, the legends we 
are proposing also are designed to put investors on notice that the 
presented performance is not the RILA's performance.
    The proposed bar chart, including the proposed 10-calendar-year 
period, is modeled on the risk/return bar chart in Item 4(b)(2) of Form 
N-1A. Form N-4 also currently requires variable annuity issuers to show 
10-years of performance in the portfolio company appendix. We 
preliminarily believe that 10 calendar years is an appropriate time to 
illustrate the performance of the index over the long term to help 
guide investors. We are proposing to require a 5% cap rate and -10% 
buffer rate to help investors understand how caps and buffers affect 
the index return, but without using values that are so high or so low 
that they will bear no resemblance to the

[[Page 71112]]

level of gains and losses that is being offered. The illustrative rates 
are designed to achieve this effect because they are higher than 
typical guaranteed levels of caps and floors, but lower than typical 
currently offered levels.
How Interest Is Calculated and Credited--Indexes
    The index underlying an index-linked option is a central feature of 
the investment, as the investor's return will be based on the index's 
performance, subject to applicable limits on gains and losses. We 
therefore are proposing to require the insurance company to provide for 
each index a brief description of the types of investments that compose 
the index and where the investor can find more information about the 
index.\145\ Where there is more than one version of an index (for 
example a total return version and a price return version), the 
disclosure would clearly state which version of the index relates to 
the index-linked option. If the index is an exchange-traded fund 
(``ETF''), the disclosure would have to clarify whether the index's 
performance for purposes of determining the amounts credited in the 
index-linked option is based on the ETF's net asset or closing value 
and, if the performance is based on the ETF's share price, the impact 
of using the share price as opposed to total return. These disclosures 
collectively are designed to help ensure that investors understand the 
applicable indexes. The disclosure would also state, if applicable, 
that the index does not reflect dividends paid on its underlying 
securities, or that the index deducts fees and costs when calculating 
index performance, which will reduce index performance. This is 
important disclosure because an index that does not reflect dividends 
paid on underlying securities, or that deducts fees and costs, will 
have a lower return, all else equal, than an index that includes 
dividends and does not deduct fees and costs.
---------------------------------------------------------------------------

    \145\ See proposed Item 6(d)(2)(v)(A) of Form N-4.
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    We also propose to require the insurance company to state that it 
reserves the right to substitute an index prior to the end of the 
crediting period.\146\ This would put investors on notice that the 
index associated with a particular index-linked option--which is a key 
driver of the investor's return--could change in the middle of a 
crediting period. The insurance company also would be required to 
disclose all circumstances that could necessitate a substitution, how 
the insurance company would choose a replacement index, when and how 
investors would be notified of this change, how index return will be 
calculated at the end of the crediting period, and what would happen if 
a suitable replacement index were not found, including whether the 
index-linked option will be discontinued prior to the end of the 
crediting period. This information would allow an investor to better 
understand the likelihood of the insurance company making a 
substitution and its potential effects.
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    \146\ See proposed Item 6(d)(2)(v)(B) of Form N-4. Insurers 
generally reserve the right to change the index in the middle of the 
crediting period if the index is discontinued or there is a 
substantial change in the calculation of the index. Based on staff 
experience, such changes are exceedingly rare.
---------------------------------------------------------------------------

How Interest Is Calculated and Credited--Maturity and Other Material 
Features
    To help investors anticipate what may happen at the end of an 
index-linked option's crediting period, the insurance company also 
would be required to state whether an investor would receive advanced 
notice of a maturing index-linked option, how an investor might provide 
instructions regarding the reallocation of the contract value rate at 
the end of the crediting period, and any automatic default allocation 
in the absence of such instructions.\147\ In describing these matters, 
the prospectus must also explain how investors will be informed of the 
index-linked option available for allocation at the end of a crediting 
period, including any changes to the currently-offered index-linked 
options and the discontinuance or addition of index-linked options.
---------------------------------------------------------------------------

    \147\ See proposed Item 6(d)(2)(vi) of Form N-4.
---------------------------------------------------------------------------

    Finally, we propose to require the insurance company to describe 
any other material aspects of the index-linked option to ensure that 
any other item not discussed above that could affect an investment 
decision is disclosed.\148\ This would include disclosure related to 
limitations on transfers to or from index-linked options, rate holds, 
``bail-out'' provisions, start dates, and holding accounts.\149\ We 
would also require a brief description of how charges may impact the 
index-linked option's value if applicable as part of this discussion.
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    \148\ See proposed Item 6(d)(2)(vii) of Form N-4.
    \149\ A ``rate hold'' locks in interest at the current cap (or 
other rate limiting index gains) for the period between which the 
insurance company receives the investor's annuity application and 
the time the investor's premium payment is allocated to the index-
linked option. A bail-out provision is a contract provision that 
provides if a current cap (or other rate limiting index gains) is 
set below a specified value, the investor may withdraw value from 
that index-linked option or RILA without a contract adjustment (and 
in some cases without a surrender charge) during a specified period 
after the start of the crediting period. A holding account is 
typically a conservative investment option (typically a money market 
fund or a fixed option) where amounts allocated to the index-linked 
option are held until the next index-linked option start date. This 
is used for index-linked options that start on a particular day each 
month (e.g., the 15th of the month).
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Fixed Options
    In addition to variable options and index-linked options, annuity 
contracts commonly include fixed investment options, such as 
traditional, unregistered fixed options and unregistered index 
options.\150\ In the variable annuity context, a fixed option provides 
an alternative for investors who wish to avoid the market risk of 
investing in a variable option. A fixed option can also serve as the 
holding account for amounts that are pending allocation to a particular 
investment option. In addition, a fixed option may be the default 
allocation vehicle at the end of an index-linked option's crediting 
period.
---------------------------------------------------------------------------

    \150\ See proposed Item 6(e) of Form N-4. Interests in fixed 
account options are exempt securities under Section 3(a)(8) of the 
Securities Act.
---------------------------------------------------------------------------

    Form N-4 generally requires registrants to describe the fundamental 
features and risks of an annuity contract, including those, like fixed 
options, that are distinct from the variable options offered through 
the registered separate account.\151\ The form also currently requires 
specific disclosure about fixed options in the KIT and the Contract 
Overview.\152\ Because we are proposing to include disclosures relating 
to index-linked options in Item 6, we are also proposing to require 
disclosures on this other type of investment option available to 
annuity contract investors so that they have a complete understanding 
of what they may invest in through that contract, either actively, or 
by default. This approach is designed to increase investor 
comprehension by ensuring that substantive information about all of the 
available investment options is presented in the same location in the 
prospectus.
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    \151\ General Instruction C.1.(a) of Form N-4 (stating that 
``[a] Registrant's prospectus should clearly disclose the 
fundamental features and risks of the [Contracts], using concise, 
straightforward, and easy to understand language.'').
    \152\ Items 2 and 3 of Form N-4.
---------------------------------------------------------------------------

    The proposed disclosures for fixed options would be similar to 
those provided for index-linked options, tailored for the specifics of 
a fixed option. Specifically, registrants would be required to describe 
the fixed options currently offered under the contract and state that 
information regarding the features of each currently-offered fixed 
option, including its name, term, and

[[Page 71113]]

minimum guaranteed interest rate is available in an appendix with 
cross-references.\153\ Further, registrants would be required to 
describe how interest is calculated and when it is credited for each 
fixed option as well as the length of the term and minimum guaranteed 
interest rate (stated as a numeric rate, rather than referring to any 
minimums permitted under State law). As with index-linked options, the 
registrant also would be required to state whether an investor would 
receive advance notice of a maturing fixed option, including what steps 
an investor might take to provide instructions regarding the 
reallocation of contract value at the end of the term, and any 
automatic default allocation in the absence of such instructions. In 
describing these matters, the registrant must also explain how 
investors will be informed of the fixed options available for 
allocation at the end of a term, including any changes to the currently 
offered fixed options and the discontinuance or addition of fixed 
options. Also as with index-linked options, we would require disclosure 
of any other material aspect of the fixed options, including 
limitations on transfers to or from the fixed options, rate holds, 
start dates and holding accounts.
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    \153\ As discussed below, we are also proposing to require 
disclosure relating to any fixed options currently offered under the 
contract in the Item 17 appendix.
---------------------------------------------------------------------------

Request for Comment
    We request comment generally on the proposed amendments to Item 6 
of Form N-4, and specifically on the following issues:
    42. Should we require each of the specific disclosures (e.g., 
disclosures relating to limits on index losses and gains, crediting 
period, etc.) relating to the RILAs and index-linked options as 
proposed? Would all of these proposed amendments provide information 
that would be important to investors? Should we modify or expand any of 
these proposed disclosure requirements?
    43. Should we make any other changes to the required prospectus 
disclosures addressing index-linked options? For example, we are 
proposing to require numeric examples, charts, graphs, or other 
presentations, as appropriate, to illustrate the mechanics of each type 
of index crediting methodology.\154\ Would the proposed requirement be 
likely to provide useful information for investors? If not, why not? 
Would the inclusion of such examples, charts, and graphs be likely to 
confuse investors about how index-linked options work? Is there a 
concern that insurance companies would utilize these examples to over-
emphasize the benefits of RILAs relative to their risks? If so, how 
could this be remedied? Should such examples be included in the 
prospectus in response to Item 6, or would they be better located 
elsewhere in the prospectus, for example, in Items 3 or 17? Given the 
potential length of such examples, should they be included in an 
appendix to the prospectus?
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    \154\ Proposed Item 6(d)(2)(iv) of Form N-4.
---------------------------------------------------------------------------

    44. Should the current limits on gains and losses be required in 
the statutory prospectus, as proposed? If not, where should such 
disclosure be located? Should insurance companies update current limits 
on gains as they change from time to time by filing a rule 497 
prospectus supplement, or should a rule 485 post-effective amendment be 
required?
    45. Should we require the proposed disclosures relating to the 
risks of investing in variable options?
    46. Should we require that the historical performance of indexes be 
disclosed as proposed? Is the proposed bar chart an effective or 
appropriate presentation approach, or should we instead require another 
presentation approach, such as a line graph or the 1-, 5-, and 10 year 
table required in the Form N-1A? If so, why? Are there any concerns 
that investors would confuse the inclusion of historical index 
information with the performance of the index-linked option itself? If 
so, are our proposed requirements to provide a hypothetical example of 
a 5% cap and -10% buffer and a legend sufficient to make clear that the 
performance illustrated by the bar chart does not show or suggest how 
an investment in the contract will perform for the investor? Are the 5% 
cap and -10% buffer appropriate limits to use in the hypothetical 
examples? Instead of prescribing a specific cap and buffer, should we 
require or permit issuers to include the current and/or guaranteed 
limits as an overlay to the bar chart, or would this provide too much 
visual clutter for investors, or be misleading in any way? Is 10 
calendar years of index performance the right amount of time to 
present?
    47. Should we require discussion of fixed investment options 
currently offered under the contract? Are the proposed disclosure items 
appropriate for these types of investment options?
    48. Is there other information we should require insurance 
companies to disclose to help investors better understand the economic 
tradeoffs associated with an index-linked option? For example, issuers 
of structured notes that offer bounded returns similar to RILAs 
disclose the issuer's valuation of the note, based on the value of (1) 
the embedded derivatives; and (2) a fixed-income bond. This disclosure 
allows investors to understand the difference between the issuer's 
valuation and the original issue price that they are paying for the 
structured note. Would a similar disclosure for RILAs, provided with 
respect to each permutation of an index-linked option, be helpful to 
investors? Would the difference between a hypothetical $100,000 
investment in an index-linked option and the value, or the cost to 
assemble, the economic components underlying the index-linked option be 
informative to investors? Would it appropriately reflect the implied 
cost the investor is paying when investing in that index-linked option? 
If we were to require this disclosure, should it be expressed in 
dollars, as a percentage of a hypothetical $100,000 investment, or 
both? Should we require the insurance company to annualize the costs 
over a stated period of time to express the cost as more akin to an 
annual expense? Recognizing that RILAs are intended to be long-term 
investments, what would be an appropriate period of time (e.g., 10, 20, 
or 30 years)?
    49. If we were to require insurance companies to provide the 
disclosure described in request for comment 48, should we require the 
insurance company to compare a hypothetical $100,000 investment in the 
index-linked option to the value, or cost, of the following components: 
derivatives that would provide the index-linked option's investment 
exposure; a fixed-income component; and the standard insurance features 
offered with the index-linked option?
    50. If we were to require insurance companies to provide the 
disclosure described in request for comment 48, should we require that 
the insurance company value or price the derivatives using exchange-
listed derivatives, such as exchange-traded options, and based on 
prices on the exchange, except in cases where exchange-listed 
derivatives could not efficiently provide the index-linked option's 
investment exposure? Would that approach provide for consistent and 
reliable pricing? In practice are insurance companies typically 
constructing and hedging index-linked options' investment exposure 
using exchange-listed options or other derivatives where feasible?
    51. If we were to require insurance companies to provide the 
disclosure described in request for comment 48, in determining the 
value of the derivatives underlying an index-linked option, should we 
require insurance companies

[[Page 71114]]

to use a collection of hypothetical index options with an expiration 
equal to the crediting period, consistent with our analysis in section 
III.B.3? \155\
---------------------------------------------------------------------------

    \155\ See infra footnote 429 and accompanying text.
---------------------------------------------------------------------------

    52. If we were to require insurance companies to provide the 
disclosure described in request for comment 48, what calculation would 
be appropriate for the fixed-income component of an index-linked 
option? Should we, for example, provide that the insurance company 
should use the $100,000 hypothetical investment discounted by the rate 
of interest the insurance company is crediting, or would credit, on 
fixed annuities with a term equal to the duration of the crediting 
periods of the index-linked option? Conversely, should we require the 
insurance company to use the value of a risk-free zero-coupon bond with 
a time to maturity equal to the crediting period of the index-linked 
option, consistent with our analysis in section III.B.3?
    53. If we were to require insurance companies to provide the 
disclosure described in request for comment 48, how should the 
insurance company value, or determine the cost of purchasing 
separately, the standard insurance features? Do insurance companies 
maintain internal pricing information that could be used for this 
purpose where those features are not offered separately rather than in 
connection with annuities or other financial products sold by the 
insurance company? Should the cost or value of insurance be based on 
amounts insurance companies are required to reserve in connection with 
those insurance obligations? Should we require additional disclosure 
related to early withdrawal charges, fees, or penalties? For example, 
should we require more prominent placement of these features on 
marketing or other materials, or should we require a comparison of 
these features to potential benefits of the RILA to clarify for 
investors possible trade-offs?
    54. If we were to require insurance companies to provide the 
disclosure described in request for comment 48, should we, in addition 
to requiring the disclosure of this cost figure, also require the 
insurance company separately to disclose the costs or values associated 
with each component underlying the index-linked option?
    55. If we were to require insurance companies to provide the 
disclosure described in request for comment 48, where should insurance 
companies place it in the registration statement? Would this 
information be most helpful to investors if it were included in the 
disclosure required by Item 6, which provides more detailed information 
on each index-linked option, or in the summary prospectus appendix 
identifying the RILA's investment options? Alternatively, should it be 
disclosed the KIT as a range based on the available index-linked 
options? If this information were in the summary prospectus, would it 
change frequently and result in a high number of prospectus supplements 
delivered to investors? If we were to further require the disclosure of 
the underlying components and pricing assumptions used to determine the 
cost to investors disclosure, would the SAI be an appropriate place for 
that disclosure? Should these disclosures be structured using inline 
XBRL as proposed for other additional disclosures?
(c) Appendix: Investment Options Available Under the Contract (Item 17)
    We propose to amend Item 17 to include a discussion of the index-
linked options and fixed options available under the contract. This 
item currently requires a variable annuity issuer to include in an 
appendix to the prospectus a table that consolidates certain summary 
information about each portfolio company offered under the contract. 
The current appendix is designed to provide investors with an overview 
of variable options available under the contract in a uniform, tabular 
presentation that promotes comparison, because the investment 
experience of an investor in a variable annuity will largely depend on 
the underlying investments available under the contract.\156\ 
Similarly, we anticipate that an overview of the index-linked options 
available to investors in a RILA, as well as any fixed option currently 
available under the contract, would help investors understand and 
compare the various investment options offered under the contract. 
Consolidating this summary information about the contract's investment 
options--equivalent to what is currently provided for variable 
options--into a concise, easy to read tabular presentation should 
enhance the ability of investors to understand, evaluate, and compare 
all the investment options available under the contract.
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    \156\ VASP Adopting Release at n.267 and accompanying text.
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    To reflect the expanded scope of the appendix, we would amend the 
current heading to ``Investment Options Available Under the Contract.'' 
\157\ We would provide a new instruction that explains that issuers may 
modify this new heading as appropriate under the contract. For example, 
if there are only variable options offered under the contract, an 
issuer could change the heading to ``Portfolio Companies Available 
Under the Contract,'' consistent with the current requirements of the 
form. Because variable options, fixed options, and index-linked options 
can vary by benefit offered under the contract, we also propose to move 
the restrictions table currently required for variable annuities by 
instruction 1(f) of Item 17 to be a separate requirement for all 
investment options, with no other changes.\158\
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    \157\ ``Investment options'' are defined as any variable option, 
index-linked option, or fixed option available under the contract. 
See infra section II.B.7(b).
    \158\ Proposed Item 17(d) of Form N-4.
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Index-Linked Options
    To accommodate the inclusion of index-linked options in the 
appendix, we propose to add a new table titled ``Index-Linked 
Options.'' \159\ As part of our approach to layered disclosure, the 
information to be supplied in the table for index-linked options would 
summarize certain prospectus disclosures required elsewhere in the 
prospectus.\160\
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    \159\ See proposed Item 17(b) of Form N-4.
    \160\ See, e.g., proposed Item 6(d) of Form N-4.
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Legends
    Similar to the requirements for variable annuities, the table for 
index-linked options would be prefaced with a legend. Specifically, the 
legend would state that the table lists index-linked options currently 
available under the contract. Further, because insurance companies 
typically change the index-linked options available over time, we would 
require the legend to specify that the insurance company may change the 
features of the index-linked options in the table (including the index 
and the current limits on gains and limits on losses), offer new index-
linked options, or terminate existing index-linked options, and that 
the insurance company will provide the investor with written notice 
before making any of these changes.
    As discussed above, current limits on index gains for index-linked 
options would be disclosed in the prospectus in response to Item 6, and 
changes to current limits on index gains would be disclosed in 
prospectus supplements.\161\ However, to avoid frequent updates to the 
summary prospectus, insurance companies would not be required to 
include current limits on index gains for index-linked options in the 
appendix as

[[Page 71115]]

those limits can change frequently.\162\ Instead, and in addition to 
the disclosure in Item 6, to ensure that investors have convenient 
access to changes in current limits on index gains, which can 
significantly affect an investor's returns on an index-linked option, 
the proposed legend would require insurance companies to state that 
current limits on gains are available at a website address.\163\ This 
website address must be specific enough to lead investors directly to 
current rates, rather than to the home page or other section of the 
website on which the rates are posted. Requiring RILA issuers 
separately to include information about current limits on gains on 
their websites would benefit investors by making this information 
easier to find and understand. Furthermore, because websites may be 
updated quickly, website disclosure would be efficient for compiling 
index-linked options' current limits on gains, given our understanding 
that these rates can change often and that insurance companies 
currently disclose current rates on their websites.
---------------------------------------------------------------------------

    \161\ See proposed Item 6(d)(2)(i)(B) of Form N-4 and supra 
footnote 134.
    \162\ As discussed below, the proposed appendix would appear in 
the summary prospectus, but Item 6 would not. See infra section 
II.C; see also infra section II.E.1 (discussing proposal to amend 
rules 485 and 497 for RILAs).
    \163\ Consistent with the current instructions to the form, any 
website address, including this one, that is included in an 
electronic version of the statutory prospectus would be required to 
include an active hyperlink or other means of facilitating access 
that leads directly to the relevant website address. However, this 
requirement would not apply to an electronic summary prospectus that 
is filed on EDGAR. See proposed General Instruction C.3.i of Form N-
4.
---------------------------------------------------------------------------

    Lastly, set off from the rest of the legend and with emphasis, we 
would require a notation that if amounts are withdrawn from an index-
linked option before the end of its crediting period, the insurance 
company may apply a contract adjustment and that this may result in a 
significant reduction in the investor's contract value that could 
exceed any protection from the index's loss that would be in place if 
an investor held the option until the end of the term. We are proposing 
this notation given the potential impact on an investor's returns if 
amounts are withdrawn prior to the end of a crediting period.
    We propose to require the legend to include appropriate cross-
references to the section(s) of the prospectus that describe the 
features of the index-linked options as well as the contract 
adjustment. This approach is designed to help investors that are 
interested in more detail about key aspects of the index-linked options 
to locate that information quickly.
Table
    The legend would be followed by a table that lists and highlights 
key elements of each index-linked option available under the contract. 
Specifically, the table would require, in sequential columns, the 
identification of (1) each index by name; (2) type of index; (3) 
crediting period, indicating the duration of the index-linked option in 
years; (4) index crediting methodology; (5) limits on index loss if 
held to the end of the crediting period; and (6) guaranteed minimum 
limit on index gain.
    The description of the type of index would be a brief statement of 
which type of index it is (e.g., market index, exchange-traded fund, 
etc.), or a brief statement describing the assets that the index seeks 
to track (e.g., U.S. large-cap equities). The column indicating the 
type of index crediting methodology used for each index-linked option 
would only be required if the RILA utilizes multiple index crediting 
methodologies under the contract (e.g., point-to-point, step-up, 
enhanced upside, etc.).\164\ The disclosures regarding limits on index 
loss would require an issuer to state the current percentage used in 
the insurance company's interest credit methodology to limit the amount 
of negative index return credited to the index-linked option and to 
identify in the table whether this limit is a buffer, floor, or some 
other rate or measure.\165\ In the last column, issuers would be 
required to state the guaranteed minimum percentage that may be used to 
limit the amount of positive index return credited to the index-linked 
option and to identify in the table whether this limit is a cap, 
participation rate, or some other rate or measure.\166\
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    \164\ If all index-linked options offered by a RILA contract 
used the same crediting methodology, the table would not include the 
column. See, e.g., supra footnote 139.
    \165\ In contrast to current limits on index gain, we understand 
that the current limits on index loss typically do not change 
frequently.
    \166\ As discussed above, instead of also requiring a column for 
current limits on index gains (in addition to the column for 
guaranteed minimum limit on index gains), the legend would state 
that information about current limits on index gains is available at 
a specified website address.
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    To ensure investors only receive disclosure relevant to them, RILAs 
would only be permitted to include in the table those index-linked 
options that are available under the contract. Further, to promote 
disclosure in a consistent format to facilitate comparisons, issuers 
would be allowed to add, modify, or exclude table headings only as 
necessary to describe the material features of an index-linked option. 
Insurance companies would also be required to indicate if any of the 
index-linked options are restricted (e.g., because of a ``hard'' or 
``soft'' close), consistent with the current disclosure requirements 
for variable options. The proposed instructions also would state that 
if an index provider calculates the index's return in a manner that 
does not reflect the full investment performance of the assets tracked 
by the index (e.g., the return does not reflect dividends paid on the 
assets composing the index, the return reflects a fee or cost, etc.), a 
footnote to the table must, if applicable, be included stating that the 
index's return does not reflect the full investment performance of the 
assets it tracks, which will reduce the index's performance. An 
investor evaluating index-linked options may be more familiar with a 
version of a given index that reflects the full performance of the 
index constituents, and this disclosure would alert investors that the 
index associated with a particular index-linked option will have 
relatively lower returns.
Fixed Options
    Consistent with our proposed approach to the Item 6 disclosure 
requirements, we are proposing to require in the appendix summary 
information about fixed options currently available under the contract. 
These disclosure requirements would be similar to the legend and table 
for index-linked options discussed above, adjusted to reflect fixed 
option details. The fixed option legend, in addition to identifying 
that what follows is a list of fixed options currently available under 
the contract, would indicate that the insurance company (1) may change 
the features of the fixed options identified, offer new ones, and 
terminate existing ones and (2) will provide the investor written 
notice before doing so. The fixed option table would include columns 
identifying (1) the name of the fixed option, (2) the term, and (3) the 
minimum guaranteed interest rate.\167\ Insurance companies would be 
instructed to include appropriate cross-references in the legend to the 
sections of the prospectus that describe the features of fixed options. 
As with index-linked options, insurance companies could add, modify, or 
exclude table heading only as necessary to describe material features 
of a fixed option.
---------------------------------------------------------------------------

    \167\ Consistent with the approach in Item 6, the minimum 
guaranteed interest rate would be required to be stated as a numeric 
rate rather than referring to any minimums permitted under State 
law.

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[[Page 71116]]

Request for Comment
    We request comment generally on the proposed inclusion of index-
linked option summary information in the appendix, and specifically on 
the following issues:
    56. Should we require these new disclosures to be included in the 
appendix? Are the proposed appendix disclosures for index-linked 
options appropriate? Would they help investors to compare information 
among index-linked options and generally understand the index-linked 
options available? Is this information likely to be relevant and useful 
to investors? Is there more or different information that we should 
require? Should any of the information not be included? For example, 
should we require current limits on gains to be disclosed in the 
appendix, rather than requiring the appendix to include a website 
address where information about current limits is available (as well as 
requiring this information in the statutory prospectus)? Would 
investors find it useful to have online access to information about 
current limits on gains? Will investors find current limits on index 
loss in the summary prospectus useful even if the current limits on 
index gains are not included?
    57. We are proposing to require in the statutory prospectus numeric 
examples, charts, graphs or other presentations to illustrate the 
mechanics of each type of index crediting methodology.\168\ Should we 
permit or require some or all of these examples for index-linked 
options to be included in the appendix? Would the inclusion of these 
examples add undue length or complexity to the appendix, or overwhelm 
the disclosure for other investment options? Could these concerns be 
ameliorated by only permitting or requiring a limited number of 
examples (e.g., no more than 4), or by placing certain other 
limitations on the inclusion of such examples? If so, how? If we were 
to require examples for index-linked options to be included in the 
appendix, should we also require the examples to be included in the 
Item 6 disclosures, or should such disclosures only be required in a 
single location (and if so, which one)?
---------------------------------------------------------------------------

    \168\ Proposed Item 6(d)(2)(iv) (Methodology and Examples) of 
Form N-4. We are proposing to permit this information to be included 
in an appendix. See supra section II.B.3(a).
---------------------------------------------------------------------------

    58. Should we include the proposed disclosure in the appendix 
relating to fixed options currently available under the contract? Are 
there any changes we should make to the specific proposed disclosure 
requirements?
4. Principal Risks of Investing in the Contract (Item 5)
    An investment in a contract offering index-linked options exposes 
investors to unique risks that may be different from those that are 
common to other investment products, including contracts that solely 
offer variable options. We propose to amend Item 5 to address certain 
principal risks that are particularly relevant to investors in RILAs. 
In addition to restructuring the current item to incorporate the 
proposed risk disclosure requirements addressing index-linked options, 
we propose certain structural changes that are designed to clarify 
existing requirements but are not anticipated to result in 
substantively different disclosure requirements for contracts offering 
variable options. These proposed changes also would consolidate certain 
risk disclosures insurance companies currently provide for variable 
annuities in other sections of the prospectus. We are proposing to 
require these disclosures in a single location to more consistently and 
effectively communicate risks to investors. As the Commission has 
previously explained, the principal risk disclosure in the prospectus 
is designed to provide a consolidated presentation of principal risks, 
which registrants can cross-reference to reduce repetition that might 
otherwise occur if the same principal risks were repeated in different 
sections of the prospectus.\169\
---------------------------------------------------------------------------

    \169\ See VASP Adopting Release at n. 690 and accompanying text.
---------------------------------------------------------------------------

    The principal risk disclosure item of Form N-4 currently consists 
of a single paragraph requiring a registrant to summarize in the 
prospectus the principal risks of purchasing a contract, including the 
following risks: (1) poor investment performance, (2) that contracts 
are unsuitable as short-term savings vehicles, (3) limitations on 
access to cash value through withdrawals, and (4) the possibility of 
adverse tax consequences. We propose to retain these substantive risk 
disclosure requirements but would restructure the current single 
paragraph into separate sub-items while also making certain minor 
changes designed to clarify existing obligations.\170\ The proposed 
sub-items are designed to be non-exclusive examples of the principal 
risks of investing in the contract being registered. In addition to 
existing disclosure requirements, these sub-items would also include 
new risk disclosures specific to index-linked options, as 
applicable.\171\ We are making parallel changes to the risk disclosures 
most applicable to variable annuities to avoid any implication that 
risk disclosure should be provided at a different level of detail than 
the disclosures for RILAs. Most contracts offering variable options 
that are currently registered on Form N-4 likely would not need to 
revise their risk disclosure in response to the proposed amendments to 
the risk disclosure requirements. In our experience, it is common 
practice for these registrants currently to include the disclosures 
that the proposal would require in their prospectuses as principal risk 
disclosure (or elsewhere in their prospectuses).
---------------------------------------------------------------------------

    \170\ See proposed Item 5(a)-(b), (d)-f) of Form N-4.
    \171\ See proposed Item 5(c) of Form N-4.
---------------------------------------------------------------------------

    The proposed approach would retain the current requirement for 
registrants to explain the principal risks of purchasing a contract, 
but would also require an explanation of the principal risks of 
investing in an investment option, including the risks of poor 
investment performance.\172\ Additionally, for index-linked options, a 
registrant would disclose the maximum potential loss from negative 
index performance over the crediting period, as a percentage. Although 
disclosures that address certain risks of index-linked options would be 
required in other locations in the prospectus, we are proposing that 
RILA issuers include certain risk factors, such as this one, in the 
consolidated summary of principal risks associated with the 
contract.\173\ The maximum potential loss resulting from negative index 
performance is a salient way to quantify potential returns for 
particular investment options. For example, absent this disclosure, it 
may not be apparent to investors that an index-linked option that 
offers a -10% buffer still has the potential for 90% loss.\174\ This 
statement would help

[[Page 71117]]

investors assess the particular risks associated with RILAs in the 
context of the other required principal risk disclosures. The potential 
risk of loss is particularly important for investors to understand 
because RILAs are often presented to investors as having the benefit of 
offering a balance between the opportunity for growth and the reduced 
risk of loss relative to savings alone or more conservative 
investments.\175\
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    \172\ See proposed Item 5(a) of Form N-4.
    \173\ See proposed Item 1(a)(6) (Outside Front Cover Page) 
(``Prominently disclose as a percentage the maximum amount of loss 
from negative Index performance that an investor could experience 
after taking into account the minimum guaranteed limit on Index loss 
provided under the Contract.''); proposed Item 2(b)(ii) (Overview of 
the Contract) (``[P]rominently state as a percentage the maximum 
amount of loss an investor could experience from negative Index 
performance, after taking into account the minimum guaranteed limit 
on Index loss provided under the Contract.''); proposed Item 
6(d)(1)(ii) (Investment Options) (``Prominently state as a 
percentage the maximum amount of loss an investor could experience 
from negative Index performance, after taking into account the 
minimum guaranteed limit on Index loss provided under the 
Contract.'').
    \174\ We recognize that this example may suggest to some 
investors that an option with a buffer is riskier than one with a 
floor. In fact, the protection offered by a buffer is more likely to 
be triggered than the protection offered by a floor. In general, a 
buffer protects the investor from experiencing smaller, more common 
losses on an index (as well a portion of any larger loses), while a 
floor protects the investor from larger, less-common losses (but 
does not protect against smaller losses). Insurers that offer both 
buffers and floors should generally make this distinction clear to 
investors in their Item 5 risk disclosures, as well as in response 
to proposed Items 2(b)(2) and 6(d) of Form N-4.
    \175\ See OIAD Report at Section 4, Review of RILA Marketing.
---------------------------------------------------------------------------

    The next proposed sub-item, which concerns the risks of early 
withdrawal, would retain the current requirement for registrants to 
disclose that contracts are unsuitable as short-term savings vehicles 
and to summarize the limitations on access to cash value through 
withdrawals, including the possibility of adverse tax 
consequences.\176\ We propose to expand this disclosure requirement to 
specify that a summary of the limitations on access to cash value 
through withdrawals may also include, if applicable, surrender charges, 
as well as negative contract adjustments and loss of interest. These 
are features of RILAs that implicate why they are not short-term saving 
vehicles. In addition, insurance companies that offer index-linked 
options would be required to state the maximum potential loss resulting 
from a negative contract adjustment, as a percentage. Although this 
last statement would be required to be provided in other locations in 
the prospectus, we are proposing to include this risk disclosure in the 
consolidated summary of principal risks because contract adjustments 
can significantly affect contract value.\177\ Also, contract 
adjustments are a distinctive feature of contracts with index-linked 
options that we recognize (based on results of qualitative investors 
interviews) investors can find difficult to understand. Quantifying 
maximum potential loss resulting from a negative contract adjustment is 
intended to illustrate the possible effects of these adjustments. 
Further, unlike other types of losses, contract adjustments are 
typically avoidable by investors. As a result, we anticipate that 
showing the maximum loss possible would help investors evaluate whether 
to take an action that would result in a contract adjustment. It also 
would help investors understand the potentially significant risks that 
they could face in a RILA, regardless of a RILA's bounded return 
structure. Therefore, this statement would assist investors in 
assessing unique risks associated with index-linked options in the 
context of the other required principal risk disclosures.
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    \176\ See proposed Item 5(b) of Form N-4.
    \177\ See proposed Item 1(a)(7) (Outside Front Cover Page) 
(``Prominently state as a percentage the maximum potential loss 
resulting from a negative Contract Adjustment, if applicable.''); 
proposed Instruction 2(a) to Item 3 (Key Information Table) 
(``Include in this statement the maximum potential loss (as a 
percentage of the investment) resulting from a negative adjustment. 
. . .''); proposed Item 4 (Fee Table--Transaction Expenses) 
(``Contract Adjustment Maximum Potential Loss (as a percentage of 
Contract value at the start of the Crediting Period or amount 
withdrawn, as applicable)''); and proposed Instruction 1 to Item 
7(e) (Contract Adjustment) (``State the maximum potential loss, as a 
percentage, that could result from a negative Contract 
Adjustment.'').
---------------------------------------------------------------------------

    The next proposed sub-item, which concerns the principal risks 
associated with index-linked options, would include new risk disclosure 
requirements tailored to address unique risks associated with these 
investment options.\178\ Under these proposed requirements, a 
registrant would have to describe the principal risks of investing in 
any index-linked options offered under the contract (in addition to the 
risks of potential loss from negative index performance, as discussed 
above). The proposed sub-item would require the prospectus to include a 
statement that an investor in an index-linked options is not invested 
in the index or in the securities tracked by the index. This reflects 
our concern, based on the results of qualitative investor interviews, 
that investors may be confused about whether an investment in an index-
linked option is a direct investment in the index.
---------------------------------------------------------------------------

    \178\ See proposed Item 5(c) of Form N-4.
---------------------------------------------------------------------------

    To help ensure that RILA prospectuses address certain key risks, 
the proposed instructions to this disclosure requirement would specify 
that discussion of the principal risks related to index-linked options 
would be required to include the principal risks relating to, as 
applicable: (1) limiting positive index returns; (2) the possibility of 
losses despite limits on negative index returns; (3) interest crediting 
methodologies; (4) the impact of contract fees on the amount of 
interest credited; and (5) the reallocation of contract value at the 
end of an index-linked option's crediting period. We are also proposing 
instructions specifying that this discussion would be required to 
include, as applicable, principal index risks relating to: (1) the type 
of index (e.g., market risk, small-cap risk, foreign securities risk, 
emerging market risk, etc.); (2) the exclusion of dividends from index 
return; and (3) market volatility. These instructions would require 
RILA issuers to specify which risks relate to each index offered under 
the contract, and to describe the principal risks related to the 
possible substitution of the index before the end of an index-linked 
option's term.
    An additional proposed new sub-item would require a description of 
the principal risks associated with any contract benefits (e.g., death 
benefits, living benefits), including the impact of excess withdrawals, 
if applicable. These risks include, for example, investment 
restrictions associated with a living benefit, which may limit 
investment performance.\179\ As an additional example, there are risks 
that withdrawals may substantially reduce the benefit, that some 
guaranteed benefits are based on a contingency that may never occur 
(e.g., the contract value falling to zero), that the rates for contract 
benefits may change over time, and that certain benefits may be 
discontinued prior to election. Because these risks could impact the 
expected performance of the annuity, or in some cases could even 
terminate the annuity, we are proposing to require issuers to disclose 
them to in the prospectus.
---------------------------------------------------------------------------

    \179\ See proposed Item 5(d) of Form N-4.
---------------------------------------------------------------------------

    Another proposed new sub-item would require an explanation of the 
principal risks associated with the insurance company's ability to meet 
its guarantees under the contract, including risks relating to its 
financial strength and claims-paying ability, which as described below 
may be of particular concern for investors who allocate contract value 
to index-linked options.\180\ We recognize that a summary of certain 
insurance company risks is currently required to be disclosed in the 
KIT.\181\ Moreover, although there is no corresponding disclosure 
requirement that mandates the inclusion of insurance-company-related 
risks in the principal risk disclosure in contract prospectuses, most 
Form N-4 registrants already provide this disclosure. We therefore do 
not expect that current Form N-4 registrants likely would have to 
modify their disclosures to comply with the proposed requirement. 
Nevertheless, we propose to require this disclosure to be included in 
the consolidated principal risks section of the prospectus for

[[Page 71118]]

completeness, and to help ensure that a prospectus for a contract that 
offers fixed options and index-linked options discloses the insurance 
company's claims-paying ability with regard to its contractual 
guarantees. In contrast to variable options, where amounts invested are 
held in a separate account insulated from the insurance company's 
general account and protected from general account creditors, assets 
invested in an index-linked option are subject to the insurance 
company's claims-paying ability for most RILAs.
---------------------------------------------------------------------------

    \180\ See proposed Item 5(e) of Form N-4.
    \181\ See current Instruction 3(d) to Item 2 of Form N-4.
---------------------------------------------------------------------------

    Lastly, we propose a final new sub-item, which would require a 
description of the principal risks relating to any material reservation 
of rights under the contract, including if applicable, (1) the right to 
remove or substitute portfolio companies; (2) add or remove index-
linked options and change the features of an index-linked option from 
one crediting period to the next; (3) stop accepting additional 
purchase payments; and (4) impose investment restrictions or 
limitations on transfers.\182\ We propose to require this disclosure 
because the ability to discontinue contract features, alter an 
investor's ability to participate in an index's upside performance, and 
otherwise change features is important information for investors when 
making an investment decision.
---------------------------------------------------------------------------

    \182\ See proposed Item 5(f) of Form N-4.
---------------------------------------------------------------------------

    We request comment generally on the proposed amendments to Item 5 
of Form N-4, and specifically on the following issues:
    59. Do the proposed amendments to Item 5 appropriately describe the 
types of principal risks that are typically associated with investing 
in a contract that offers variable options and/or index-linked options? 
Should different or additional principal risks be required to be 
summarized in the prospectus?
    60. Do commenters agree with the proposed approach of amending Item 
5 to restructure the current item into separate sub-items? For 
contracts offering variable options, do commenters agree that the 
proposed changes would clarify existing requirements, but would not 
generally result in substantively different principal risk disclosure 
requirements? Would the proposed changes to Item 5 require contracts 
offering variable options that are currently registered on Form N-4 to 
revise their current risk disclosure, or could they continue to use 
their existing disclosures? Why or why not? To the extent that Form N-4 
registrants are currently disclosing risks on topics that the proposed 
changes address in other parts of the prospectus, would this current 
risk disclosure be considered to be ``principal'' risk disclosure?
    61. Although we are proposing to require disclosure of specified 
index-linked option-related principal risks to be provided in response 
to the Item 5 disclosure requirements, we also propose to require 
aspects of these risks to be disclosed in response to certain other 
prospectus disclosure requirements, facilitating a layered disclosure 
approach. Is this appropriate? What ``layers'' of risk disclosure are 
appropriate for the summary prospectus, statutory prospectus, and SAI?
    62. Are the proposed additions to the current principal risk 
disclosures appropriate? If not, why not? Should we, for example, 
require a registrant specifically to disclose principal risks 
associated with index-linked options, contract benefits, the insurance 
company, and any material reservation of rights under the contract, as 
proposed? If not, why not? Is an insurer's ability to discontinue 
contract features, reduce index limits on gains and otherwise change 
features likely to be inconsistent with an investor's reasonable 
expectations, as we state above? Should we modify any of the aspects of 
these proposed principal risk disclosure requirements?
5. Addition of Contract Adjustments and Other Amendments to Fee and 
Expense Disclosures (Items 4, 7, and 22)
    We are proposing amendments to Form N-4 to require specific 
disclosures regarding contract adjustments and other implicit RILA-
specific costs that can result in a significant erosion of investment 
principal. The proposed disclosures are designed to provide investors 
with a better understanding of the mechanics of these costs and the 
associated potential for loss. Under the proposed approach, these 
disclosure requirements would be set forth in Items 4, 7, and 22(d) of 
Form N-4. We are also proposing revisions to the existing provisions of 
these Items, applicable to all Form N-4 issuers, to clarify certain 
terminology.
(a) Amendments to Fee Table Disclosure Requirements (Item 4)
    We propose amending Item 4 to require specific disclosures 
regarding contract adjustments and other costs specific to RILAs. Item 
4 currently requires variable annuity registrants to provide 
comprehensive information on the fees and expenses investors will pay 
when buying, owning, and surrendering or making withdrawals from a 
contract, as well as expenses paid each year during the time the 
investor owns the contract. While RILAs typically do not charge the 
explicit ongoing fees and expenses common to variable annuities, 
investors do experience an implicit ongoing fee to the extent the 
insurer limits, through the use of a cap, participation rate, or some 
other rate or measure, index gains. Moreover, RILA issuers typically 
utilize contract adjustments, which can result in a significant charge 
to investors who make withdrawals from an index-linked option or from 
the contract before the end of a specified period. Further, investor 
testing suggested that most participants struggled to fully comprehend 
the costs to investors of these products.\183\ These costs include 
contract adjustments because they can negatively affect an investor's 
contract value or the amounts an investor could withdraw from the 
contract.\184\ Accordingly, we are proposing to include a detailed 
description of contract adjustments in the prospectus, and that this 
disclosure be proximate and similar to other disclosures regarding fees 
and expenses. Thus, we are proposing several amendments to incorporate 
the concept of contract adjustments as well as implicit ongoing fees 
and expenses into the current Item 4 disclosure requirements. We 
propose generally expanding the tabular disclosures that Item 4 
requires to address contract adjustment costs that investors will pay 
when buying, owning, and surrendering or making withdrawals from an 
investment option, and as noted below, requiring disclosures about the 
maximum potential loss that an investor could experience in connection 
with a contract adjustment. We are also proposing to expand the tabular 
disclosures with respect to annual contract expenses, to alert 
investors to the implicit ongoing costs associated with limiting 
positive index returns. In addition, we are proposing certain non-
substantive changes to the fee table disclosures and instructions that 
would be applicable to all issuers.\185\

[[Page 71119]]

Particularized changes we propose to the fee table disclosures are 
discussed below.
---------------------------------------------------------------------------

    \183\ See OIAD Report at Section 6, Quantitative Testing, 
Testing Impacts, Table 9 (noting that 16.2 percent of participants 
understood that a participation rate reduces potential gains from 
the market and 52.1 percent of participants understood that a cap 
reduces potential gains from the market).
    \184\ See, e.g., OIAD Report at Section 5, Qualitative Testing, 
Results From Round 2.
    \185\ In order to eliminate unnecessary information in the 
prospectus, we propose amending the general instructions to clarify 
that registrants may omit a narrative explanation that is not 
applicable under the contract. See proposed instruction 1 to Item 4 
of Form N-4. We also are proposing an amendment to general 
instruction 5 regarding the preparation of the Transaction Expenses 
and Annual Contract Expenses tables, clarifying that the instruction 
to disclose the maximum guaranteed charge as a single number where a 
fee is calculated based on a benchmark does not apply to a contract 
adjustment. See proposed instruction 5 to Item 4 of Form N-4.
---------------------------------------------------------------------------

Transaction Expenses Table
    Form N-4 issuers currently must include a transaction expenses 
table in their prospectuses, describing fees and expenses investors 
must pay when buying, owning, and surrendering or making withdrawals in 
connection with a contract. This requires a description of the sales 
load imposed on purchases (as a percentage of purchase payments), the 
deferred sales load (as a percentage of purchase payments or amount 
surrendered, as applicable), and transfer fees. To provide proximate 
and similar disclosure for RILA-specific costs, we propose to require 
that insurance companies additionally include the maximum negative 
contract adjustment that may be imposed, to be expressed as a 
percentage of contract value at the start of the crediting period or 
the amount withdrawn, as applicable. To provide investors notice of the 
circumstances where they might be subject to this cost, we also propose 
that insurance companies include a footnote describing all transactions 
potentially subject to a contract adjustment.\186\
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    \186\ See proposed instruction 11 to Item 4 of Form N-4.
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    Currently this table also requires registrants to describe the 
maximum exchange fee that investors could incur for any exchange or 
transfer of contract value from the registrant to another investment 
company, or between sub-accounts or to the insurance company's general 
account. In a change relevant to all Form N-4 issuers, we are proposing 
a terminology change, replacing the term ``exchange fee'' with 
``transfer fee,'' as this term better reflects our experience, namely 
that the vast majority of such fees are those imposed on transfers of 
account value among investment options under the contract.\187\
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    \187\ See proposed Instruction 10 to Item 4 of Form N-4. Under 
the proposed definition, ``transfer fee'' would encompass both the 
maximum fee charged for any exchange or transfer of contract value 
between investment options as well as the maximum fee charged for 
any exchange or transfer of contract value from the registered 
separate account to another investment company or from the 
registered separate account to the insurance company's general 
account. Thus, the proposed amendments regarding the definition and 
terminology surrounding transfer fees would not result in any 
substantive change for existing Form N-4 issuers.
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Annual Contract Expenses
    Form N-4 issuers currently must include an annual contract expenses 
table in their prospectuses, detailing the fees and expenses that 
investors pay each year in administrative expenses, base contract 
expenses, and optional benefit expenses. Currently, base contract 
expenses must be expressed as a percentage of average account value. In 
a change relevant to all Form N-4 issuers, we propose an amendment that 
would also allow base contract expenses to be expressed as a percentage 
of average account value or contract value. We do not expect that this 
change will substantively affect variable annuities' existing 
disclosure. We are proposing this expansion to describe expenses 
deducted where index-linked options or fixed options are implicated, as 
those options do not generally use the concept of average account 
value.\188\ Additionally, to place investors on notice of the unique 
and ongoing trade-off costs associated with RILAs that may not be 
captured by this table, we are proposing to require registrants to 
include the following statement in the table:
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    \188\ We are also proposing two related, non-substantive 
amendments to the instructions relating to annual contract expenses 
relevant to all issuers. These changes are to broaden terminology 
given the expanded scope of issuers that under the proposal could 
file on Form N-4. Currently the instruction for describing 
administrative expenses references ``any Contract, account, or 
similar fee on all Investor Accounts;'' however, as noted below, we 
propose deleting the term ``Investor Account,'' and accordingly also 
propose amending this instruction to conform to that change. 
Relatedly we are proposing to amend the instruction regarding base 
contract expenses to remove a reference to fees and expenses 
deducted ``from separate account assets or charged to all Investor 
Accounts,'' replacing it with an instruction to consider fees and 
expenses ``charged to any Investment Option.''

    In addition to the fees described above, we limit the amount you 
can earn on an Index-Linked Option. Imposing this limit helps us 
make a profit on the Index-Linked Option. In return for accepting 
this limit on Index gains, you will receive some protection from 
Index losses.
Annual Portfolio Company Expenses
    Form N-4 currently requires issuers to include in the prospectus an 
annual portfolio company expenses table, disclosing the minimum and 
maximum total operating expenses charged by the portfolio companies 
offered by variable annuity contracts that may be periodically charged 
to investors during the time they own the contract. This includes costs 
incurred by portfolio companies directly and, if the portfolio company 
invests in other mutual funds, the fees and expenses the portfolio 
company indirectly incurs from these investments. In a change that also 
would apply to variable annuities prospectuses, we are proposing that 
registrants disclose that expenses shown in this table may change over 
time and may be higher or lower in future. We propose this change for 
two reasons. First, this modification would help to ensure that 
investors understand that these charges may increase over time, 
notwithstanding that these charges are described as maximum expenses. 
Second, given that we are proposing similar disclosures with regard to 
features of RILA offerings that are subject to change, we propose to 
require a similar level of disclosure with regard to variable annuity 
offerings where appropriate.
Example
    Form N-4 issuers currently must provide an example in their 
prospectuses that is designed to allow variable annuity investors to 
compare the cost of investing in the contract with the cost of 
investing in other variable annuity contracts. We propose amending the 
example requirements to clarify, for variable annuity and RILA issuers, 
that the example is designed to permit investors to compare costs of 
investing solely in variable options under the contract with costs 
associated with variable options offered under other annuity contracts. 
Under the proposal, the example would be preceded with a legend 
specifically stating that: the example assumes that all contract value 
is allocated to variable options; the example does not reflect contract 
adjustments; and costs would likely differ if an investor selects 
index-linked options or fixed options.
(b) Charges (Item 7)
    Currently, Item 7 requires registrants to provide a brief 
description in their prospectuses of all current charges deducted from 
purchase payments, investor accounts, or assets of the registrant. 
Consistent with the proposed changes to Item 4, we also are proposing a 
change in terminology that would affect all Form N-4 issuers, replacing 
references in Item 7 to ``investor accounts'' and the assets of 
``registrants'' with the terms ``contract value'' and ``investment 
option'' assets, respectively. Therefore, in responding to Item 7, 
variable annuity and RILA issuers would describe charges deducted from 
purchase payments, contract value, or investment option assets.\189\
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    \189\ Additionally, we are proposing two non-substantive 
terminology changes in Instruction 3 to Item 7(a) regarding how 
registrants must describe the sources that will be used to cover 
shortfalls where proceeds from sales load will not cover expected 
costs. First, we propose replacing the term ``depositor'' with the 
term ``insurance company.'' Second, where shortfalls are to be made 
from an insurance company's general account, this instruction 
requires a disclosure that amounts paid by the insurance company may 
consist of proceeds derived from base contract expenses deducted 
from the registered separate account. We propose striking this 
italicized language referring to assets of the registered separate 
account because it is superfluous given the definition of ``base 
contract expenses'' in proposed Instruction 14 to Item 5, discussed 
above.

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[[Page 71120]]

    For the reasons described above and given the potentially 
significant economic consequences contract adjustments can have on RILA 
investors, we are also proposing additional specific requirements to 
incorporate contract adjustments into the prospectus's disclosure of 
charges, which would entail detailed descriptions of any contract 
adjustments under the contract. These disclosures are designed to be 
comparable in scope and proximate to existing disclosures about 
contract charges applicable to variable annuities.\190\
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    \190\ See instructions (a) through (d) to Item 7 of Form N-4.
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    Specifically, we are proposing that insurance companies would have 
to: (1) disclose (as a percentage) the maximum potential loss that 
could result from a negative contract adjustment; (2) define the period 
during which any contract adjustment would apply; and (3) describe all 
transactions subject to a contract adjustment.\191\ Insurance companies 
also would have to include a description of how the contract adjustment 
will affect the contract value, surrender value, death benefit, and any 
living benefits, and disclose that a negative adjustment could reduce 
the value under the contract in an amount greater than the value 
withdrawn.\192\ They would also need to describe, in simple terms, how 
the contract adjustment is determined under the contract, and the 
relationship between the contract adjustment and any other charges or 
fees applied under the contract, including, for example, the sequence 
in which charges and adjustments are applied.\193\ The required 
disclosure would also require the issuer to briefly describe the 
purpose of the contract adjustment, including, for example, that the 
contract adjustment transfers risk from the insurance company to the 
investor to protect the insurance company from losses on its own 
investments supporting contract guarantees if amounts are withdrawn 
prematurely.\194\ Finally, issuers would be required to disclose how an 
investor can obtain information about the current value of the contract 
adjustment, while stating that this value can fluctuate daily, and that 
the quoted value may differ from the actual value at the time of 
adjustment.\195\
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    \191\ See proposed instructions (e)(1) through (e)(3) to Item 7 
of Form N-4. In describing the transactions subject to a contract 
adjustment, the insurance company would need to describe, for 
example, whether adjustments apply if amounts are transferred or 
withdrawn from an index-linked option or from the contract due to a 
partial withdrawal, surrender, election of an annuity option, or 
payment of death benefit proceeds, or where a particular optional 
benefit (e.g., a withdrawal under a guaranteed living benefit) is 
utilized, and to describe any circumstances under which the 
adjustment will be waived.
    \192\ See proposed instruction (e)(5) to Item 7 of Form N-4. If 
applicable, the insurance company would also be required to state 
the impact of the contract adjustment on interest to be credited to 
an index-linked option at the end of its crediting period.
    \193\ See proposed instructions (e)(4) and (e)(6) to Item 7 of 
Form N-4. The description of how the contract adjustment is 
determined would have to provide a meaningful explanation of all the 
material features of the contract adjustment's application, 
including: (1) information about any formula applied (e.g., a change 
in value of hypothetical derivative instruments); (2) the factors 
that may cause an adjustment (e.g., timing of withdrawal, index 
volatility, increase in external interest rates); (3) a description 
of any proportionate withdrawal calculations; and (4) how 
adjustments are applied (e.g., allocated among the investment 
options, applied to a withdrawal amount).
    \194\ See proposed instruction (e)(7) to Item 7 of Form N-4.
    \195\ See proposed instruction (e)(8) to Item 7 of Form N-4.
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    These proposed disclosures are intended to provide investors with 
the necessary scope and level of detail of the contract adjustments 
that could negatively affect an investor's contract value or the 
amounts an investor could withdraw from the contract. These disclosures 
are further justified given the RILA Act's requirement that the 
Commission use the results of investor testing in designing a 
registration form for RILAs. That mandated investor testing showed that 
participants were confused about contract adjustments, their purpose, 
the situations in which they could arise, their potential magnitude, 
and their relationship to other fees and charges (e.g., surrender 
fees).\196\ These disclosures are designed to address these areas of 
identified confusion.
---------------------------------------------------------------------------

    \196\ See, e.g., OIAD Report at Section 5, Qualitative Testing, 
Results From Round 2 and Section 7, Conclusions.
---------------------------------------------------------------------------

    To simplify this disclosure, we propose specifying that detailed 
disclosure on the method of calculating the contract adjustment appear 
in the SAI, as opposed to the prospectus.\197\ We also propose 
requiring that Item 7(e) include a cross-reference to Item 22 of Form 
N-4, which would require more-detailed disclosure on the contract 
adjustment's calculation (including illustrative examples as to 
adjustment's operation) to appear in the SAI. The more detailed SAI 
discussion is not, however, a substitute for the Item 7 requirements. 
Thus, for example, an insurance company could not include the formula 
underlying the contract adjustment calculation in the SAI in lieu of 
the required discussion of the formula in the prospectus. Rather, in 
addition to stating the formula in the SAI, the insurance company would 
need to include in the prospectus a brief description, in simple terms, 
of the manner in which contract adjustment is determined.
---------------------------------------------------------------------------

    \197\ See proposed instruction (e)(4) to Item 7 of Form N-4.
---------------------------------------------------------------------------

    Further, while the proposed disclosures are tailored to the 
mechanics of contract adjustments, they are also designed to be, where 
possible, consistent with existing requirements regarding disclosure of 
current charges deducted from purchase payments, investor accounts, or 
assets of the registrant. For example, Form N-4 currently requires 
disclosure of current fees and charges, which are typically expressed 
as a percentage. Because the value of a given contract adjustment can 
change daily, we are proposing that insurance companies disclose the 
maximum potential loss, as a percentage, that could result from a 
negative contract adjustment (rather than mandate a disclosure of a 
current contract adjustment value that could quickly become 
outdated).\198\
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    \198\ See proposed instruction (e)(1) to Item 7 of Form N-4.
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(c) Purchase of Securities Being Offered (Item 22)
    We are proposing to amend Item 22, which addresses the purchase of 
securities being offered, to require specific, detailed contract 
adjustment disclosures to appear in RILA issuers' SAIs. As discussed 
above, issuers would be required to provide a simple explanation of the 
underlying mechanics of contract adjustments in their prospectuses, 
while noting that further detail is available in the SAI and providing 
a cross reference to that information. Under the proposal, in addition 
to the discussion required in the prospectus by Item 7, Item 22 would 
require issuers to explain fully the operation of any contract 
adjustment that can be applied under the contract. This more detailed 
explanation would not take the place of the prospectus discussion and 
would need to address all the material features of the adjustment and 
include an explanation

[[Page 71121]]

of any formulas used to calculate the adjustment, and at least one 
numeric example to illustrate the application of the contract 
adjustment. This numeric example would have to include a negative 
adjustment, reflect surrender charges (if applicable), and disclose the 
percentage change in contract value as a result of the adjustment.
    The mechanics of contract adjustments under a RILA contract are 
typically complex, often implicating the application of factors or 
formulas that can be difficult for many investors to understand. 
Because the application of a negative contract adjustment can 
substantially affect an investor's contract value, however, we propose 
to require the inclusion of information on negative contract adjustment 
in the SAI, so that investors who wish to learn more about the 
calculation may do so. In addition to promoting transparency generally, 
this proposed disclosure would ensure that liability attaches under 
section 11 of the Securities Act for any material misrepresentations 
regarding the application of a contract adjustment.
    We are also proposing to make applicable to RILA issuers certain 
existing SAI disclosure requirements about the purchase of securities 
being offered. Specifically, we are proposing revisions to the 
instructions to the existing requirement to describe the manner in 
which the securities are offered to the public, which would instruct 
RILA issuers to respond by addressing any exchange privileges between 
investment options.\199\ Additionally, we propose to make the existing 
requirement to describe the method used to determine the sales load 
applicable to RILA issuers.\200\ We do not propose applying the 
existing disclosure requirement dealing with frequent transfer 
arrangements to RILA issuers, as its provisions are relevant only to 
variable annuity contracts.\201\
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    \199\ See proposed Item 22(a) of Form N-4.
    \200\ See proposed Item 22(b) of Form N-4.
    \201\ See proposed Item 22(c) of Form N-4.
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(d) Request for Comment
    We request comment on these proposed amendments.
    63. Do commenters agree that it is appropriate to include a 
discussion of contract adjustments in Items 4, 7, and 22 as proposed? 
If not, how would commenters suggest issuers disclose contract 
adjustments to ensure that investors have sufficient information to 
make an informed investment decision regarding RILAs?
    64. Is it appropriate to require the disclosure of the contract 
adjustment maximum potential loss in the transaction expense table? Do 
commenters agree that is appropriate to require that issuers express 
the contract adjustment maximum potential loss as a percentage? If not, 
what alternative measure would commenters suggest?
    65. Do commenters agree that the proposal strikes the proper 
balance in the location of the proposed contract adjustment 
disclosures? Are there any contract adjustment disclosures we propose 
including in the SAI that commenters believe would be more 
appropriately located in the prospectus? Are there any contract 
adjustment disclosures we propose including in the prospectus that 
commenters believe would be better situated in the SAI?
    66. Do commenters agree with our proposal that issuers be required 
to include, in the annual contract expenses table, a statement 
disclosing that, in addition to the expenses described in the table, 
investors will be subject to limits on the amounts they can earn in 
connection with index-linked options? Do commenters agree that it is 
appropriate to include a statement addressing current limits on gains 
in conjunction with the annual contract expenses table? Do commenters 
agree the proposed statement captures the most salient concerns to 
investors of these kinds of limits on gains? Do commenters have any 
suggestions for alternate wording or placement of the statement?
    67. Do commenters have any suggestions about additional or 
alternative disclosures that would address the areas of confusion 
regarding contract adjustments that this release describes as being 
identified in investor testing?
    68. Are there any concerns with our proposal to use the term 
``contract adjustment'' when referring to MVAs (market value 
adjustments) and IVAs (interim value adjustments)? Is there an 
alternative term that we should use to describe these kinds of 
adjustments?
    69. Does our proposal to replace the term ``exchange fee'' with 
``transfer fee'' in Item 4 raise any concerns?
    70. With regard to the numeric examples we propose requiring in the 
SAI, should there be any additional requirements for what those 
examples would need to include? For example, should we require that the 
example utilize the average negative contract adjustment in operation 
for the preceding year, or the negative contract adjustment expected 
over the next year? Should we also (or instead) require an example of a 
contract adjustment in the prospectus? If so, why, and what particular 
assumptions should we require in the example?
    71. Do commenters agree with our recommendation to place the more 
detailed disclosures associated with the mechanics of contract 
adjustments (such as applicable formulas) in the SAI as opposed to the 
prospectus? Why or why not?
    72. In addition to the contract adjustment disclosures we have 
proposed, should we also require issuers to provide a graphic 
illustrating the operation of a contract adjustment? If so, where 
should we require that graphic illustration be presented, and what 
particular circumstances should it illustrate? For example, would it be 
helpful to require issuers to include a graphic illustration 
demonstrating how a contract adjustment works when investors withdraw 
amounts from their contract prior to the end of a crediting period? 
Should we require illustrations that demonstrate the operation of a 
contract adjustment for investors in circumstances where they change to 
a different index-linked option before the end of a crediting period, 
and demonstrating how they can change investment options to minimize 
the financial impact to their contract value?
6. Information About Contracts With Index-Linked Options (Item 31A)
    We are proposing new Item 31A of Form N-4 to require census-type 
information regarding RILAs offered in connection with the applicable 
registration statement. Specifically, under proposed Item 31A, an 
insurance company would be required to provide the following 
information regarding any RILA offered through the registration 
statement, as of the most recent calendar year-end: (1) the name of 
each contract; (2) the number of contracts outstanding; (3) the total 
value of investor allocations attributable to index-linked options; (4) 
the number of contracts sold during the prior calendar year; (5) the 
gross premiums received during the prior calendar year; (6) the amount 
of contract value redeemed during the prior calendar year; and (7) 
whether the contract is a ``combination contract,'' that is, a contract 
that offers variable options in addition to index-linked options. This 
information would be required as of the most recent calendar year-end 
and, accordingly, would generally be updated through a post-effective 
amendment to a registration statement on Form N-4.\202\
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    \202\ See proposed Item 31A of Form N-4. An issuer transitioning 
from an existing registration statement on Form S-1 or S-3 to Form 
N-4 through a post-effective amendment would be required to report 
this information as of the most recently completed calendar year in 
its first post-effective amendment transitioning onto Form N-4.

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[[Page 71122]]

    This information is census-type data that would provide contract-
level disclosures designed to assist the Commission and staff in 
identifying trends in insurance companies' offerings of RILAs. This 
information would also provide improved transparency to investors by 
supplementing the information available about the marketplace for the 
contracts offered in connection with a registration statement. These 
items are relatively limited in scope and primarily consist of 
information that should generally be readily available to issuers. The 
particular data required is similar to that provided by registered 
separate accounts that likewise assist the Commission and staff in 
identifying trends in variable annuities.\203\
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    \203\ See Item F.14 of Form N-CEN; see also Investment Company 
Reporting Modernization, Investment Company Act Release No. 32314 
(Oct. 13, 2016) [81 FR 81870 (Nov. 18, 2016)] at the sentences 
following n.1142.
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    We are proposing to require information to be presented as of the 
most recent calendar year-end to provide the Commission and its staff 
with information that will be updated with an annual frequency for 
offerings of RILAs. We anticipate that this information would typically 
be updated as part of an issuer's annual update to its registration 
statements for such contracts.\204\ This approach would result in 
information provided as of a uniform date for all offerings of RILAs, 
regardless of the issuer's filing date, and, in turn, would provide for 
increased comparability across issuers and contracts.\205\ Requiring 
this information to be updated annually is intended to achieve an 
appropriate balance between providing the Commission and its staff with 
current information while avoiding overburdening issuers. An annual 
snapshot should be sufficient for the census-type nature of the 
information and would provide Commission staff with appropriate 
intervals of data points over time in which to identify trends in 
insurance companies' offerings of RILAs. Requiring these issuers to 
report such census information semi-annually or more frequently would 
place an increased burden on issuers that may not be justified by a 
commensurate increase in the value of the information received by the 
Commission.
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    \204\ See 15 U.S.C. 77j(a)(3).
    \205\ We understand that insurance companies offering RILAs have 
a December 31 fiscal year end which, in practice, means a 
distinction between calendar year and fiscal year would result in 
limited effect on the reporting.
---------------------------------------------------------------------------

    This reporting would provide the Commission with additional 
transparency into the RILA market segment, which would in turn improve 
the effectiveness of the Commission's oversight of offerings on Form N-
4. Requiring this high-level reporting would permit the Commission to 
identify trends occurring in this market segment over time and assist 
with allocating the Commission's resources in administering the form. 
This reported information on index-linked options would complement 
parallel census-type information that is currently required to be 
reported annually on Form N-CEN by registered unit investment trusts 
offering variable annuities.\206\ The new census-type information 
therefore would help provide the Commission with a more complete 
picture of the marketplace for insurance products offered through 
registration statements on Form N-4. In addition, this information may 
benefit the public in supplementing the information available about 
RILAs.
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    \206\ Issuers registering combination contracts on Form N-4 
would be required to exclude amounts allocated to a variable option 
when providing information in response to Item 31A as these 
allocations would be separately reported by registered separate 
accounts on Form N-CEN.
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    We request comment on these proposed amendments.
    73. Are the required reporting elements in Item 31A of proposed 
Form N-4 appropriate and clear? If not, what elements require 
additional instruction?
    74. Do commenters agree that it is appropriate to require reporting 
under Item 31A to be provided as of calendar year-end? Do commenters 
agree that there is limited practical difference between requiring a 
fiscal year-end and calendar year-end requirement in light of 
investment company practices?
    75. Should we require additional or different reporting of census-
type reporting regarding RILAs? If so, should we also amend the 
requirements of Form N-CEN to ensure parallel reporting by registered 
unit investment trusts offering variable annuities registered on Form 
N-4?
    76. Would RILA issuers face any significant challenges in providing 
the required reporting elements? If so, why?
    77. Do commenters agree that it would be appropriate for issuers 
with existing contracts to report information required by proposed Item 
31A for the calendar year prior to the calendar year the issuer first 
transitions its registration statement onto Form N-4?
7. Other Amendments and Provisions
    Our proposed amendments also include certain other amendments to 
Form N-4 and related rules designed to accommodate the inclusion of 
RILA issuers on that form. These include amendments to Form N-4's 
facing sheet, definitions, exhibit list, and required representations, 
as well as amendments to certain Securities Act rules that help to 
implement the proposal. These proposed amendments are discussed below.
(a) Facing Sheet
    We are proposing amendments to include a new checkbox section on 
the facing sheet. Specifically, an issuer would be required to identify 
in this new section: (1) if it is a new registrant, defined as, as 
applicable, a registered separate account or insurance company that has 
not filed a Securities Act registration statement or amendment thereto 
within 3 years preceding this filing; \207\ (2) if it is an emerging 
growth company (``EGC''), as defined by Rule 12b-2 under the Exchange 
Act; (3) if it is an EGC, whether it has elected not to use the 
extended transition period for complying with any new or revised 
financial accounting standards provided pursuant to Section 7(a)(2)(B) 
of the Securities Act; and (4) if it is relying on an exemption from 
Exchange Act reporting requirements in reliance on rule 12h-7.\208\ 
These changes would help the Commission better understand the types of 
registration statements being filed on Form N-4 and, in the case of the 
EGC information, mirrors similar facing sheet requirements found in 
Form S-1. In addition, we are proposing amendments to the description 
of the types of entities that use Form N-4 to include insurance 
companies that offer index-linked options, either as stand-alone or 
combination products.\209\
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    \207\ For example, a variable annuity separate account that has 
not previously filed a Securities Act registration statement would 
identify itself as a new registrant, regardless of whether the 
sponsoring insurance company has filed a recent Securities Act 
registration statement or amendment thereto as the proposed 
requirements request information on the registrant. In the same 
manner, an insurance company filing on Form N-4 would determine 
whether it is a new registrant solely with respect to its own 
Securities Act registration statement filings.
    \208\ In addition to this checkbox, we are proposing an 
instruction that implements the requirements of rule 12h-7 to 
indicate that the insurance company is relying upon the exemption 
provided by that rule in the relevant prospectus. See supra section 
II.B.3.b.
    \209\ See supra section II.A.
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(b) Definitions (General Instruction A)
    We are proposing amendments to General Instruction A to update the

[[Page 71123]]

existing definitions in Form N-4, add new definitions to accommodate 
the inclusion of RILAs on Form N-4, and implement these proposed 
definitions throughout the form. However, unless otherwise stated, the 
proposed amendments to the definitions in General Instruction A would 
not alter the existing obligations under Form N-4 for current issuers 
on Form N-4. These changes should provide a standard set of definitions 
to convey form provisions in a consistent and efficient manner without 
the need for lengthy descriptions in each instance and clarify which 
form provisions apply to which categories of issuers and investment 
products.\210\
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    \210\ We are also proposing to amend Form N-4 throughout to use 
the gender-neutral reference of ``investor'' where appropriate. See, 
e.g., proposed Instruction 6 to Item 2 of Form N-4.
---------------------------------------------------------------------------

    Specifically, we propose to add a new definition for ``index-linked 
option.'' The proposed definition covers RILAs and index-linked options 
offered in combination contracts, as an investment option offered under 
any contract, pursuant to which the value of the contract, either 
during an accumulation period or after annuitization, or both, will 
earn positive or negative interest based, in part, on the performance 
of a specified index.\211\ This is a functional definition focused on 
the key features of a RILA and would cover RILAs as defined in the RILA 
Act. We also propose to define ``fixed option'' as an investment option 
under the contract pursuant to which the value of the contract, either 
during an accumulation period or after annuitization, or both, will 
earn interest at a rate specified by the insurance company, subject to 
a minimum guaranteed rate under the contract. Further, we would change 
the existing definition of ``variable annuity contract'' to ``variable 
option'' and move the parts of that definition that refer to annuity 
contracts generally to a new definition for ``contract.'' In connection 
with the addition of other types of investment options on Form N-4, we 
are proposing to amend ``portfolio company'' to clarify that this term 
relates to the investment companies offered as investment options in 
contracts containing variable options. We also propose to add a new 
defined term ``investment option'' to refer collectively to any index-
linked, variable, or fixed option. We propose to add these items to 
help clarify which provisions of amended Form N-4 apply to which types 
of annuities or investment options.
---------------------------------------------------------------------------

    \211\ Because RILA returns may not be one for one with the 
index, we propose to indicate that positive or negative interest is 
only based ``in part'' on the index's performance.
---------------------------------------------------------------------------

    Because an insurance company issuing a RILA is not acting as a 
depositor, we propose to change the definition of ``depositor'' to 
``insurance company.'' The proposed definition refers to the insurance 
company that issues the contract, which company is subject to state 
supervision, and that the insurance company may also be the depositor 
or sponsor for a variable annuity separate account. We would also add a 
new definition of ``registered separate account'' defined as the 
separate account in which the contract participates with regard to any 
variable option offered under the contract, and refine the definition 
of ``registrant'' to mean either the registered separate account or 
insurance company, as applicable. These changes further help to clarify 
which provisions of the form apply to variable annuities and RILAs.
    We also propose to add definitions of ``index,'' \212\ ``contract 
adjustment,'' \213\ and ``crediting period'' \214\ to refer to these 
RILA-centric concepts in the form and, in the case of ``contract 
adjustment'' and ``crediting period,'' help clarify when the relevant 
disclosures would be required. Lastly, we propose to eliminate the 
currently defined term ``investor account.'' Insurance companies 
typically do not use this term in their disclosure, and the more 
generalized concept of contract value, which also is designed to 
address the value of an investor's investment, is intended to convey 
the characteristics of the broader scope of annuities that insurance 
companies could register on Form N-4 under the proposal.
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    \212\ As proposed, ``index'' means any index, rate, or benchmark 
(such as a registered exchange-traded fund that tracks an index) 
used in the calculation of positive or negative interest credited to 
an index-linked option. See proposed General Instruction A to Form 
N-4.
    \213\ As proposed, ``contract adjustment'' means a positive or 
negative adjustment made to the value of the contract by the 
insurance company if amounts are withdrawn from an index-linked 
option or from the contract before the end of a specified period. 
This adjustment may be based on calculations using a predetermined 
formula, or a change in interest rates, or some other factor or 
benchmark. See id.
    \214\ As proposed, ``crediting period'' means the period of time 
over which an index's performance is measured, subject to applicable 
limits on index gains and losses, to determine the amount of 
positive or negative interest that will be credited to an index-
linked option at the end of the period.
---------------------------------------------------------------------------

    We also are proposing related amendments throughout Form N-4 to 
help implement the proposed new definitions. For example, we are 
proposing to clarify the applicability of certain variable annuity or 
Investment Company Act-specific disclosure to limit those requirements 
to ``registered separate accounts'' or ``variable options'' when 
appropriate.\215\ As another example, the form requires disclosure of 
the procedures to purchase an annuity contract including certain 
particularized information.\216\ We would apply this provision 
generally to all annuities including RILAs, but are only requiring 
certain disclosures relating to the operation of accumulation units and 
sub-accounts to contracts with variable options as those elements are 
not utilized by RILAs.
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    \215\ See, e.g., proposed Items 3, 7, 8, 24, 32, and 34(a) of 
Form N-4; see also proposed definitions for ``class'' (clarifying 
applies to all contracts) and ``platform charge'' (clarifying only 
applies if there is a variable option).
    \216\ See Item 11 of Form N-4.
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(c) Rules 405, 480, 481, 483, and 484
    We are proposing amendments to rule 405 under the Securities Act to 
add the new defined terms ``Form available solely to investment 
companies registered under the Investment Company Act of 1940'' and 
``registered index-linked annuity'' for purposes of Securities Act 
rules.
    Certain Securities Act rules apply only to registration statements 
that are prepared on a form available solely to a registered investment 
company or a business development company. These rules are 17 CFR 
230.480 (``rule 480''), 17 CFR 230.481 (``rule 481''), 17 CFR 230.483 
(``rule 483''), and 17 CFR 230.484 (``rule 484'') under the Securities 
Act, and include forms such as Forms N-1A, N-2, N-3, N-4, N-5, and N-6. 
These rules prescribe requirements relating to: information given with 
the title of securities; information contained in registration 
statements; exhibits filed as part of the registration statement; and 
undertakings required with respect to requests for acceleration.
    By virtue of moving RILAs, which are not issued by a registered 
investment company, onto Form N-4, Form N-4 would be outside the scope 
of this description absent the proposed amendments. As such, the 
proposed new defined term ``form available solely to investment 
companies registered under the Investment Company Act of 1940'' would 
specify that these rules would continue to apply to registration 
statements filed on Form N-4. Specifically, we are proposing to amend 
rule 405 to state that ``a form available solely to investment 
companies registered under the Investment Company Act of 1940'' 
includes the form used to register the offering of securities of a 
registered index-linked annuity for purposes of the Securities Act of 
1933. By operation of this new

[[Page 71124]]

term, RILA registration statements on Form N-4 would be subject to 
rules 480, 481, 483, and 484.\217\ We propose to subject RILA 
registration statements to these rules to help facilitate a consistent 
application of Form N-4 requirements.
---------------------------------------------------------------------------

    \217\ These rules currently apply to registration statements on 
Form N-4. Rule 480 prescribes requirements relating to information 
given with the title of securities. Rule 481 prescribes certain 
information to be required in the registration statement (e.g., 
certain legends to appear on the front and back cover pages of 
prospectuses). Rule 483 prescribes certain requirements relating to 
exhibits filed as part of the registration statement. Rule 484 
prescribes certain required undertakings with respect to requests 
for acceleration under 17 CFR 230.461 when certain arrangements 
exist with respect to indemnification of specified persons against 
liability under the Securities Act.
---------------------------------------------------------------------------

    We are also proposing to add a definition of ``registered index-
linked annuity'' to rule 405, which provides consistent definitions for 
select terms used throughout the Securities Act rules, to simplify 
references to RILAs in the proposed Securities Act rule amendments. 
Specifically, we would define ``registered index-linked annuity'' as an 
annuity or an option available under an annuity (1) that is deemed a 
security; (2) that is offered or sold in a registered offering; (3) 
that is issued by an insurance company that is the subject to the 
supervision of either the insurance commissioner or bank commissioner 
of any state or any agency or officer performing like functions as such 
commissioner; (4) that is not issued by an investment company; and (5) 
whose value, either during the accumulation period or after 
annuitization or both, will earn positive or negative interest based, 
in part, on the performance of any index, rate, or benchmark.
    Under the RILA Act, the term ``registered index-linked annuity'' 
means an annuity (A) that is deemed to be a security, (B) that is 
registered with the Commission in accordance with section 5 of the 
Securities Act, (C) that is issued by an insurance company that is 
subject to the supervision of the insurance commissioner or bank 
commissioner of any State or any agency or officer performing like 
functions as such commission, (D) that is not issued by an investment 
company, and (E) the returns of which are based on the performance of a 
specified benchmark index or rate (or a registered exchange traded fund 
that seeks to track the performance of a specified benchmark index or 
rate) and may be subject to a market value adjustment if amounts are 
withdrawn before the end of the period during which that market value 
adjustment applies.\218\ The proposed definition in rule 405 differs in 
certain respects from this definition, but covers all offerings that 
would be included in the RILA Act's definition. These differences are 
intended to simplify the definition and use terminology that is 
consistent with other rules under the Securities Act. For example, the 
proposed definition clarifies that the insurance company is registering 
the offering of a RILA, rather than the RILA itself, with the 
Commission.\219\ As another example, the proposed definition in rule 
405 does not include a reference to a ``market value adjustment,'' as 
the RILA Act's definition does, because the RILA Act did not require 
that feature as a predicate for being a ``RILA.'' \220\ Since the 
presence of a market value adjustment does not factor into the 
assessment of whether a security is a RILA under the RILA Act's 
definition, it is unnecessary to refer to this feature in the proposed 
definition in rule 405. The proposed definition, however, continues to 
encompass the full scope of the RILA Act's definition.
---------------------------------------------------------------------------

    \218\ See Public Law 117-328; 136 Stat. 4459 (Dec. 29, 2022).
    \219\ This is functionally the same as the requirement of the 
RILA Act that the RILA ``be registered with the Commission in 
accordance with section 5 of the Securities Act of 1933.'' See 
section 101(a)(5) of Division AA, Title I of the Consolidated 
Appropriations Act, 2023.
    \220\ See Public Law 117-328; 136 Stat. 4459 (Dec. 29, 2022) 
(defining RILA as an annuity, among other things, the returns of 
which may be subject to a market value adjustment if amounts are 
withdrawn before the end of a period in which that market value 
adjustment is applied) (emphasis added).
---------------------------------------------------------------------------

(d) Exhibits and Undertakings (Items 27 and 34)
    As a function of moving RILAs onto Form N-4 and subjecting them to 
the requirements of rule 483, RILA issuers would be required to file 
various exhibits as part of a registration statement, similar to the 
requirements these issuers are subject to when registering RILA 
offerings on Forms S-1 and S-3 currently.\221\ Further, in addition to 
the requirements of rule 484, we are proposing to amend Item 34 of Form 
N-4 to include certain undertakings currently required of RILAs as part 
of their Form S-1 and S-3 registration statements.\222\
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    \221\ See Item 16 of Form S-1; Item 16 of Form S-3; Item 601 of 
Regulation S-K.
    \222\ The disclosure currently required in Item 34, the fee 
representation mandated of registered separate accounts under the 
Investment Company Act, would be retained as paragraph (a) of this 
item, limited in application to variable options, and the new 
undertakings added as new paragraph (b) and limited to index-linked 
options. See also 15 U.S.C. 80a-26(f)(2)(A). We would also rename 
this item ``Fee Representation and Undertakings.''
---------------------------------------------------------------------------

Item 27--Exhibits
    RILA issuers are currently subject to the integrated disclosure 
requirements of Regulation S-K when registering their offerings, which 
provide requirements for exhibits that must be filed as part of the 
registration statement.\223\ Conversely, issuers on Form N-4 are 
required to file the exhibits required by rule 483 and Item 27 of Form 
N-4. To provide consistent requirements for Form N-4 issuers, we are 
proposing amendments to require RILA issuers to adhere to the same 
requirements as current issuers on Form N-4. RILA issuers and current 
Form N-4 issuers are subject to somewhat different provisions for 
filing exhibits to a registration statement. However, there are 
significant similarities between the types of the exhibits that each 
type of issuer is required to file, and thus we generally are not 
proposing to change those requirements. RILA registration statements 
will therefore continue to include the types of exhibits currently 
included in their registration statements on Forms S-1 and S-3. For 
example, RILA issuers filing on Form N-4 would continue to be required 
to file such exhibits as the insurance company's certificate of 
incorporation and by-laws, forms of contracts offered in connection 
with the registration statement, underwriting agreements, legal 
opinions, and other material contracts, as applicable.\224\
---------------------------------------------------------------------------

    \223\ See 17 CFR 229.601.
    \224\ See 17 CFR 229.601; proposed Item 27 of Form N-4.
---------------------------------------------------------------------------

    We are not, however, proposing to amend Item 27 of Form N-4 to 
include required exhibits under Regulation S-K that are generally not 
applicable to RILAs or would no longer be relevant in light of the 
proposed amendments.\225\ For example, RILA registration statements are 
currently required to include a filing fee exhibit. Under the proposed 
amendments, RILA issuers would no longer include registration fee 
payments as part a registration statement or post-effective amendment 
filing. Therefore, the proposed amendments to Item 27 of Form N-4 omit 
this existing exhibit requirement for RILAs.\226\
---------------------------------------------------------------------------

    \225\ See 17 CFR 229.601; proposed Item 27 of Form N-4. For 
example, some items, like Item 601(b)(96) of Regulation S-K which 
requires a technical report summary to be filed as an exhibit to a 
registration statement on Form S-1 when a registrant discloses 
information concerning its mineral resources, are wholly 
inapplicable to RILAs.
    \226\ See 17 CFR 229.601(b)(107).
---------------------------------------------------------------------------

    We are, however, proposing to amend Form N-4's required exhibits 
list to add new Item 27(p) for all issuers, which would require the 
filing of any power of

[[Page 71125]]

attorney included pursuant to rule 483(b).\227\ While this exhibit is 
already required to be filed with a Form N-4 registration statement 
under rule 483(b), practices differ in regards to the placement of a 
required power of attorney exhibit within the exhibit list. This 
amendment is designed to assist the public in comparing these exhibits 
by standardizing their location in the registration statement. In 
addition, we are proposing conforming changes in Item 27 to reflect the 
proposed amendments to the definitions in Form N-4.
---------------------------------------------------------------------------

    \227\ RILA registration statements on Forms S-1 and S-3 
similarly include a power of attorney, when applicable, to be filed 
as part of the registrations statement. See 17 CFR 229.601(b)(24). 
See also supra section II.D (discussing the addition of a new 
exhibit relating to changes in accountants).
---------------------------------------------------------------------------

Item 34--Fee Representation and Undertakings
    We are also proposing amendments to Item 34 of Form N-4 to require 
RILA issuers to include specific undertakings in their registration 
statements on Form N-4. Under the proposed amendments, a RILA issuer 
would be required to furnish two undertakings as part of the 
registration statement on Form N-4. These undertakings are (1) to file, 
during any period in which offers or sales are being made, through a 
post-effective amendment to its registration statement, any prospectus 
required by section 10(a)(3) of the Securities Act and (2) that, for 
the purposes of determining liability under the Securities Act, each 
post-effective amendment shall be deemed to be a new registration 
statement relating to the securities offered therein, and the offering 
of such securities at that time shall be deemed to be the initial bona 
fide offering thereof. These proposed undertakings are the same as two 
undertakings RILA issuers currently provide in registration 
statements,\228\ and mirror the effect of similar provisions of section 
24(e) of the Investment Company Act, which applies to amendments to 
Form N-4 registration statements by registered separate accounts.\229\ 
We are proposing that RILA issuers continue to furnish these 
representations concerning post-effective amendments to a registration 
statement as, under the proposed amendments, RILAs may be continuously 
offered on a registration statement for an indefinite amount of time. 
In that time, a RILA registration statement may be subject to a number 
of various post-effective amendments. Conversely, the proposed 
amendments do not include other undertakings which may be currently 
required in RILA registration statements. These undertakings relate to 
the process for conducting continuous offerings under rule 415, which 
RILAs will no longer be subject to under the proposed amendments. In 
addition, we are not including other undertakings that are unnecessary 
in light of the proposed amendments as a whole.\230\ For example, RILA 
issuers currently are required to include an undertaking to remove from 
registration any of the securities being registered that remain unsold 
at the termination of an offering through a post-effective 
amendment.\231\ However, under the proposed amendments, RILA issuers 
will be registering an indeterminate amount of securities and paying 
registration fee payments in arrears on amended Form 24F-2 for the life 
of an offering. Under this approach, a RILA issuer would only pay 
registration fees on the exact amount of net issuance of securities 
relating to an offering and therefore, it is unnecessary to 
additionally require an undertaking that relates to a surplus 
registration of securities during an offering.
---------------------------------------------------------------------------

    \228\ See rule 415(a)(3) and 17 CFR 229.512(a). Under the 
proposed amendments, RILAs would be exempt from the conditions of 
rule 415, including furnishing the required undertakings pursuant to 
Item 512(a) of Regulation S-K. See infra footnote 331. For example, 
RILA registration statements would no longer be required to include 
a statement that the issuer undertakes to file a post-effective 
amendment to reflect in the prospectus any facts or events arising 
after the effective date of the registration statement (or the most 
recent post-effective amendment thereof) which, individually or in 
the aggregate, represent a fundamental change in the information set 
forth in the registration statement. We preliminarily believe this 
requirement is not necessary for RILA registration statements on 
Form N-4 in light of the other amendments we are making to the 
prospectus and registration statement filing process for RILAs. See 
infra section II.E (discussing proposed amendments to rules 485 and 
497 under the Securities Act).
    \229\ See Section 24(e) of the Investment Company Act [15 U.S.C. 
80a-24(e)]. Section 24(e) generally requires a registered separate 
account to amend its registration statement annually to update its 
prospectus for the purposes of section 10(a)(3). Section 24(e) also 
provides that, for the purposes of liability under Securities Act, 
the effective date of the latest amendment is deemed to be the 
effective date of the registration statement with respect to 
securities sold after the effectiveness of amendment.
    \230\ See 17 CFR 229.512(a).
    \231\ See 17 CFR 229.512(a)(3).
---------------------------------------------------------------------------

(e) Request for Comment
    We request comment on these proposed amendments.
    78. Are the instructions for the proposed new section on the facing 
sheet appropriate? Should there be additional or different options for 
the proposed new section on the facing sheet?
    79. Are the definitions in Part A of the General Instructions of 
Form N-4 appropriate? If not, which definitions require additional 
clarity or modifications? For example, do commenters believe it is 
appropriate to use the collective term ``registrant'' to include 
insurance companies that may not be registered entities under the 
Securities Act? Do the definitions effectively convey which provisions 
apply to which type of annuity contract?
    80. Do commenters agree with the statement that ``investor 
account'' is not generally used in insurance company disclosures to 
investors relating to annuity contracts?
    81. Did we appropriately scope those provisions that practically 
only apply to variable options to those types of investment options? 
Are there any other disclosures we should limit to variable options? 
Conversely, are there provisions we limited to variable options that we 
should also apply to index-linked options?
    82. Should we add any additional definitions to Part A of the 
General Instructions to Form N-4? Should we retain the term ``investor 
account''?
    83. Is the definition of ``Index-Linked Option'' appropriate? 
Should we revise the definition in any way? Does this definition 
encompass all potential RILAs and index-linked options offered in 
combination contracts as proposed as required by the RILA Act?
    84. Do commenters agree that the proposed definition of 
``registered index-linked annuity'' in rule 405 is appropriate? Do 
commenters agree that the proposed definition is inclusive of the types 
of RILAs encompassed in the definition of ``registered index-linked 
annuity'' in the RILA Act?
    85. Do commenters agree that with the proposed definition of ``Form 
available solely to investment companies registered under the 
Investment Company Act of 1940?'' Do commenters think this may cause 
confusion as RILA issuers are not investment companies registered under 
the Investment Company Act?
    86. Should we require RILA issuers to adhere to rules 480, 481, 
483, and 484 when registering RILAs on Form N-4?
    87. Do commenters agree that the Exhibit List for proposed Form N-4 
encompasses the types of exhibits that RILA issuers currently include 
in registration statements and is appropriate for RILAs? If not, what 
exhibit requirements should govern RILAs registered on Form N-4? Are 
there additional exhibits that RILA issuers should be required to file 
as part of their registration statements on Form N-4? Are there any 
exhibits that the integrated disclosure requirements of Regulation S-K 
currently include that we should require on Form N-4?

[[Page 71126]]

    88. Is it appropriate to require RILA issuers to furnish the 
undertakings in Item 34 of proposed Form N-4? Are there different or 
additional undertakings that should be required for these issuers?
8. Remaining Form N-4 Items
    We propose to make applicable to RILAs the remaining requirements 
and disclosure items on the existing Form N-4 discussed below, which we 
do not propose to substantively change.\232\ The general instructions 
to the proposed form include both organizational requirements along 
with substantive requirements for the preparation of the registration 
statement, including instructions relating to the organization, 
presentation, and prospectuses permitted to be included in a 
registration statement. The remaining disclosure items principally 
provide investors with information about the annuity contract and how 
it operates. In addition, these items provide basic information about 
the insurance company or the securities offering itself, consistent 
with some of the disclosures provided currently in Forms S-1 or S-3.
---------------------------------------------------------------------------

    \232\ As noted above, some of these items would be amended to 
account for changes in defined terms and to use gender-neutral 
terminology. See supra section II.B.7.
---------------------------------------------------------------------------

(a) General Instructions
    RILAs offerings registered on Form N-4 will need to comply with the 
general instructions of that form. These general instructions are 
structured to include four parts: (A) Definitions; \233\ (B) Filing and 
Use of Form; (C) Preparation of the Registration Statement; and (D) 
Incorporation by Reference.\234\ This would result in a number of 
substantive outcomes for those issuers.\235\ Specifically:
---------------------------------------------------------------------------

    \233\ See supra section II.B.7(b) (discussing proposed 
amendments to the definitions used in the form).
    \234\ The items described in this section can generally be found 
in proposed General Instruction C of Form N-4. See also supra 
section II.B. [Other Amendments] (discussing definitional updates). 
EDGAR permits registrants to file required financial statements 
separately under a specific submission type. Thus, registrants may 
incorporate by reference into their post-effective amendment and 
other filings the financial statements filed under this EDGAR 
submission type. See VASP Adopting Release at n.592.
    \235\ We are also proposing to correct a typographical error in 
General Instruction B.2(b) regarding items that can be omitted for 
registration statements or amendments filed only under the 
Investment Company Act. Currently, the instructions state that 
issuers can omit from Part C Items 26(c), (k), (l), and (m), but 
those items do not exist in the form and Item 26 (Financial 
Statements) is in the SAI, not Part C. This is supposed to refer to 
Item 27 (Exhibits), which do exist, are in Part C, and are more 
Securities Act in nature. This instruction would be updated to refer 
instead to Item 27 as a result.
---------------------------------------------------------------------------

     Plain English. The instructions provide a number of points 
to issuers on how best to promote effective communication between 
issuers and prospective investors. For example, issuers are directed to 
use document design techniques that promote effective communication and 
to respond to the items in the form as simply and directly as 
reasonably possible and avoid the use of formulas as the primary means 
of communicating certain terms or features of a contract.\236\ Issuers 
are also encouraged to use, as appropriate, Q&A formats beyond the KIT, 
tables, and other presentation methods in the form generally.\237\
---------------------------------------------------------------------------

    \236\ See proposed General Instructions C.1.(a) and (c) to Form 
N-4. This specific text is not intended to discourage use of a 
formula, but rather, to clarify that if a formula is used in 
connection with a term or feature, investors are first provided 
appropriate plain English disclosure regarding the operation of the 
term or feature. See VASP Adopting Release at n.591.
    \237\ See proposed General Instruction C.3.(c) to Form N-4. As 
discussed above, we are proposing to require Q&A formatted responses 
to the Key Information Table. See supra section II.B.2.
---------------------------------------------------------------------------

     Organization. Issuers are directed to organize information 
in the prospectus and SAI to make it easy for investors to understand, 
with some limitations on the order of presentation.\238\
---------------------------------------------------------------------------

    \238\ See proposed General Instruction C.3.(b) to Form N-4.
---------------------------------------------------------------------------

     Other Information. Issuers are permitted to include (other 
than in Items 2 or 3) information in the prospectus or SAI not 
otherwise required as long as the additional information is not 
incomplete, inaccurate, or misleading and does not, because of its 
nature, quantity, or manner of presentation, obscure, or impede 
understanding of the information that is required.\239\ In similar 
circumstances, issuers may include sales literature in the 
prospectus.\240\
---------------------------------------------------------------------------

    \239\ See proposed General Instruction C.3.(b) to Form N-4.
    \240\ See proposed General Instruction C.3.(g) to Form N-4.
---------------------------------------------------------------------------

     Terminology. Issuers are required to define special terms 
used in the prospectus in any presentation that clearly conveys meaning 
to investors.\241\ Only these special terms must be defined or listed 
in any glossary or list of definitions elected to be used.\242\ 
Registrants are not required to use the same terminology as that used 
in the form as long as the registrant clearly conveys the meaning of, 
or provides comparable information as, the form's terminology.
---------------------------------------------------------------------------

    \241\ See proposed General Instruction C.3.(d) to Form N-4.
    \242\ Registrants are also permitted to define terminology only 
used in one section in such section.
---------------------------------------------------------------------------

     Multiple Contracts. Issuers are permitted to describe 
multiple contracts that are essentially identical in a single 
prospectus, and the instructions discuss the presentation of 
information regarding multiple contracts in these circumstances.\243\ 
Further, issuers are permitted to combine multiple prospectuses into a 
single registration statement where the contracts are substantially 
similar.
---------------------------------------------------------------------------

    \243\ See proposed General Instruction C.3.(e) to Form N-4. The 
instructions state that ``essentially identical'' is a facts and 
circumstances-based determination but that contracts that differ in 
providing optional benefits or being group or individual contracts 
are not essentially identical whereas variances due only to State 
regulatory requirements would be.
---------------------------------------------------------------------------

     Timing. The instructions state that, consistent with 
Securities Act rules, in most circumstances prospectuses and SAIs used 
after the effective date of the registration statement shall be dated 
approximately as of such effective date, but that a revised or amended 
prospectus or SAI used thereafter need only bear the approximate date 
of its issuance. Each supplement to the prospectus or SAI shall be 
dated separately the approximate date of its first use.\244\
---------------------------------------------------------------------------

    \244\ See proposed General Instruction C.3.(f) to Form N-4; 17 
CFR 230.423.
---------------------------------------------------------------------------

     Provision of Websites. Any websites included in an 
electronic version of the prospectus must include active hyperlinks or 
other means of facilitating access that leads directly to the relevant 
website address, though this requirement does not apply to a prospectus 
filed on EDGAR.\245\
---------------------------------------------------------------------------

    \245\ See proposed General Instruction C.3.(i) to Form N-4.
---------------------------------------------------------------------------

     Incorporation by Reference. In addition to the general 
requirements of the Commission rules on incorporation by reference, 
issuers are not permitted to incorporate by reference information 
required to be in the prospectus unless otherwise permitted by the 
form, but may incorporate by reference the SAI into the prospectus 
without delivering the SAI and incorporate by reference information 
required to be included in the SAI or Part C.\246\
---------------------------------------------------------------------------

    \246\ Proposed General Instruction D of Form N-4.
---------------------------------------------------------------------------

    Collectively, these general instructions are designed to require 
clear disclosure to investors about the variable annuity contracts 
currently registered on the form and to make clear how issuers must 
prepare and file their registration statements. Requiring RILA issuers 
to prepare their registration statements in accordance with these 
instructions would likewise facilitate the provision of clear 
disclosure to

[[Page 71127]]

investors and provide clear direction to these issuers on how to 
prepare and file their registration statements. Further, applying these 
requirements to RILAs as proposed would help ensure the comparability 
of different annuity offerings, for example, by ensuring that the 
filings are held to the same plain English, multiple contract 
disclosure, timing, website, and incorporation by reference standards.
(b) Contract Disclosures
    The table below summarizes disclosures in the existing Form N-4 
about the annuity contract, how it operates, and how it is serviced by 
the insurance company, that we propose making applicable to RILA 
issuers without substantive change.

                      Table 4--Contract Disclosures
------------------------------------------------------------------------
             Item                             Description
------------------------------------------------------------------------
                           Prospectus (Part A)
------------------------------------------------------------------------
General Description of the     A general description of the contract,
 Contracts (Item 8).            including disclosure of the parties'
                                material rights under the contract;
                                relevant contract provisions and
                                limitations; contract obligations funded
                                by the insurance company's general
                                account; class of purchasers, and
                                material changes that can be made to the
                                contract by the insurance company.
Annuity Period (Item 9)......  A description of the annuity options
                                available, including a discussion of
                                material factors that determine the
                                benefits; annuity commencement date;
                                frequency and duration of annuity
                                payments; the effect of assumed
                                investment return; any minimum amount
                                necessary for an annuity option and the
                                consequences of an insufficient amount;
                                rights to change annuity options; and,
                                if applicable, a disclosure that the
                                investor will be unable to withdraw any
                                contract value amounts after the annuity
                                commencement date.
Benefits Available Under the   A tabular summary overview of the
 Contract (Item 10).            benefits available under the contract
                                (e.g., standard or optional death
                                benefits, standard or optional living
                                benefits, etc.), briefly discussing,
                                among other things: whether the benefit
                                is optional; current and maximum fees
                                associated with the benefit; how the
                                benefit amount is calculated; and any
                                associated restrictions or limitations.
Purchases and Contract Value   A description of the procedures for
 (Item 11).                     purchasing a contract, including concise
                                explanations of minimum initial and
                                subsequent purchase payment required,
                                when these payments are credited, and
                                how they are allocated to investment
                                options. Also an identification of the
                                principal underwriters (other than the
                                insurance company) of the contracts and
                                other information about that underwriter
                                such as any affiliations.
Surrenders and Withdrawals     A description of how surrenders and
 (Item 12).                     withdrawals can be made from a contract,
                                including limits on the ability to
                                surrender, how proceeds are calculated,
                                and when surrenders and withdrawals are
                                payable. Issuers must also describe
                                potential effect of surrenders and
                                withdrawals, including how they could
                                affect a contract's value or benefits,
                                and whether any charges or contract
                                adjustments will apply. Issuers should
                                also describe any involuntary redemption
                                provisions and any revocation rights,
                                disclosing the calculation methodology
                                and any associated limitations to
                                investment options.
Loans (Item 13)..............  A description of the loan provisions of
                                the contract, including, for example,
                                loan availability and related
                                restrictions, interest mechanics, the
                                effect of a loan on the contract's value
                                and death benefit, other effects that a
                                loan could have on a contract; and loan
                                procedures.
Taxes (Item 14)..............  A description of the material tax
                                consequences to the investor and
                                beneficiary of buying, holding,
                                exchanging, or exercising rights under
                                the contract. The description should
                                include a discussion of the taxation of
                                annuity payments, death benefit
                                proceeds, periodic and non-periodic
                                withdrawals, loans, and any other
                                distribution that may be received under
                                the contact, as well as the tax benefits
                                accorded the contract and other material
                                tax consequences. Issuers must identify
                                the types of qualified plans for which
                                the contracts are intended to be used
                                and describe any effect of taxation on
                                the determination of contract values.
------------------------------------------------------------------------
              Statement of Additional Information (Part B)
------------------------------------------------------------------------
Cover Page and Table of        A statement of the name of the insurance
 Contents (Item 18).            company, the contract, and related class
                                or classes. This item also requires a
                                table of contents, a statement that the
                                SAI is not a prospectus, information
                                about how to obtain the prospectus, and
                                a discussion of information the SAI
                                incorporates by reference.
Non-principal Risks of         A summary of the non-principal risks of
 Investing in the Contract      purchasing a contract not otherwise
 (Item 20).                     disclosed in the prospectus.
Services (Item 21)...........  Information on services provided to the
                                registrant in connection with the
                                contract. If not disclosed elsewhere,
                                this requires a summary of the
                                substantive provisions of certain
                                management-related service contracts.
                                The registrant must also provide the
                                name and address of its independent
                                public accountant. Where affiliates of
                                the insurance company act as agents for
                                the registrant in connection with the
                                contract, issuers are required to
                                provide specific information about the
                                services performed and remuneration paid
                                for the services. Issuers must also
                                disclose if the insurance company is the
                                principal underwriter of the contract.
Annuity Payments (Item 25)...  A description of the method for
                                determining the amount of annuity
                                payments if not described in the
                                prospectus and how any change in the
                                amount of a payment after the first
                                payment is determined.
------------------------------------------------------------------------
                       Other Information (Part C)
------------------------------------------------------------------------
Management Services (Item 33)  A summary of the substantive provisions
                                of any management-related service
                                contracts not discussed in Parts A or B,
                                including the last three years' payment
                                history.
------------------------------------------------------------------------


[[Page 71128]]

    These requirements apply to existing Form N-4 issuers because these 
disclosures provide investors in these products with a concise 
presentation of material information about the annuity contract they 
would be purchasing, as well as other information that provides 
necessary context about the contracts such as management service 
disclosures.\247\ Because disclosure of this information is equally 
fundamental to the ability of investors to make informed investment 
decisions about RILA contracts, we are proposing to apply these 
requirements to RILAs. For example, existing Form N-4 issuers are 
required to summarize standard and optional benefits available to the 
investor under the contract because these benefits are primary features 
of variable contracts and are also often key differentiators between 
competing products.\248\ Insurance companies also offer these benefits 
in connection with RILAs.
---------------------------------------------------------------------------

    \247\ See Registration Forms for Insurance Company Separate 
Accounts That Offer Variable Annuity Contracts, Investment Company 
Act Release No. 14575 (June 24, 1985) [50 FR 26145 (June 25, 1985)] 
(``Forms N-3 and N-4 Adopting Release'').
    \248\ See VASP Adopting Release at n.26 and accompanying text.
---------------------------------------------------------------------------

(c) Issuer and Offering Disclosures
    In addition to disclosures about the contract, the proposed 
amendments to Form N-4 would require that RILA issuers make certain 
disclosures relating to the issuer and offering consistent with the 
form's current requirements. The table below summarizes these items, 
omitting items in Form N-4 that, by their terms, would not apply to 
RILAs.

                Table 5--Issuer and Offering Disclosures
------------------------------------------------------------------------
                                                        Similar form S-1
             Item                     Description          disclosure
------------------------------------------------------------------------
                           Prospectus (Part A)
------------------------------------------------------------------------
Legal Proceedings (Item 15)...  A description of        Item 11(c)
                                 material pending        (legal
                                 legal proceedings to    proceedings).
                                 which the registered
                                 separate account, the
                                 principal
                                 underwriter, or the
                                 insurance company is
                                 a party, including
                                 similar information
                                 regarding any
                                 proceedings
                                 instituted or known
                                 to be contemplated by
                                 a governmental
                                 authority.
------------------------------------------------------------------------
              Statement of Additional Information (Part B)
------------------------------------------------------------------------
General Information and         Basic information       Item 11(a)
 History (Item 19).              regarding the           (description of
                                 background and          business).
                                 organization of the
                                 insurance company,
                                 including the
                                 jurisdiction in which
                                 it is organized and a
                                 description of its
                                 business.
Underwriters (Item 23)........  Identification of the   Item 8 (plan of
                                 principal               distribution).
                                 underwriters (other
                                 than the insurance
                                 company), and for
                                 affiliated
                                 underwriters, a
                                 description of the
                                 nature of the
                                 affiliation. For each
                                 principal underwriter
                                 distributing the
                                 registrants'
                                 contracts, the
                                 insurance company
                                 must provide
                                 information about the
                                 offering and related
                                 commissions. If the
                                 registrant made
                                 payments to an
                                 underwriter of or
                                 dealer in the
                                 contracts during its
                                 last fiscal year over
                                 a threshold amount,
                                 the registrant must
                                 disclose certain
                                 information about
                                 those payments.
------------------------------------------------------------------------
                       Other Information (Part C)
------------------------------------------------------------------------
Directors and Officers of the   A statement of the      Item 11(k)
 Insurance Company (Item 28).    name, principal         (directors and
                                 business address,       executive
                                 position, and office    officers).
                                 held for each
                                 director or officer
                                 of the insurance
                                 company.
Persons Controlled by or Under  Disclosure of persons   Item 11(k)
 Common Control with the         directly or             (directors and
 Insurance Company or the        indirectly controlled   executive
 Registrant (Item 29).           by or under common      officers).
                                 control with the
                                 registrant or the
                                 sponsoring insurance
                                 company.
Indemnification (Item 30).....  Information about the   Item 14
                                 effect of relevant      (indemnificatio
                                 indemnification         n of directors
                                 agreements,             and officers).
                                 arrangements, or
                                 statutory provisions
                                 through which
                                 underwriters or
                                 affiliates are
                                 insured or
                                 indemnified against
                                 any liability
                                 incurred in their
                                 official capacity.
Principal Underwriters (Item    A statement of          Item 8 (plan of
 31).                            investment companies,   distribution).
                                 other than any
                                 registered separate
                                 account related to
                                 the filing, each
                                 principal underwriter
                                 is also acting as a
                                 principal
                                 underwriter. More
                                 detailed information
                                 about principal
                                 underwriters
                                 identified in Item
                                 23, such as recent
                                 information about
                                 commissions and other
                                 compensation received
                                 from the registrant
                                 by each principal
                                 underwriter.
------------------------------------------------------------------------

    Information about the issuer and the offering process are relevant 
when purchasing an annuity contract, including in the context of a 
RILA.\249\ These items, which largely correspond to items currently 
required to be disclosed by RILAs on Forms S-1 and S-3 as detailed in 
the table above, provide the appropriate amount of information about 
the issuing insurance company and the offering of securities in a way 
tailored to annuity contract investors. For example, because an 
investor's rights under RILAs are dependent on the insurance company's 
claim-paying ability, RILA purchasers also share an interest in 
disclosures of material pending legal proceedings involving the 
insurance company or related parties. On the other hand, where Form S-1 
disclosures have less relevance to RILAs, we have not included those 
disclosures in proposed Form N-4.
---------------------------------------------------------------------------

    \249\ See Forms N-3 and N-4 Adopting Release.

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[[Page 71129]]

(d) Request for Comment
    We request comment on our proposed application of these 
requirements and disclosures to RILAs.
    89. Is it appropriate to require RILA issuers to meet these general 
instructions of the form? Should we tailor any particular provision to 
account for the differences between RILAs and the variable annuities 
that currently use the form? For example, is there any reason to treat 
RILAs different for purposes of the ``essentially identical'' test?
    90. The investor testing results suggested that investors had 
significant difficulty in understanding certain terminology used in 
connection with RILAs, in particular the words ``term'' and 
``investment term.'' \250\ Should we, as a result, change any 
instruction to aid in investor understanding? For example, the form 
currently provides that the prospectus disclosure requirements in Form 
N-4 are intended to elicit information for an average or typical 
investor who may not be sophisticated in legal or financial 
matters.\251\ In light of this feedback in investor testing, should we 
amend this instruction or otherwise provide that insurance companies 
should not use ``term,'' ``investment term,'' or other terminology that 
investors found confusing? Regardless of whether insurance companies 
use ``investment term'' or different terminology, in the glossary 
definition of the ``investment term'' (or another term to describe that 
concept) should insurance companies be required to specifically 
disclose to investors that the ``investment term'' is not the same as 
the life of the contract? As another example, should we require, rather 
than permit, the use of a glossary or list of definitions for the 
entirety of the form so that investors have one place to look to 
understand a particular term? Should we clarify what terms are 
``special terms''? What terminology in particular should be considered 
a special term in the RILA context?
---------------------------------------------------------------------------

    \250\ See OIAD Report at Section 7, Conclusions, Summary of 
Findings.
    \251\ See Instruction C.1.b of Form N-4.
---------------------------------------------------------------------------

    91. Should we define certain key terms that insurance companies 
must use in their registration statement to help to mitigate investor 
confusion and help investors compare one RILA to another? Which key 
terms should we address and how should they be defined?
    92. Is it appropriate, as proposed, to apply these exiting Form N-4 
disclosure requirements to RILA issuers? Are any of these disclosure 
items inappropriate for including in a RILA registration?
    93. Are there other details about the RILA contract, not otherwise 
addressed above, that we should require be disclosed on amended Form N-
4? Are there details regarding the issuer or offering that we should 
require?
    94. Certain of these disclosures are repeated throughout the 
registration statement. For example, similar disclosures regarding 
principal underwriters are contained in the prospectus (Item 11) and 
SAI (Item 23). Should we limit these items to a particular location in 
the registration statement?
    95. Under the proposal, certain information that RILA issuers 
currently provide on Forms S-1 and S-3 would still be required by Form 
N-4, but would be placed in the SAI rather than the prospectus. Should 
any of the information we propose to require in the SAI instead be 
provided in the prospectus?
    96. Are these items properly ordered? Should we move any of these 
items to greater prominence or move items from the prospectus, SAI, or 
Part C to another part of the registration statement?
9. Inline XBRL
    We are proposing to require RILA issuers to tag certain of the 
information they would disclose in their prospectuses and SAIs in a 
structured, machine-readable data language. Specifically, we are 
proposing to require RILA issuers to tag the required information in 
Inline XBRL in accordance with Rule 405 of Regulation S-T (17 CFR 
232.405) and the EDGAR Filer Manual.\252\ The proposed requirements for 
RILA issuers would include tagging of the overview and more in-depth 
descriptions of index-linked options and contract adjustments that RILA 
issuers would have to include in their prospectuses under the proposal, 
the proposed disclosure of census-type information regarding contracts 
with index-linked options, and information disclosed about changes in 
and disagreements with accountants.\253\ RILA issuers, in addition to 
variable contracts issuers whose contracts offer fixed options, would 
have to tag the proposed descriptions of fixed options available under 
the contract.\254\ Form N-4 filers also would have to tag the proposed 
new disclosures indicating that the insurance company is relying on the 
exemption provided by rule 12h-7, and variable contract issuers would 
have to tag the proposed new statement relating to the risks of 
variable options.\255\
---------------------------------------------------------------------------

    \252\ This proposed tagging requirements would be implemented by 
amending General Instruction C.3(h) of Form N-4, and by revising 
rule 405(b) of Regulation S-T to include the proposed RILA-specific 
disclosures. Pursuant to rule 301 of Regulation S-T, the EDGAR Filer 
Manual is incorporated by reference into the Commission's rules. In 
conjunction with the EDGAR Filer Manual, Regulation S-T governs the 
electronic submission of documents filed with the Commission. Rule 
405 of Regulation S-T specifically governs the scope and manner of 
disclosure tagging requirements for operating companies and 
investment companies, including the requirement in rule 405(a)(3) to 
use Inline XBRL as the specific structured data language to use for 
tagging the disclosures.
    \253\ See proposed General Instruction C.3(h) of Form N-4; see 
also proposed Items 2(b)(2), 2(d), 6(d), 7(e), 26(c), and 31A.
    \254\ See proposed General Instruction C.3(h) of Form N-4; see 
also proposed Item 6(e).
    \255\ See proposed General Instruction C.3(h) of Form N-4; see 
also proposed Items 6(a) (instruction) and 6(c)(1).
---------------------------------------------------------------------------

    In addition, RILA issuers would have to tag those prospectus 
disclosures that Form N-4 currently requires to be tagged.\256\ These 
include the following disclosure items: the Key Information Table, Fee 
Table, Principal Risks of Investing in the Contract, Other Benefits 
Available Under the Contract, and Investment Options Available Under 
the Contract in the statutory prospectus. The proposed Inline XBRL 
requirements, like the current Inline XBRL requirements for Form N-4 
issuers, would only apply to contracts being sold to new investors. The 
result of this proposed approach would be that prospectus disclosure 
for contracts that are no longer being sold to new investors would not 
need to be tagged, as we believe tagging this disclosure would have 
less utility for current investors and other market participants.\257\ 
Issuers of variable annuities registered on Form N-4 are currently 
required to tag certain registration statement disclosure items using 
Inline XBRL.\258\ These items are those that would be most suited to 
being tagged in a structured format and be of greatest utility for 
investors and other data users that seek structured data to analyze and 
compare RILA contracts. This rationale is the same as that which the 
Commission articulated in originally adopting these tagging 
requirements in

[[Page 71130]]

the context of variable annuity disclosure.\259\
---------------------------------------------------------------------------

    \256\ See rule 405(b) of Regulation S-T; proposed General 
Instruction C.3(h) of Form N-4; see also proposed Items 3, 4, 5, 10, 
and 17.
    \257\ See VASP Adopting Release at paragraph accompanying n.904.
    \258\ See General Instruction C.3(h) of current Form N-4; see 
also Interactive Data to Improve Financial Reporting, Release No. 
33-9002 (Jan. 30, 2009) [74 FR 6776], as corrected by Release No. 
33-9002A (Apr. 1, 2009) [74 FR 15666] (requiring operating companies 
to submit financial statements accompanying their registration 
statements and periodic and current reports in XBRL).
    \259\ See VASP Adopting Release at section II.E.
---------------------------------------------------------------------------

    In addition to these existing items, requiring Inline XBRL tagging 
of the new disclosure requirements we are proposing to include in Form 
N-4 would benefit investors, other market participants, and the 
Commission by making the disclosures more readily available and easily 
accessible for aggregation, comparison, filtering, and other 
analysis.\260\ We chose these particular items in the form to 
structure--including those that issuers of variable annuities would 
newly have to structure--because we believe that they are the most 
salient to investors and benefit most from being structured. We believe 
that tagging this disclosure, along with the requirement for RILA 
issuers to tag the same other disclosure items that are currently 
tagged, would result in information being tagged that would best permit 
investors and other data users to analyze and compare RILAs. For 
example, this would enable automated extraction and analysis of 
descriptions of index-linked options available under the contract, 
information regarding the features of each currently offered index-
linked option, and information regarding contract adjustments. This 
would allow investors and other market participants more efficiently to 
perform large-scale analysis and comparison across RILAs (including the 
index-linked options that different RILAs offer) and time periods. 
Similarly, the requirement to tag information about fixed options will 
permit the same type of analysis with respect to these investment 
options--including comparing fixed options across contracts, as well as 
index-linked options, variable options, and fixed options offered under 
the same contract.
---------------------------------------------------------------------------

    \260\ See supra footnotes 253-255. These primarily include the 
proposed new disclosure items that are specific to RILAs, as opposed 
to extant Form N-4 disclosure items to which we are proposing 
incremental amendments to address RILAs along with variable 
annuities.
---------------------------------------------------------------------------

    As another example, census-type information about variable annuity 
contracts, which is parallel to the SAI disclosure we propose to 
require for contracts with index-linked options, is currently reported 
in structured data format.\261\ Requiring census-type information about 
contracts with index-linked options to be tagged in Inline XBRL would 
help the Commission and staff identify trends in insurance companies' 
offerings of the contracts, similar to the tools the Commission and 
staff currently have to identify trends in the offering of variable 
annuity contracts. An Inline XBRL requirement also would facilitate 
other analytical benefits, such as more easily extracting and searching 
disclosures about annuities, and automatically comparing these 
disclosures against prior periods.
---------------------------------------------------------------------------

    \261\ See supra section II.B.I.A.6; see also Item F.14 of Form 
N-CEN.
---------------------------------------------------------------------------

    We are proposing to require RILA issuers to submit Interactive Data 
Files as follows, consistent with the approach for issuers of variable 
annuities registered on Form N-4:
     For most post-effective amendments, Interactive Data Files 
would have to be filed either concurrently with the filing, or in a 
subsequent amendment that is filed on or before the date that the post-
effective amendment that contains the related information becomes 
effective; \262\
---------------------------------------------------------------------------

    \262\ See proposed General Instruction C.3(h)(i)(B) of Form N-4. 
This instruction relates to post-effective amendments filed pursuant 
to paragraph (b)(1)(i), (ii), (v), (vi), or (vii) of rule 485.
---------------------------------------------------------------------------

     For initial registration statements (and post-effective 
amendments other than as described in the bullet immediately above), 
Interactive Data Files would have to be filed in a subsequent amendment 
on or before the date the registration statement or post-effective 
amendment that contains the related information becomes effective; 
\263\ and
---------------------------------------------------------------------------

    \263\ See proposed General Instruction C.3(h)(i)(A) of Form N-4. 
This instruction relates to initial registration statements and 
post-effective amendments other than those filed pursuant to 
paragraph (b)(1)(i), (ii), (v), (vi), or (vii) of rule 485.
---------------------------------------------------------------------------

     For any form of prospectus filed pursuant to rule 497(c) 
or (e), Interactive Data Files would have to be submitted concurrently 
with the filing.\264\
---------------------------------------------------------------------------

    \264\ See proposed General Instruction C.3(h)(ii) of Form N-4.
---------------------------------------------------------------------------

    We anticipate that this approach would facilitate the timely 
availability of important information in a structured format for 
investors, investment professionals, and other data users yielding 
substantial benefits. For data aggregators responding to investor 
demand for the data, the availability of the required disclosures in 
the Inline XBRL format concurrent with filing or before the date of 
effectiveness would allow them to quickly process and share the data 
and related analysis with investors.
    Like other issuers, RILA issuers could request temporary and 
continuing hardship exemptions for the inability to timely file 
electronically the Interactive Data File.\265\
---------------------------------------------------------------------------

    \265\ See rule 201 Regulation S-T (temporary hardship exemption) 
and rule 202 of Regulation S-T (continuing hardship exemption).
---------------------------------------------------------------------------

Request for Comments
    We request comment generally on the proposed amendments to require 
the use of Inline XBRL, and specifically on the following issues:
    97. Should we adopt rules that make the submission of structured 
data in the Inline XBRL format mandatory for RILA issuers?
    98. Is it appropriate that RILA issuers would have to tag the same 
disclosure items that variable annuity issuers tag? Why or why not? If 
RILA issuers were to be required to tag other disclosure items that are 
also applicable to variable annuities, should variable annuity issuers 
also be required to tag these same items?
    99. Is it appropriate that all Form N-4 filers would have to tag 
certain of the new disclosure items that we are proposing to add to 
Form N-4, in particular, proposed Items 2(b)(2), 2(d), 6(a) 
(instruction), 6(c)(1), 6(d), 6(e), 7(e), 26(c), and 31A of Form N-4? 
Should insurance companies not be required to tag any of these items, 
and if so, why not? Are there other proposed disclosure items that we 
should also require insurance companies to tag? If so, why?
    100. Is it appropriate that the approach for RILA issuers to submit 
Interactive Data Files be consistent with the current approach for 
issuers of variable annuities registered on Form N-4, as proposed? If 
not, what alternative approach would be more appropriate and why? Is it 
appropriate that, like variable annuities registered on Form N-4, the 
proposed Inline XBRL requirements for RILA issuers would apply only to 
contracts being sold to new investors? Do commenters agree that tagging 
the prospectus disclosure would have less utility for current investors 
and other market participants?
    101. Are any other amendments necessary or appropriate to require 
the submission of the proposed required information in Inline XBRL? If 
so, what are they?

C. Option To Use a Summary Prospectus

    We are proposing to amend rule 498A to permit RILA issuers, as well 
as issuers of ``combination contracts'' offering a combination of 
index-linked options and variable options, to use a summary prospectus 
to satisfy statutory prospectus delivery obligations.\266\

[[Page 71131]]

Investors would continue to have access to the RILA statutory 
prospectus and other information about the RILA contract online, with 
paper or electronic copies of this information upon request.\267\ This 
proposed approach would provide parity between RILA issuers and issuers 
of variable annuities registered on Form N-4, which are permitted to 
use summary prospectuses to satisfy their prospectus delivery 
obligations.
---------------------------------------------------------------------------

    \266\ Section 5(b)(2) of the Securities Act makes it unlawful to 
carry or cause to be carried a security for purposes of sale or for 
delivery after sale ``unless accompanied or preceded'' by a 
prospectus that meets the requirements of section 10(a) of the Act. 
See section 10(a) of the Securities Act (generally requiring a 
prospectus relating to a security to contain the information 
contained in the registration statement). For purposes of this 
release, a prospectus meeting the requirements of a section 10(a) 
prospectus is referred to as a ``statutory prospectus.'' For 
purposes of this section, we refer to RILA contracts and combination 
contracts together as ``RILA contracts.''
    \267\ To further effectuate the changes being proposed, we 
propose to exclude RILA offerings from the provisions of rule 172, 
which provides that a final prospectus will be deemed to precede or 
accompany a security for sale for purposes of Securities Act section 
5(b)(2) as long as the final prospectus meeting the requirements of 
Securities Act section 10(a) is filed or the issuer will make a good 
faith and reasonable effort to file it with the Commission as part 
of the registration statement within the required rule 424 
prospectus filing timeframe. Consistent with registered investment 
companies and business development companies, RILA offerings would 
be subject to a separate framework governing communications with 
investors under the proposal. See supra section II.E; see also 
Offering Reform Release at section VI.B.1.b.
---------------------------------------------------------------------------

RILA Summary Prospectus Overview
    The current summary prospectus rule for variable contracts uses a 
layered disclosure approach designed to provide investors directly with 
key information relating to the contract's terms, benefits, and risks 
in a concise and reader-friendly presentation, with more detailed 
information available elsewhere. We anticipate that the summary 
prospectus framework would improve investor understanding of RILA 
contracts, as the Commission similarly expressed when it adopted the 
summary prospectus rule for variable contracts.\268\ This proposed 
approach for RILA contracts builds on the Commission's decades of 
experience with layered disclosure and rules permitting the use of 
summary prospectuses.\269\ The proposal also recognizes investors' 
expressed preferences for concise and engaging disclosure of key 
information. Accordingly, we believe the proposed approach is 
consistent with the RILA Act's mandate of designing disclosure 
requirements ``with the goal of ensuring that key information is 
conveyed in terms that a purchaser is able to understand.'' \270\
---------------------------------------------------------------------------

    \268\ See VASP Adopting Release at n.21 and accompanying text.
    \269\ See id.; see also Enhanced Disclosure and New Prospectus 
Delivery Option for Registered Open-End Management Investment 
Companies, Investment Company Act Release No. 28584 (Jan. 13, 2009) 
[74 FR 4545 (Jan. 26, 2009)] (``2009 Summary Prospectus Adopting 
Release''); Tailored Shareholder Reports for Mutual Funds and 
Exchange-Traded Funds; Fee Information in Investment Company 
Advertisements, Investment Company Act Release No. 34731 (Oct. 26, 
2022) [87 FR 72758 (Nov. 25, 2022)] (``Tailored Shareholder Reports 
Adopting Release'') (adopting rules incorporating a layered 
disclosure approach to open-end funds' annual and semi-annual 
reports to shareholders).
    \270\ See VASP Adopting Release at n.20 and accompanying text; 
Tailored Shareholder Reports Adopting Release at nn.10, 11, and 29 
and accompanying text; see also supra discussion following footnote 
7.
---------------------------------------------------------------------------

    The proposed amendments to rule 498A would broaden the scope of the 
rule to address RILA contracts.\271\ Under the proposed amendments, the 
rule's conditions for relying on the rule to satisfy prospectus 
delivery obligations would be the same for RILA contracts as for 
variable contracts.\272\ These conditions include the requirements to 
send or give a summary prospectus to an investor no later than the time 
of the ``carrying or delivery'' of the contract security, as well as: 
(1) requirements for the contents that must be included in a summary 
prospectus, (2) limitations on binding a summary prospectus with other 
materials, and (3) requirements that the summary prospectus, statutory 
prospectus, and contract statement of additional information must be 
publicly accessible, free of charge, on a website in the manner that 
the rule specifies.
---------------------------------------------------------------------------

    \271\ To facilitate this change, and to make the terminology 
used in rule 498A more consistent with certain terms used in the 
proposed amendments to Form N-4, we are also proposing a number of 
amendments to the rule's definitions. Specifically, we would (1) 
amend the definitions to ``Class,'' ``Contract,'' Investment 
Option,'' ``Registrant,'' ``Variable Annuity Contract,'' and 
``Variable Life Insurance Contract'' to address RILA contracts, and/
or to make changes to these definitions that correspond with 
amendments to certain definitions in Form N-4 (either definitions of 
these same terms in Form N-4, or definitions of other terms in Form 
N-4 that would otherwise affect the way these terms are defined in 
rule 498A); (2) add definitions for ``Fixed Option,'' ``Index-Linked 
Option,'' ``Insurance Company,'' ``Registered Separate Account,'' 
``RILA Contract,'' and ``Variable Option'' consistent with their 
counterparts in the proposed Form N-4 amendments; and (3) deleting 
the definition of ``Depositor.'' These changes are necessary to 
communicate the provisions of the rule that would be applicable to 
RILA and combination contracts.
    \272\ See proposed rule 498A(f). Rule 498A also provides that a 
communication relating to an offering registered on Form N-4 that a 
person sends or gives after the effective date of the registration 
statement (other than a prospectus that Section 10 of the Securities 
Act permits or requires) will not be deemed a prospectus under 
section 2(a)(10) of the Securities Act, under certain conditions. 
The proposed amendments to rule 498A would extend this provision to 
RILA contracts. See rule 498A(g). Under the proposed amendments, the 
rule 498A provision addressing information that may be incorporated 
by reference into a summary prospectus also would apply the same to 
RILAs as it does to other contracts currently within the scope of 
the rule. See rule 498A(d).
---------------------------------------------------------------------------

    The proposed amendments to rule 498A would involve the use of two 
distinct types of summary prospectuses for RILA contracts, employing 
the same approach the rule currently uses for variable contracts. An 
``initial summary prospectus,'' covering contracts offered to new 
investors, would include certain key information about the contract's 
most salient features, benefits, and risks, presented in plain English 
in a standardized order. The rule amendments would also require 
``updating summary prospectuses'' to be provided to existing investors 
in RILA contracts as a condition to relying on the rule. The updating 
summary prospectus would include a brief description of certain changes 
to the contract that occurred during the previous year, as well as a 
subset of the information required to appear in the initial summary 
prospectus. Certain key information about the index-linked options that 
the contract offers would be provided in both the initial summary 
prospectus and updating summary prospectus.\273\
---------------------------------------------------------------------------

    \273\ This proposed approach is consistent with the approach for 
information about variable options in variable contracts' summary 
prospectuses, in which certain key information about the portfolio 
companies offered as variable options appears in both the initial 
summary prospectus and updating summary prospectus. See proposed 
rule 498A(b)(5)(ix); proposed rule 498A(c)(6)(iv).
---------------------------------------------------------------------------

    As under current rule 498A for variable contracts, the proposed use 
of summary prospectuses for RILA contracts would be voluntary. This 
would be appropriate to provide RILA issuers sufficient time to 
transition to a summary prospectus regime, as well as in recognition of 
the fact that there could be different relative benefits of using a 
summary prospectus for certain RILA issuers and investors in these 
contracts.\274\ Similar considerations informed the Commission's 
decision to adopt a voluntary summary prospectus regime for variable 
contracts.\275\
---------------------------------------------------------------------------

    \274\ The Commission similarly discussed the relative benefits 
to variable contract issuers of using a summary prospectus, based on 
the types of products that these issuers offer and the length of 
their current prospectuses, as well as the benefit of more concise 
disclosure to investors, in adopting rule 498A. See, e.g., VASP 
Adopting Release at section IV.E.1 (discussion in the Economic 
Analysis section of the release, addressing the Commission's 
consideration of mandating summary prospectuses for variable 
contracts).
    \275\ See VASP Adopting Release at discussion accompanying 
nn.41-45; see also infra section III.C.1.c (discussing that 
different issuers and investors could expect to benefit differently 
from this optional prospectus delivery regime, although we expect a 
majority of RILA issuers to choose to use summary prospectuses and 
that therefore the majority of RILA investors will have the option 
to use both summary prospectuses and statutory prospectuses in their 
decision-making, in whatever proportion investors think is best for 
their preferences).
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Initial Summary Prospectus
    As under the current rule 498A, an initial summary prospectus for a 
RILA

[[Page 71132]]

contract may only describe a single contract that the RILA issuer 
currently offers for sale.\276\ An initial summary prospectus may 
describe more than one class of a currently offered contract.\277\ 
Aggregating disclosures for multiple contracts, or currently offered 
and no-longer-offered features and options of a single contract, can 
hinder investors from distinguishing between contract features and 
options that apply to them and those that do not. As a result, an 
initial summary prospectus could simplify and consolidate lengthy and 
complex disclosures. The content and ordering of items is designed to 
highlight aspects of a RILA contract that may not be emphasized in 
marketing materials and other disclosures.
---------------------------------------------------------------------------

    \276\ See proposed rule 498A(b)(1).
    \277\ The definition of the term ``class'' in the proposed 
amendments is the same as the definition in the current rule (that 
is, as a class of a contract that varies principally with respect to 
distribution-related fees and expenses). Proposed rule 498A(a).
---------------------------------------------------------------------------

    Like other summary prospectuses that rule 498A addresses, we are 
proposing a standardized presentation for RILA initial summary 
prospectuses to require certain disclosure items that we believe would 
be most relevant to investors to appear at the beginning of the initial 
summary prospectus, followed by supplemental information.\278\ The 
required presentation could also facilitate comparisons of different 
RILA contracts, as well as comparisons between RILA contracts and 
variable annuities. An initial summary prospectus must contain the 
information required by the rule, and only that information, in the 
order specified by the rule.\279\ The information would be required to 
appear in the same order, and under relevant corresponding headings, as 
the rule specifies.
---------------------------------------------------------------------------

    \278\ See VASP Adopting Release at paragraph accompanying nn.58-
59.
    \279\ Proposed rule 498A(b)(5).
---------------------------------------------------------------------------

    The chart in Table 6 below outlines the information that we propose 
to require to appear in an initial summary prospectus for a RILA 
contract. We would not change these content requirements, with the 
exception of the ordering of the Overview of the Contract and KIT 
disclosures, from the current variable annuity requirements. The 
Commission has historically viewed these items as providing annuity 
investors with key information relating to a contract's terms, 
benefits, and risks in a concise and reader-friendly presentation, and 
highlighting aspects of the contract that may not be emphasized in 
marketing materials and other disclosures.\280\ We preliminarily 
believe that this rationale is equally true in the context of RILA 
disclosure. Further, as discussed above, we propose that the Overview 
of the Contract disclosures (currently Item 3 of Form N-4, but proposed 
to be re-numbered as Item 2) should precede the KIT (currently Item 2 
of Form N-4, but proposed to be re-numbered as Item 3), due to the 
context that the Overview section provides and based upon our 
experience with the form [and taking into account the results of 
investor testing].\281\ This change would be reflected in the 
requirements of rule 498A.\282\ Otherwise, the same order of 
disclosures would be provided as under the current rule.
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    \280\ See VASP Adopting Release at nn. 47-48 and accompanying 
text. To the extent that these content requirements are unchanged 
from the content requirements for variable annuity summary 
prospectuses, our rationale for these requirements has not changed 
from the rationale that is discussed throughout the sections of the 
VASP Adopting Release that address each of the content items 
discussed in Table 6 below. See VASP Adopting Release at section 
II.A.1.c. Further, we provide our reasoning as to why these 
particular disclosures are important to investors in the RILA 
context as a general matter in section II.B, supra.
    \281\ See supra section II.B.I.A.2.
    \282\ Currently, rule 498A requires issuers to place ``Important 
Information You Should Consider About the [Contract]'' disclosures 
before ``Overview of the [Contract] disclosures.''

                               Table 6--Outline of the Initial Summary Prospectus
----------------------------------------------------------------------------------------------------------------
                                    Relevant paragraph  Item of Form N-                         Applicable to
    Heading in initial summary         in proposed      4 (as proposed   Applicable to RILA   variable annuities
            prospectus              amendments to rule  to be amended)       contracts?       registered on Form
                                           498A                                                      N-4?
----------------------------------------------------------------------------------------------------------------
Cover Page:
    Identifying Information        Rule 498A(b)(2)(i)   ..............  [check]............  [check]
     (front cover page) \1\.        through (iv).
    Legends (front cover page)     Rule 498A(b)(2)(v).  ..............  [check]............  [check]
     \2\.
    EDGAR Contract Identifier      Rule 498A(b)(3)....  ..............  [check]............  [check]
     (back cover page).
    Table of Contents (optional).  Rule 498A(b)(4)....  ..............  [check]............  [check]
Content:
    Overview of the [Contract]...  Rule 498A(b)(5)(ii)               2  [check]............  [check]
                                                                        (each paragraph of   (each paragraph of
                                                                         Item 2, as           Item 2 except
                                                                         applicable).         (b)(2) and (d),
                                                                                              which are
                                                                                              generally only
                                                                                              applicable to RILA
                                                                                              contracts).
    Important Information You      Rule 498A(b)(5)(i).               3  [check]............  [check]
     Should Consider About the                                          (with line items     (with line items
     [Contract].                                                         applicable to RILA   applicable to
                                                                         contracts, as        variable
                                                                         specified in         annuities, as
                                                                         instructions to      specified in
                                                                         Item 3).             instructions to
                                                                                              Item 3).
    Benefits Available Under the   Rule 498A(b)(5)(iv)           10(a)  [check]............  [check]
     [Contract].
    Buying the [Contract]........  Rule 498A(b)(5)(v).           11(a)  [check]............  [check]
    Making Withdrawals: Accessing  Rule                          12(a)  [check]............  [check]
     the Money in Your [Contract].  498A(b)(5)(vii).
    Additional Information About   Rule                              4  [check]............  [check]
     Fees.                          498A(b)(5)(viii).

[[Page 71133]]

 
    Appendix: [Investment Options/ Rule 498A(b)(5)(ix)              17  [check]............  [check]
     Portfolio Companies]                                               (Item 17(b) and      (Item 17(a) and
     Available Under the Contract.                                       17(c), as            17(c), as
                                                                         applicable).         applicable).
----------------------------------------------------------------------------------------------------------------
Notes to Table 6:
\1\ The beginning or front cover page of a RILA contract's initial summary prospectus, like the initial summary
  prospectus of a variable annuity registered on Form N-4, would need to include the following information: (1)
  the insurance company's name; (2) the name of the contract, and the class or classes if any, to which the
  initial summary prospectus relates; (3) a statement identifying the document as a ``Summary Prospectus for New
  Investors''; and (4) the approximate date of the first use of the initial summary prospectus.
\2\ The required legends would be the same for RILA contracts and for variable annuities registered on Form N-4.
  These legends address the purpose of the summary prospectus, the availability of the statutory prospectus and
  other information, information regarding the permitted cancellation period for the contract, and a statement
  that additional information about RILA contracts has been prepared by Commission staff and is available at
  investor.gov. The initial summary prospectuses for RILA contracts as well as variable annuities also would
  have to include the additional statements that we are proposing to require on the cover page of the prospectus
  for all Form N-4 issuers. See supra section II.B.1; see also proposed Item 1(a)(6)-(8) of Form N-4.

    A RILA initial summary prospectus would be permitted to include a 
table of contents. A table of contents must show the page number of the 
various sections or subdivisions of the summary prospectus, and 
immediately follow the cover page in any initial summary prospectus 
delivered electronically.
    The topics of the contents included in an initial summary 
prospectus--as well as the required headings under which these contents 
must appear--are the same for a RILA contract summary prospectus as for 
a summary prospectus of a variable annuity registered on Form N-4.\283\ 
Further, certain of these required contents would vary in substance to 
reflect the unique aspects of RILA contracts as compared to variable 
annuities. These are indicated in Table 1 above and include:
---------------------------------------------------------------------------

    \283\ Proposed rule 498A(b)(5).
---------------------------------------------------------------------------

     Disclosure provided under the heading ``Overview of the 
Contract'' (Item 2 of Form N-4), where disclosure for RILA contracts 
must include specific information about index-linked options currently 
offered under the contract, as well as interim value adjustments or 
market value adjustments that could affect an investor's contract 
value;
     Disclosure provided under the heading ``Important 
Information You Should Consider About the Contract'' (Item 3 of Form N-
4), where certain rows in the required table are specific to RILA 
contracts as opposed to variable annuities;
     Disclosure provided under the heading ``Additional 
Information About Fees'' (Item 4 of Form N-4), where the requirements 
for fee information for RILA contracts differ from the parallel 
requirements for variable annuities (reflecting that RILA contracts 
generally do not entail annual contract expenses, but there are other 
costs associated with an investment in a RILA contract); and
     Disclosure under the heading ``Appendix: Investment 
Options Available Under the Contract'' (Item 17 of Form N-4), where a 
RILA contract would include a different summary table for index-linked 
options offered under the contract than the summary table of variable 
options offered under a variable annuity.
    Each of these disclosure items, which would also appear in a RILA 
statutory prospectus, is discussed in more detail in section II.B 
above.
Updating Summary Prospectus
    As under current rule 498A, RILA issuers would not send an updated 
initial summary prospectus to investors each year. Instead, any RILA 
issuers would send an updating summary prospectus, which would provide 
a brief description of certain changes with respect to the contract 
that occurred within the prior year.\284\ This would allow investors to 
focus their attention on new or updated information relating to the 
contract. Additionally, the updating summary prospectus would include 
certain of the items required in the initial summary prospectus that 
are most likely to entail contract changes and where any such contract 
changes are most likely to be important to investors because they 
affect how investors evaluate RILA contracts and are relevant to 
investors when considering additional investment decisions or otherwise 
monitoring their contracts. This is consistent with the Commission's 
approach for variable annuity updating summary prospectuses.\285\
---------------------------------------------------------------------------

    \284\ A RILA issuer, like a variable annuity issuer, could only 
use an updating summary prospectus if it uses an initial summary 
prospectus for each currently offered contract described under the 
contract statutory prospectus to which the updating summary 
prospectus relates. Proposed rule 498A(c)(1). See also VASP Adopting 
Release at n.209 and accompanying text.
    \285\ See VASP Adopting Release at section II.A.2.a. As 
discussed above, the policy rationale for content requirements that 
would be the same among updating summary prospectuses for RILA 
contracts and variable annuity contracts--as well as the rationale 
for the location of these contents--is the same as that which the 
Commission articulated in adopting rule 498A. To the extent that 
these content requirements are unchanged from the content 
requirements for variable annuity summary prospectuses, our 
rationale for these requirements has not changed from the rationale 
that is discussed throughout the sections of the VASP Adopting 
Release that address each of the content items discussed in Table 7 
below. See VASP Adopting Release at section II.A.2.c. Further, we 
provide our reasoning as to why these particular disclosures are 
important to investors in the RILA context as a general matter in 
section II.B, supra.
---------------------------------------------------------------------------

    Because the initial summary prospectus is designed for someone 
making an initial investment decision, we believe that existing RILA 
investors would benefit more from receiving a shorter-form document 
including a brief summary of the changes to the contract, than from 
receiving the initial summary prospectus year after year.\286\ This 
approach also takes into account the cost to maintain and update 
separate initial summary prospectuses for currently offered contracts 
and those no longer offered.
---------------------------------------------------------------------------

    \286\ The Commission discussed this rationale when it initially 
adopted rule 498A. See VASP Adopting Release at section II.A.2.a.
---------------------------------------------------------------------------

    Unlike an initial summary prospectus, which could describe only a 
single contract that a RILA issuer currently offers for sale, an 
updating summary prospectus for a RILA could describe one or more 
contracts covered in the statutory prospectus to which the updating 
summary prospectus relates,

[[Page 71134]]

as under current rule 498A.\287\ Similar to the initial summary 
prospectus, an updating summary prospectus could also describe more 
than one class of a contract.
---------------------------------------------------------------------------

    \287\ Proposed rule 498A(c)(2); see also VASP Adopting Release 
at nn.342-343 and accompanying paragraph.
---------------------------------------------------------------------------

    Updating summary prospectuses for RILA contracts, like initial 
summary prospectuses, would include specific disclosure items appearing 
in a prescribed order, under relevant corresponding headings.\288\ An 
updating summary prospectus for a RILA contract would have to contain 
the information required by the rule, and only that information, in the 
order specified by the rule. The chart in Table 7 below outlines the 
information that we propose to require to appear in an updating summary 
prospectus for a RILA contract.
---------------------------------------------------------------------------

    \288\ Proposed rule 498A(c)(6).

                               Table 7--Outline of the Updating Summary Prospectus
----------------------------------------------------------------------------------------------------------------
                                    Relevant paragraph                                          Applicable to
   Heading in updating summary         in proposed          Item of      Applicable to RILA   variable annuities
            prospectus              amendments to Rule  amended Form N-      contracts?       registered on Form
                                           498A                4                                     N-4?
----------------------------------------------------------------------------------------------------------------
Cover Page:
    Identifying Information        Rule 498A(c)(3)(i)   ..............  [check]............  [check]
     (front cover page) \1\.        through (iv).
    Legends (front cover page)     Rule 498A(c)(3)(v).  ..............  [check]............  [check]
     \2\.
    EDGAR Contract Identifier      Rule 498A(c)(4)....  ..............  [check]............  [check]
     (back cover page).
    Table of Contents (optional)   Rule 498A(c)(5)....  ..............  [check]............  [check]
     \3\.
Content:
    Updated Information About      Rule 498A(c)(6)(i)   ..............  [check]............  [check]
     Your Contract.                 through (ii).
    Important Information You      Rule                              3  [check]............  [check]
     Should Consider About the      498A(c)(6)(iii).                    (with line items     (with line items
     [Contract].                                                         applicable to RILA   applicable to
                                                                         contracts, as        variable
                                                                         specified in         annuities, as
                                                                         instructions to      specified in
                                                                         Item 3).             instructions to
                                                                                              Item 3).
    Appendix: [Investment Options/ Rule 498A(c)(6)(iv)              17  [check]............  [check]
     Portfolio Companies]                                               (Item 17(b) and      (Item 17(a) and
     Available Under the Contract.                                       17(c), as            17(c), as
                                                                         applicable).         applicable).
----------------------------------------------------------------------------------------------------------------
Notes to Table 7:
\1\ The beginning or front cover page of a RILA contract's updating summary prospectus, like the updating
  summary prospectus of a variable annuity registered on Form N-4, would need to include the following
  information: (1) the insurance company's name; (2) the name of the contract(s), and the class or classes if
  any, to which the updating summary prospectus relates; (3) a statement identifying the document as an
  ``Updating Summary Prospectus''; and (4) the approximate date of the first use of the updating summary
  prospectus.
\2\ The required legends would be the same for RILA contracts and for variable annuities registered on Form N-4.
  These legends address the purpose of the summary prospectus, the availability of the statutory prospectus and
  other information, and a statement that additional information about RILA contracts has been prepared by the
  SEC staff and is available at investor.gov. The updating summary prospectuses for RILA contracts as well as
  variable annuities also would have to include the additional statements that we are proposing to require on
  the cover page of the prospectus for all Form N-4 issuers. See supra section II.B.1; see also proposed Item
  1(a)(6) through (8) of Form N-4.
\3\ The requirements for this optional table of contents would be the same for an updating summary prospectus as
  for an initial summary prospectus. See proposed rule 498A(b)(4); proposed rule 498A(c)(5).

    The updating summary prospectus for a RILA contract would be 
required to include a concise description of certain changes to the 
contract made after the date of the most recent updating summary 
prospectus or statutory prospectus that was sent or given to investors. 
These changes would appear under the heading ``Updated Information 
About Your Contract,'' with a required legend following the 
heading.\289\ The changes that the rule would require a RILA issuer to 
describe include those that relate to: (1) the availability of 
investment options under the contract; (2) the overview of the 
contract; (3) the KIT; (4) certain information about fees; (5) benefits 
available under the contract; (6) purchases and contract value; and (7) 
surrenders and withdrawals. The updating summary prospectus also could 
include a concise description of any other changes that the RILA issuer 
wishes to disclose, provided they occurred within the same time period 
as the other changes the rule would require the issuer to describe. In 
providing a concise description of a contract-related change in the 
updating summary prospectus, RILA issuers would have to provide enough 
detail to allow investors to understand the change and how it will 
affect them.\290\
---------------------------------------------------------------------------

    \289\ The legend would be the same for RILA contracts and 
variable annuities: ``The information in this Updating Summary 
Prospectus is a summary of certain [Contract] features that have 
changed since the Updating Summary Prospectus dated [date]. This may 
not reflect all of the changes that have occurred since you entered 
into your [Contract].'' Proposed rule 498A(c)(6)(i)(A).
    \290\ Proposed rule 498A(c)(6)(i)(B); see also VASP Adopting 
Release at paragraph accompanying n.374.
---------------------------------------------------------------------------

    The topics for which a change would necessitate a description in 
the updating summary prospectus would be the same for RILA contracts as 
for variable annuities registered on Form N-4. We do not anticipate 
that disclosures addressing these topics in a contract statutory 
prospectus would change frequently, and thus providing investors with a 
notice and a brief description of any changes that do occur may be more 
informative than repeating all the disclosures each year.\291\ Despite 
the infrequency of changes, investors should be notified of any changes 
to these items given their importance to the investor's experience of 
investing in a RILA contract.\292\
---------------------------------------------------------------------------

    \291\ See VASP Adopting Release at paragraph following n.372.
    \292\ See id. at paragraph accompanying nn.365-369.
---------------------------------------------------------------------------

    We are proposing to amend rule 498A to specify that, in the context 
of a RILA

[[Page 71135]]

contract updating summary prospectus, the change of availability of 
investment options includes a change to any of the features of the 
index-linked options disclosed in the table that Item 17(b) of Form N-4 
requires (that is, the table in the appendix of investment options that 
will appear in a RILA contract summary prospectus).\293\ When the 
Commission adopted rule 498A, it stated that a change that has affected 
availability of portfolio companies (or investment options) includes 
changes in the portfolio companies (or investment options) offered 
under the contract or available in connection with any optional 
benefit.\294\ In the context of index-linked options, any change to the 
features of the index-linked options that the required table would 
describe--that is, the index, type of index, crediting period, index 
crediting methodology, limit on index loss, and/or guaranteed minimum 
limit on index gain--would meaningfully change the investor's 
experience of investing in a RILA contract with the index-linked option 
that investor had previously chosen. For this reason, under the 
proposed amendments a change to any of these features would represent a 
change in the availability of the investment options that the RILA 
contract offers.
---------------------------------------------------------------------------

    \293\ Proposed rule 498A(c)(6)(i).
    \294\ VASP Adopting Release at n.361.
---------------------------------------------------------------------------

    The topics of the additional contents included in an updating 
summary prospectus--as well as the required headings under which these 
contents must appear--would be the same for RILA contracts and for 
variable annuities registered on Form N-4.\295\ Certain of these 
required contents, however, would vary in substance to reflect the 
unique aspects of RILA contracts as compared to variable annuities. 
These are indicated in Table 2 above and include:
---------------------------------------------------------------------------

    \295\ Proposed rule 498A(c)(6).
---------------------------------------------------------------------------

     Disclosure provided under the heading ``Important 
Information You Should Consider About the Contract'' (Item 3 of Form N-
4), where certain rows in the required table are specific to RILA 
contracts as opposed to variable annuities; and
     Disclosure under the heading ``Appendix: Investment 
Options Available Under the Contract'' (Item 17 of Form N-4), where a 
RILA contract would include a different summary table for index-linked 
options offered under the contract than the summary table of variable 
options offered under a variable annuity.
Online Accessibility of Contract Statutory Prospectus and Certain Other 
Documents Relating to the Contract
    Investors who receive a RILA contract initial or updating summary 
prospectus would have access to more detailed information about the 
RILA contract, either by reviewing the information online, or by 
requesting the information to be sent in paper or electronically. In 
this respect, the proposed amendments would include the same 
requirements for RILA contracts as for variable contracts. These 
requirements further the layered disclosure framework that rule 498A 
creates for variable contracts and would, under the proposed 
amendments, similarly create for RILA contracts. Those insurance 
companies that issue RILAs, to the extent that they also issue variable 
annuity contracts that use summary prospectuses under rule 498A, 
therefore should be generally familiar with the practice of making this 
information available online and be able to integrate it with existing 
processes for variable annuities. Similar to what the Commission 
expressed in the context of variable annuity summary prospectuses, 
permitting RILA investors to access the contract statutory prospectus 
in several ways (online and by physical or electronic delivery) would 
maximize the accessibility and usability of this information and that 
investors have historically indicated a preference for both online and 
paper resources.\296\
---------------------------------------------------------------------------

    \296\ See VASP Adopting Release at n.417 and accompanying text; 
and Office of Investor Education and Advocacy of the U.S. Securities 
and Exchange Commission, Study Regarding Financial Literacy Among 
Investors (Aug. 2012), available at https://www.sec.gov/news/studies/2012/917-financial-literacy-study-part1.pdf, at iv, xix. 
These proposed requirements are unchanged from the requirements for 
variable annuity summary prospectuses, and our rationale for these 
requirements has not changed from the Commission's rationale that is 
discussed throughout the sections of the VASP Adopting Release that 
discuss online accessibility requirements. See VASP Adopting Release 
at sections II.A.5 and II.A.6.
---------------------------------------------------------------------------

    Under the proposed amendments, a RILA issuer relying on rule 498A 
(like a variable annuity issuer relying on this rule currently), would 
have to make the contract's current initial summary prospectus, 
updating summary prospectus, statutory prospectus, and SAI (together, 
the ``required online contract documents'') available online.\297\ 
These required online contract documents would be required to be 
publicly accessible, free of charge, at the website address that the 
cover page of the summary prospectus specifies, on or before the time 
that the person relying on the rule provides the summary prospectus to 
investors.\298\ The website address on which the required online 
contract documents appear must be specific enough to lead investors 
directly to the documents, although the website could be a central site 
with prominent links to each document.\299\ The required online 
contract documents would have to be presented in a manner that is 
human-readable and capable of being printed on paper in human-readable 
format, and persons accessing the documents must be able to permanently 
retain electronic versions of the documents. The proposed amendments 
include requirements for linking within the electronic versions of the 
contract statutory prospectus and SAI that are available online, and 
also for linking between electronic versions of contract summary and 
statutory prospectuses that are available online.
---------------------------------------------------------------------------

    \297\ For proposed requirements relating to the required online 
contract documents, see generally proposed rule 498A(h).
    \298\ A current version of each of the required online contract 
documents would have to remain available for at least 90 days 
following either: (1) the time of the ``carrying or delivery'' of 
the contract security if a person is relying on the rule to satisfy 
its section 5(b)(2) prospectus delivery obligations; or (2) if a 
person is relying on the rule to send communications that will not 
be deemed to be prospectuses, the time that the person sends or 
gives the communication to investors. Proposed rule 498A(h)(1).
    \299\ Proposed rule 498A(b)(2)(v)(B).
---------------------------------------------------------------------------

    Both initial summary prospectuses and updating summary prospectuses 
for RILA contracts would, like variable annuity summary prospectuses, 
be required to define any ``special terms'' elected by the registrant, 
using any presentation that clearly conveys their meaning to 
investors.\300\ In RILA contract summary prospectuses that are 
available online, the proposed amendments (like the current rule) 
require that investors be able either to view the definition of each 
special term upon command, or to move directly back and forth between 
each special term and the corresponding entry in any glossary or list 
of definitions the summary prospectus includes.
---------------------------------------------------------------------------

    \300\ Proposed rule 498A(e).
---------------------------------------------------------------------------

    Satisfying each of these requirements regarding online 
accessibility of contract statutory prospectuses and certain other 
documents relating to the contract is a condition for a RILA issuer to 
rely on rule 498A to satisfy prospectus delivery obligations.\301\ 
Failure to comply with any of these conditions could result in a 
violation of section 5(b)(2) unless the contract statutory prospectus 
is delivered by means other than reliance on the rule. We recognize, 
however, that there may be times when, due to events

[[Page 71136]]

beyond a person's control, the person may temporarily not be in 
compliance with the rule's conditions regarding the availability of the 
required online contract documents. The proposed amendments, like the 
current rule, includes a safe harbor provision addressing temporary 
noncompliance.\302\
---------------------------------------------------------------------------

    \301\ Proposed rule 498A(f)(4); proposed rule 498A(g)(4).
    \302\ Proposed rule 498A(h)(4). This provides that the 
conditions regarding the availability of the required online 
contract documents will be deemed to be met, even if the required 
online contract documents are temporarily unavailable, provided that 
the person has reasonable procedures in place to ensure that those 
materials are available in the required manner. A person relying on 
the rule to satisfy prospectus delivery obligations is required to 
take prompt action to ensure that those materials become available 
in the manner required as soon as practicable following the earlier 
of the time when the person knows, or reasonably should have known, 
that the documents were not available in the manner required.
---------------------------------------------------------------------------

Other Requirements for Summary Prospectus and Other Contract Documents
    Like current rule 498A, the proposed amendments to rule 498A 
include additional requirements for RILA contract summary 
prospectuses.\303\ These include:
---------------------------------------------------------------------------

    \303\ For these additional proposed requirements, see generally 
proposed rule 498A(i).
---------------------------------------------------------------------------

     Certain requirements relating to the delivery of paper or 
electronic copies of the required online contract documents upon 
request;
     The requirement that a contract summary prospectus must be 
given greater prominence than any materials that accompany the contract 
summary prospectus;
     Requirements that: (1) the required online documents be 
presented in a format that is convenient for reading and printing, and 
(2) a person be able to retain electronic versions of these documents 
in a format that is convenient for reading and printing; and
     The requirement for any website address that is included 
in an electronic version of the summary prospectus to be an active 
hyperlink.
    Failure to comply with these additional requirements would not, 
however, negate a person's ability to rely on the rule to satisfy 
prospectus delivery obligations.
Request for Comments
    We request comment on the proposed amendments to rule 498A, which 
would permit RILA issuers to use a summary prospectus to satisfy 
statutory prospectus delivery obligations:
    102. Is it appropriate to permit RILA issuers, as well as issuers 
of ``combination contracts,'' to use a summary prospectus to satisfy 
statutory prospectus delivery obligations? Why or why not?
    103. Would the current rule 498A framework, which provides for an 
initial summary prospectus and an updating summary prospectus, be 
appropriate for RILA contracts?
    104. Is it appropriate that the use of summary prospectuses for 
RILA contracts be voluntary, as proposed? Should the use of summary 
prospectuses for RILA contracts instead be mandatory?
    105. Should an initial summary prospectus for a RILA contract only 
describe a single contract that the RILA issuer currently offers for 
sale, as proposed? Instead should we permit an initial summary 
prospectus to describe more than one contract? Do commenters recommend 
any other changes to the proposed scope requirements for initial 
summary prospectuses for RILA contracts?
    106. Is the proposed presentation for RILA initial summary 
prospectuses appropriate, or should we modify the initial summary 
prospectus presentation requirements in any way?
    107. Are the proposed summary prospectus cover page requirements 
appropriate? For example, is it appropriate that initial (and updating) 
summary prospectuses for RILA contracts as well as variable annuities 
also would have to include the additional statements that we are 
proposing to require on the cover page of the prospectus for all Form 
N-4 issuers?
    108. Do the proposed RILA initial summary prospectus content items 
represent the disclosure that would best highlight the key terms, 
benefits, and risks of a RILA contract? Do the proposed content items 
capture key considerations that a typical contract investor would find 
salient? Should an initial summary prospectus include additional 
information an investor would need in order to make an informed 
investment decision, and if so, what would this information be? For 
example, is there any information we are proposing to include in Item 6 
of Form N-4 that we should include in the summary prospectus? 
Alternatively, should we exclude or modify any of the proposed initial 
summary prospectus disclosure requirements? To the extent that 
commenters suggest changes that would result in different content 
across initial summary prospectuses for RILA contracts versus variable 
annuities, why would such changes be appropriate, and how should we 
address these suggested changes in the context of ``combination 
contracts'' offering a combination of index-linked options and variable 
options?
    109. Under the proposal, would initial summary prospectuses for 
RILA contracts, on average, be longer, shorter, or about the same 
length as variable annuity initial summary prospectuses? What would 
account for any meaningful differences in average length?
    110. Is the proposed updating summary prospectus approach 
appropriate for existing RILA investors? Do commenters agree that 
existing RILA investors would benefit more from a brief summary of the 
changes to the contract reflected in the statutory prospectus than from 
receiving all of the disclosures in the initial summary prospectus? 
Instead should existing RILA investors receive a summary prospectus 
akin to the initial summary prospectus year after year?
    111. Should we permit, as proposed, an updating summary prospectus 
for a RILA contract to describe one or more contracts covered in the 
related statutory prospectus? Do commenters recommend any other changes 
to the proposed scope requirements for updating summary prospectuses 
for RILA contracts?
    112. We request comment on the proposed requirement to include a 
brief description of certain contract-related changes in the updating 
summary prospectus. Would this disclosure requirement be useful to 
investors? Is the scope of changes that a RILA issuer would be required 
to discuss appropriate? Are there other topics about which we should 
require a RILA issuer to describe a change? Should we define a change 
in the availability of investment options that would require disclosure 
as a change to any of the features of the index-linked options that the 
table that Item 17(b) of Form N-4 would require, as proposed? If not, 
what definition would be more appropriate and why?
    113. Do the other proposed RILA contract updating summary 
prospectus content items represent the disclosure that would be most 
appropriate and useful for existing investors, for example in 
considering whether to continue making additional purchase payments or 
reallocate contract value? If not, what alternative disclosure should 
we require?
    114. Should rule 498A include, as proposed, the same requirements 
with respect to online accessibility of a RILA contract statutory 
prospectus and certain other documents relating to the contract as the 
rule provides for variable annuities (including, as described above, 
the requirements to make the required online contract documents

[[Page 71137]]

available online, presentation and linking requirements for these 
documents, and requirements relating to the definitions of ``special 
terms'')? If not, what alternative requirements should we adopt to help 
ensure that investors who receive a RILA contract summary prospectus 
have access to more detailed information about the RILA contract if 
they want it? For example, should the required online contract 
documents also include information about the current limits on gains 
for each index-linked option offered under the contract? As another 
example, should the required online contract documents for issuers of 
RILAs and variable annuities that rely on rule 498A also include the 
financial statements of the registrant and/or insurance company, to the 
extent that these financial statements are not included in the SAI (if, 
for instance, an insurer's financial statements are filed on Form N-
VPFS or Form 10-K, and are incorporated by reference into the 
registration statement)? To what extent would using the same approach 
for both RILAs and variable annuities ease compliance burdens on 
insurers? Is it appropriate that, as proposed, satisfying each of these 
proposed online accessibility requirements would be a condition for a 
RILA issuer to rely on rule 498A to satisfy prospectus delivery 
obligations? Are there any modifications we should make to the proposed 
safe harbor provision for temporary noncompliance?
    115. Should rule 498A include, as proposed, the same other 
requirements for summary prospectuses (relating to delivery upon 
request, prominence of the summary prospectus in relation to 
accompanying materials, ``convenient for reading and printing'' 
formatting, and hyperlinking requirements) as the rule currently 
requires for variable annuity summary prospectuses? Is it appropriate 
that, as proposed, satisfying each of these proposed requirements would 
not be a condition for a RILA issuer to rely on rule 498A to satisfy 
prospectus delivery obligations?

D. Accounting (Items 16 and 26)

    We are proposing to permit RILA issuers to provide financial 
statements on amended Form N-4 in the same way that insurance companies 
currently do on Form N-4. The principal consequence of this change 
would be that the financial statements filed in connection with a RILA 
registration statement could be prepared in SAP to the same extent as 
currently permitted for insurance companies' financial statements filed 
on that form. Instruction 1 to Item 26(b) of Form N-4 currently permits 
insurance companies that are the depositors of variable annuity 
separate accounts to prepare their financial statements for use in a 
registration statement filed on Form N-4 in accordance with SAP if the 
depositor would not have to prepare its financial statements in 
accordance with GAAP except for use in that registration statement or 
other registration statements filed on Forms N-3, N-4, or N-6 (the 
forms used to register insurance products that are issued by investment 
companies).\304\ The instruction further states that the depositor 
insurance company's financial statements must be prepared in accordance 
with GAAP if it prepares financial information in accordance with GAAP 
for use by its parent (as defined in Regulation S-X) in any report 
under sections 13(a) and 15(d) of the Exchange Act or any registration 
statement filed under the Securities Act.\305\ In interpreting this 
instruction the Commission has stated that the insurance product forms 
do not require the use of GAAP when: (1) GAAP financial statements are 
not prepared for either the depositor or its parent; or (2) the 
depositor's parent prepares GAAP financial statements, but the 
depositor's accounts are immaterial to its parent's consolidated 
financial statements and, therefore, neither partial GAAP financial 
statements nor a GAAP reporting package is prepared by the 
depositor.\306\
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    \304\ Similar to insurance products currently filing 
registration statements on these forms, RILA issuers would also be 
required, if all of the required financial statements of the 
insurance company are not in the prospectus, to state in the 
prospectus, under a separate caption, where the financial statements 
may be found and to briefly explain how investors may obtain any 
financial statements not in the SAI. Proposed item 16 of Form N-4.
    \305\ Similar instructions are contained in the other forms used 
to register insurance products issued by investment companies. See 
instruction 1 to Item 31(b) of Form N-3 and instruction 1 to Item 
28(b) of Form N-6.
    \306\ See Registration Form for Insurance Company Separate 
Accounts Registered as Unit Investment Trusts that Offer Variable 
Life Insurance Policies, Investment Company Act Release No. 23066 
(Mar. 13, 1998) [63 FR 13988 (Mar. 23, 1998)] (discussing the same 
instruction in Form N-6).
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    Forms S-1 and S-3 do not include an instruction similar to 
Instruction 1 of Item 26(b) of Form N-4. Rather RILAs registered on 
these forms are required to provide their financial statements in 
accordance with GAAP. The Commission, however, acting through authority 
delegated to the staff, has permitted insurance companies registering 
on Form S-1 to include SAP financial statements in RILA registration 
statements in the circumstances permitted by Form N-4.\307\ The 
Commission has stated that this approach appropriately recognizes the 
cost burdens that would be imposed if the Commission were to require 
GAAP financial statements in cases where the depositor is not otherwise 
required to prepare financial information in accordance with GAAP.\308\ 
We preliminarily believe this is also true for insurance companies that 
offer RILAs and that it is important to provide for the consistent 
treatment of financial statements for all insurance companies that meet 
the circumstances permitted by Form N-4. As a result, permitting RILA 
issuers to rely on Instruction 1 to Item 26 to provide SAP financial 
statements to the same extent as issuers registering offerings of 
variable annuities on Form N-4 would be consistent with investor 
protection. In addition, SAP financial statements, which focus on an 
issuer's ability to meet its obligations under its insurance contracts, 
as regulated by state law, appear to provide sufficient material 
information for investors evaluating RILAs.
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    \307\ See, e.g., F&G Life Letter.
    \308\ See Registration Form for Insurance Company Separate 
Accounts Registered as Unit Investment Trusts That Offer Variable 
Life Insurance Policies, Investment Company Act Release No. 25522 
(Apr. 12, 2002) [67 FR 19848 (Apr. 23, 2002)]; see also VASP 
Adopting Release at n.813 and accompanying text.
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    Another consequence of requiring insurance companies to register 
offerings of RILAs on Form N-4 is that they will have greater 
flexibility to update their registration statement without the need to 
update certain financial statements. Under section 10(a)(3) of the 
Securities Act, RILA issuers, like variable annuity issuers, generally 
must file a post-effective amendment annually to update their audited 
fiscal year-end financial statements. In addition, Regulation S-X 
requires Form S-1 filers to include unaudited interim financial 
statements in any new registration statement or post-effective 
amendment that goes effective later than 134 days after the end of the 
insurer's fiscal year.\309\ Form N-4 filers are not subject to this 
requirement.\310\ In addition, after the end of an insurer's fiscal 
year, RILA issuers must include year-end audited financial statements 
in any new registration statement or post-effective amendment filed 45 
days after the fiscal

[[Page 71138]]

year-end.\311\ However, Form N-4 filers instead have a 90-day grace 
period.\312\ As a result of the proposal to include RILAs on Form N-4, 
RILA issuers therefore would be able to file and amend their 
registration statements during certain times of year without the need 
to update their financial statements, which RILA issuers cannot do 
today.\313\ These approaches, in consideration of consistency in 
treatment among all insurance companies that meet the circumstances 
permitted by Form N-4, are equally appropriate for RILA filers on Form 
N-4.
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    \309\ 17 CFR 210.3-12(a). RILA issuers that rely on rule 12h-7 
are not required to provide periodic Exchange Act reports, including 
quarterly reports that include interim financial statements. 
Therefore, they must prepare interim financial statements for 
Securities Act registration statements, like Form S-1 and Form S-3, 
even though they do not prepare interim financial statements for 
other purposes.
    \310\ See Instruction 3 to Item 26(b) of Form N-4.
    \311\ See 17 CFR 210.3-01(c).
    \312\ See Instruction 3 to Item 26(b) of Form N-4.
    \313\ A further consequence of the proposed changes would be 
that insurance companies would generally be making available their 
RILA-related financial statements to investors on an annual basis, 
consistent with the timing of financial statements for variable 
annuities. Currently, insurance companies relying upon rule 12h-7 
provide their RILA-related financials annually, whereas insurance 
companies not relying on that rule provide financial statements 
quarterly. Insurance companies not relying on rule 12h-7 will file 
financial statements more frequently than annually if there are any 
post-effective amendments to the registration statement that require 
updated financial statements. See Form 10-Q.
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    We are also proposing to require RILAs to provide the information 
relating to changes in and disagreements with accountants on accounting 
and financial disclosure as detailed in 17 CFR 229.304 (``Item 304 of 
Regulation S-K''). Further, RILAs would be required to provide as an 
exhibit any letter from the insurance company's former independent 
accountant regarding its concurrence or disagreement with the 
statements made by the insurance company in the registration statement 
concerning the resignation or dismissal as the insurance company's 
principal accountant. These items are currently provided by RILAs on 
Forms S-1 and S-3 and are designed to address the practice of ``opinion 
shopping'' for an auditor willing to support a proposed accounting 
treatment designed to help a company achieve its reporting objectives 
even though that treatment might frustrate reliable reporting.\314\ The 
proposed amendments would not be required for variable annuities in 
light of their tiered investment company structure. Variable annuities 
typically invest indirectly in mutual funds offered as investment 
options under such contracts, which themselves are subject to similar 
disclosure obligations relating to changes in and disagreements with 
accountants on accounting and financial disclosure.\315\
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    \314\ See Disclosure Amendments to Regulation S-K, Form 8-K and 
Schedule 14A Regarding Changes in Accountants and Potential Opinion 
Shopping Situations, Investment Company Act Release No. 16358 (Apr. 
12, 1988) [53 FR 12924 (Apr. 20, 1988)]; see also item 11(i) of Form 
S-1.
    \315\ See Item 27(b)(4) of Form N-1A.
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    We request comment on these aspects of the proposal.
    116. Is it appropriate, as proposed, to permit RILA issuers to use 
the same approach with respect to the use of SAP financial statements, 
for purposes of preparing financial statements that are included on a 
registration statement on Form N-4, as Form N-4 currently provides for 
insurance company issuers? Why or why not?
    117. Would SAP financials provide sufficient material information 
for a RILA investor to make an informed investment decision? Why or why 
not?
    118. Why do insurance companies currently provide SAP financials 
instead of GAAP financials in their Form N-4 registration statements 
when permitted to do so? Do SAP financials currently provide sufficient 
material information for a variable annuity investor to make an 
informed investment decision?
    119. Should we require the proposed items relating to changes in 
accountants for RILAs? If so, should we also require these items for 
all Form N-4 filers? If the information called for in Item 304 of 
Regulation S-K is required, is it appropriately placed in the SAI?

E. Filing and Prospectus Delivery Rules

1. Fee Payment Method and Amendments to Form 24F-2
    We are proposing to require insurance companies to pay securities 
registration fees relating to RILA offerings using the same method used 
for variable annuities.\316\ Specifically, issuers registering the 
offerings of RILAs on amended Form N-4 would be deemed to be 
registering an indeterminate amount of securities upon effectiveness of 
the registration statement.\317\ These issuers would then be required 
to pay registration fees annually based on their net sales of these 
securities, no later than 90 days after the issuer's fiscal year ends, 
on the form that is used by registered separate accounts to pay 
securities registration fees relating to variable annuities (Form 24F-
2).\318\ We are further proposing to specify the calculation method for 
paying securities registration fees for RILA offerings, consistent with 
the fee calculation methodology that applies to variable 
annuities.\319\ We are also proposing amendments to Form 24F-2 to 
specify when issuers can take credits for RILA redemptions that pre-
date their use of that form and when expiring annuity contracts are 
rolled over into a new crediting period, as well as other non-
substantive and conforming amendments.\320\
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    \316\ To accommodate the changes proposed in this release, EDGAR 
would be modified to require insurance companies registering RILAs 
to use a different CIK than that used for their other offerings. One 
CIK would be utilized to register the offerings of RILAs on Form N-4 
and pay registration fees for securities relating to RILA offerings 
on Form 24F-2. The other would be utilized to register the insurance 
company's other offerings of securities as they do currently. As a 
result, insurance companies would need to utilize separate CIKs for 
their RILA-related filings. If the issuer only offers RILAs, it 
should only use one CIK. Further, we are proposing to amend rule 313 
of Regulation S-T in order to permit filings relating to RILA 
offerings to have both an investment company type and contract 
identifier in order to facilitate RILA issuers' filing these forms 
and for ease in identification of particular RILA contracts.
    \317\ The proposed rule amendments would apply the same 
registration fee payment approach to RILAs that is currently 
provided by rule 24f-2 to current Form N-4 issuers. See proposed 
rules 456(e) (providing that where the registration statement 
relates to a RILA offering, RILA issuers would be deemed to have 
registered an indeterminate amount of securities for purposes of 
sections 5 and 6(a) of the Securities Act upon the effective date of 
its registration statement); and 457(u) (providing for RILA issuers 
to pay registration fees for securities relating to RILA offerings 
on the same annual net basis as other Form N-4 issuers); see also 
proposed Form 24F-2. See section 4(e) of the Exchange Act [15 U.S.C. 
78d-4(e)]; section 28 of the Securities Act [15 U.S.C. 77z-3]. We 
preliminarily believe that these actions are necessary or 
appropriate in the public interest and consistent with the 
protection of investors.
    \318\ As a general matter, the proposed amendments would provide 
the same process for registering an indeterminate amount of 
securities relating to RILA offerings as is currently provided for 
exchange-traded vehicle securities under rule 456(d) (which, in 
turn, mirrors of the process for current Form N-4 issuers to 
register securities) except that (1) this process would be mandatory 
for RILAs and (2) RILA issuers would pay fees on Form 24F-2 instead 
of through a prospectus supplement in accordance with rule 424. See 
also Securities Offering Reform for Closed-End Investment Companies, 
Investment Company Act Release No. 33836 (Apr. 8, 2020) [85 FR 33290 
(June 1, 2020)] (``Closed-End Fund Offering Reform Adopting 
Release''). For example, the proposed amendments would provide the 
same mechanics as other Form 24F-2 issuers when addressing interest 
calculations for late payments.
    \319\ All payments of filings fees for RILA registration 
statements would continue to be made by wire transfer, debit card, 
or credit card or via an ACH and there would be no refunds. See 17 
CFR 230.111; proposed instruction A.5 to Form 24F-2.
    \320\ In addition to conforming changes in proposed Form 24F-2 
to effectuate the changes discussed below, in order to improve the 
form we are proposing to: (1) remove reporting relating to shares 
paid for prior to Oct. 11, 1997; (2) remove the statement in current 
Instruction A.3 to consult the EDGAR Filer Manual because the 
instructions referenced in Instruction A.3 are intended to be 
removed from the EDGAR Filer Manual; (3) remove current Instruction 
C.4, which includes EDGAR header tags for Item 5 of the form, as 
this information is no longer sufficient for filing purposes and 
current technical specifications are provided through the technical 
specifications page on the Commission's web page; (4) revise current 
Instruction C.9 for Item 5(vii) to correspond to the current 
instructions for fee filing rates on the Commission's website; (5) 
correct the website linked in current Instruction D.1; and (6) 
remove the estimated Paperwork Reduction Act burden cited in current 
Instruction F as extraneous in light of the OMB approval box that 
contains information on this topic.

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[[Page 71139]]

    Currently, insurance companies, like most issuers, register a 
specific amount of securities when registering RILAs and are required 
to pay a registration fee for those securities to the Commission at the 
time of filing a registration statement on Form S-1 or S-3.\321\ In 
contrast, the Investment Company Act provides that certain registered 
investment companies, including the variable annuity separate accounts 
that file on Form N-4, are deemed to have registered an indefinite 
amount of securities upon the effective date of their registration 
statement.\322\ Instead of paying registration fees at the time of 
filing a registration statement, registered separate accounts pay 
registration fees in arrears based on their net issuance of securities, 
no later than 90 days after the issuer's fiscal year end, on Form 24F-
2.\323\ As a result, RILA issuers must currently ensure that they do 
not inadvertently sell more securities than they have registered, 
however this is not a concern in relation to variable annuities. 
Further, RILA issuers pay fees at effectiveness on Forms S-1 or S-3 for 
the securities being registered, while registered separate accounts do 
not pay a fee at effectiveness on Form N-4 but rather pay fees annually 
on Form 24F-2 on the net sales of securities that year.
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    \321\ In general, issuers today--including insurance companies 
issuing securities relating to RILA offerings--are required under 
the Securities Act to pay a registration fee to the Commission at 
the time of filing a registration statement. See sections 6(b)(1) 
(requiring applicants to pay a fee to the Commission at the time of 
filing a registration statement) and (c) (providing that a 
registration statement shall not be deemed to have taken place 
without payment of a registration fee) of the Securities Act [15 
U.S.C. 77f(b)(1) and (c)]. This means they pay registration fees at 
the time they register the offering of securities, regardless of 
when (or if) they sell them. In addition, although well-known 
seasoned issuers have additional flexibility in paying filing fees, 
none of the insurance companies that issue securities relating to 
RILA offerings currently claim status as a well-known seasoned 
issuer. See supra footnote 21.
    \322\ See 15 U.S.C. 80a-24(f).
    \323\ See id.; Form 24F-2.
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    Consistent with the other elements of this proposal, these proposed 
amendments are designed to require insurance companies to use the same 
framework to pay securities registration fees for RILAs that they do 
for variable annuities. Insurance companies offer RILAs in a manner 
substantially similar to variable annuities and would similarly benefit 
from paying registration fees on an annual net basis and from 
registering offerings of an indeterminate number of securities. The 
proposed amendments would provide registration fee payment parity for 
an insurance company that may offer one or more related insurance 
products, including index-linked options offered as part of combination 
annuity contracts.\324\ Requiring insurance companies to pay 
registration fees for securities relating to RILA offerings on Form 
24F-2 would therefore be efficient for insurance companies. This 
approach would eliminate the risk that a RILA issuer may inadvertently 
oversell securities with respect to a registration statement on Form N-
4, and the payment of fees on an annual net basis furthermore should 
lead to a reduction in overall filing fees relating to RILAs.\325\ 
Further, by requiring RILA and variable annuity offerings to use the 
same form and payment method, this process also would be efficient for 
the Commission.
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    \324\ For combination products, each issuer of securities under 
the product (e.g., the separate account for the variable option and 
the insurance company for the index-linked option) would file a 
separate Form 24F-2 relating to the payment of registration fees for 
its respective securities offered under the product.
    \325\ As part of the proposed amendments to Form 24F-2, RILA 
issuers would be required to include the value of any expiring 
annuity contract or index-linked option that is rolled over into a 
new crediting period in its calculation of the aggregate sale price 
of securities sold during the fiscal year. RILA issuers further 
would be required to report such contracts or options as a 
redemption. This would result in zero net sales being reported in 
this situation. See proposed instruction C.4 to Form 24F-2.
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    The proposed fee calculation method is also consistent with the 
continuous offering of RILAs to investors. These investors may make 
additional allocations or other investment decisions over time with 
respect to an investment in a RILA. One effect of this is that RILA 
issuers, unlike other Form S-1 or S-3 issuers, may have increased 
difficulty in using the filing fees associated with unsold securities 
of a particular RILA offering to offset the filing fees due for a 
subsequent registration statement. This is because many RILA issuers 
are not easily able to terminate a RILA offering, a necessary step to 
recoup fees paid on unsold securities for use in a separate RILA 
offering.\326\
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    \326\ See 17 CFR 230.457(p). To facilitate the transition to 
calculating fees on an annual net basis and filing Form 24F-2, a 
RILA's fee calculation should exclude excess securities that were 
registered under its last registration statement that remain unsold 
prior to the effectiveness of any final rule. See proposed 
instruction C.5 to Form 24F-2. This would be so that a filing fee is 
not charged twice for the same securities being registered.
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    We are also proposing amendments to Form 24F-2 that would indicate 
when RILA issuers can take credits for redemptions of securities not 
claimed in a prior fiscal year (``non-claimed prior redemptions''). 
Typically, issuers that file Form 24F-2 can take credit for these 
redemptions to offset some of the purchases being reported for the 
current fiscal year. This is only intended to be available for non-
claimed prior redemptions that had occurred since the use of the form 
(and the payment of registration fees on an annual net basis) was 
available to the issuer.\327\ The form, however, includes a legacy 
instruction for any non-claimed redemptions in a prior fiscal year that 
ends no earlier than October 11, 1995. This specific date is related to 
the timing of open-end funds' and unit investment trusts' transition to 
Form 24F-2.\328\ With the addition of RILAs to this form, we are 
removing the reference to October 11, 1995 in Item 5(iii) of Form 24F-2 
and amending the related instructions so that it is clear that issuers 
will only be able to take credit for non-claimed prior redemptions that 
occur on or after the date the issuer became eligible to use the form, 
which for RILA issuers would be the effective date of the proposed 
amendments, if adopted.\329\
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    \327\ See generally Closed-End Fund Offering Reform Adopting 
Release at n.348.
    \328\ See Registration Under the Securities Act of 1933 of 
Certain Investment Company Securities, Investment Company Act 
Release No. 22815 (Sep. 10, 1997) [62 FR 47934 (Sep. 12, 1997)] at 
n.9.
    \329\ In addition to RILA issuers, interval funds have been able 
to use Form 24F-2 since Aug. 1, 2021 (the effective date of rule 
24f-2 as applied to interval funds), so these funds likewise would 
only be able to take credit for non-claimed prior redemptions since 
that date.
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    We request comment on the proposed fee payment methodology for 
RILAs and the proposed amendments to Form 24F-2.
    120. Is it appropriate to require RILA issuers to pay registration 
fees in arrears for the registration of securities? Would the process 
be more efficient for insurance companies than the current registration 
fee processes used by RILA issuers? If not, what is the appropriate 
manner in which RILA issuers should pay registration fees? For example, 
should we instead amend Form N-4 to permit or require the payment of 
fees on that form for RILA issuers at the time the issuer files the 
registration statement, consistent with insurance companies' current 
practices when paying registration fees for securities offerings 
registered on Forms S-1 and S-3?
    121. Instead of requiring RILA issuers to pay registration fees in 
arrears as proposed, should we permit RILA issuers to choose whether to 
take this treatment or use some other registration fee system?

[[Page 71140]]

    122. Is the proposed calculation methodology appropriate for RILAs? 
If not, what aspects of the methodology should be changed and why?
    123. Is it appropriate to have RILA issuers file Form 24F-2 for 
this purpose, or should we instead have RILA issuers file a prospectus 
pursuant to rule 424(i), consistent with the treatment of exchange-
traded vehicle securities under rule 456(d)?
    124. Are the proposed amendments to Form 24F-2 appropriate? Should 
we tailor Form 24F-2 to RILAs in other ways? Are the proposed 
amendments clear as to how a RILA issuer would use that form? Are there 
any other clarifications we should offer?
    125. Should we, as proposed, require separate Form 24F-2 filings 
for index-linked options and variable options that are offered as 
investment options in combination contracts? If not, how can we amend 
Form 24F-2 and rules 456 and 457 to accommodate combination contracts, 
given different legal entities are issuing the securities associated 
with different types of investment options?
    126. Are the proposed amendments to rule 456 and 457 sufficiently 
clear as to how RILA issuers should calculate and pay the registration 
fees for securities relating to RILA offerings? Should we amend the 
rules further to provide more clarity?
    127. The proposed amendments to rule 456 and Form 24F-2 provide 
procedures for how to address a merger or the cessation of operations 
of the issuer, which in the RILA context is the insurance company 
issuing the RILA. Are these provisions necessary for RILA issuers? 
Should these instructions instead address the cessation or merger of 
the particular RILA being reported?
    128. Do commenters agree with the proposed requirements for how to 
address non-claimed prior redemptions? Why or why not?
    129. Are there any other considerations or changes we should make 
to facilitate requiring RILA issuers to pay registration fees in 
arrears, either regarding securities already registered by RILA issuers 
or for some other reason?
2. Post-Effective Amendments and Prospectus Supplements
    To facilitate the registration of RILA offerings on Form N-4 and 
consistent with the other elements of this proposal, we are proposing 
amendments to require RILA issuers to use the same framework for filing 
post-effective amendments to the registration statement that other 
issuers on Form N-4 currently use. Specifically, the proposal would 
amend rule 485 to require RILA issuers to use that rule when amending 
RILA registration statements on Form N-4. This change would permit RILA 
issuers to file post-effective amendments that become automatically 
effective under rule 485(a) after a specified period of time after the 
filing or, in certain enumerated circumstances, immediately effective 
under rule 485(b).\330\ In addition, we are also proposing amendments 
that would require RILA issuers to apply rule 497 under the Securities 
Act when appropriate to file RILA prospectuses and prospectus 
supplements with the Commission.\331\ These amendments are intended to 
facilitate a uniform post-effective amendment and prospectus filing 
framework for issuers on Form N-4 and should provide increased 
efficiencies for RILA issuers and Commission staff by applying 
consistent procedures for all security offerings registered on Form N-
4.
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    \330\ See rule 485(b).
    \331\ Consistent with this change, we are also proposing 
corresponding changes to (1) rule 424(f) to specify that RILA 
issuers must use rule 497 rather than rule 424 when filing 
prospectuses and prospectus supplements, and (2) rule 415(b) to 
exempt RILA offerings from the requirements of paragraph (a) of that 
rule consistent with the treatment of variable annuity separate 
accounts.
---------------------------------------------------------------------------

    Our rules currently provide different processes for RILA issuers on 
Forms S-1 and S-3 and current issuers on Form N-4 to update and keep 
current a registration statement or prospectus. Form N-4 is used by 
separate accounts that are unit investment trusts that offer variable 
contracts to register their securities under the Investment Company Act 
and to register an indefinite amount of continuously-sold securities 
under the Securities Act. Therefore, these issuers have a system of 
updating their disclosures that facilitates that structure. Issuers on 
Form N-4 typically update their registration statements annually 
through a post-effective amendment filed in accordance with rule 485 in 
order to, among other things, comply with Securities Act 
requirements.\332\ Rule 485(b) provides for the immediate effectiveness 
of many of the routine updates that issuers on Form N-4 may make over 
the course of a continuous, long-term offering, for example, those 
amendments filed for no purpose other than to bring the financial 
statements up to date under section 10(a)(3) of the Securities 
Act.\333\ These issuers also file forms of prospectuses used in their 
offerings through rule 497 and can supplement their prospectuses, also 
known as ``stickering,'' to reflect certain changes to the information 
disclosed by making a filing with the Commission in accordance with 
rule 497.
---------------------------------------------------------------------------

    \332\ See, e.g., section 10(a)(3) of the Securities Act [15 
U.S.C. 77j(a)(3)].
    \333\ See rule 485(b)(1)(i). Material post-effective amendments, 
however, are not immediately effective. See rule 485(a).
---------------------------------------------------------------------------

    Conversely, RILA issuers currently follow the processes operating 
companies use to update their registrations statements. Operating 
companies that are engaged in a continuous offering of securities, like 
RILA issuers, are similarly required to update their registration 
statement each year and may update their registration statement for 
changes other than to bring the financial statements up to date.\334\ 
For RILAs whose offerings are registered on Form S-1, these updates 
typically occur through a post-effective amendment.\335\ Rule 462 
currently provides RILA issuers with a limited set of circumstances, 
none of which are specific or generally relevant to RILA offerings, in 
which a post-effective amendment to a registration statement is 
effective upon filing.\336\ Rather, when a RILA issuer seeks to update 
a RILA registration statement on Form S-1, the issuer must file a post-
effective amendment that is typically declared effective by Commission 
staff acting pursuant to delegated authority.\337\
---------------------------------------------------------------------------

    \334\ See, e.g., section 10(a)(3) of the Securities Act; rule 
415(a); Item 512 of Regulation S-K.
    \335\ Under Form S-3, the section 10(a)(3) update need not be 
made through a post-effective amendment. Rather, under this form, 
the section 10(a)(3) update generally occurs when the issuer files 
its annual report on Form 10-K containing the issuer's audited 
financial statements for its most recently completed fiscal year.
    \336\ See rule 462(d) and (e). For example, this rule provides 
that a post-effective amendment that seeks only to add exhibits to a 
registration statement would be effective upon filing. In addition, 
although a well-known seasoned issuer is permitted to file a post-
effective amendment to an automatic shelf registration statement 
with immediate effectiveness, none of the insurance companies 
currently offering RILAs currently claims status as a well-known 
seasoned issuer.
    \337\ See 15 U.S.C. 77h; 17 CFR 229.501(a); 17 CFR 230.473. See 
also supra footnote 335 (describing the Form S-3 post-effective 
amendment process).
---------------------------------------------------------------------------

    In addition to differences in the post-effective amendment process, 
RILA issuers also follow different processes to file prospectuses than 
current Form N-4 filers, relying on rule 424 rather than rule 497. 
Although these rules provide for similar processes, there are certain 
differences. For example, rule 424 requires an issuer to file a 
prospectus only if the issuer makes substantive changes or additions to 
a previously-filed prospectus, whereas rule 497 requires funds to file 
every prospectus that varies from any previously-filed prospectus.\338\ 
Accordingly, under the proposed amendments, a RILA issuer

[[Page 71141]]

would be required to file every prospectus relating to a RILA offering 
that varies in form from a previously filed prospectus before it is 
first used.\339\ This approach would provide a publicly accessible, 
usable database of current RILA prospectuses which would also assist 
the Commission in conducting its regulatory functions. In addition, 
rule 424 includes provisions related to continuous or delayed 
securities offering under rule 415.\340\ However, in light of the 
proposed amendments to the RILA registration framework, these 
provisions would no longer be applicable to RILAs.\341\
---------------------------------------------------------------------------

    \338\ See rule 424(a); rule 497.
    \339\ See proposed rule 497(e).
    \340\ See rule 424(b).
    \341\ See proposed rule 415(b).
---------------------------------------------------------------------------

    Consistent with the other elements of this proposal, the proposed 
amendments are designed to provide parity between RILAs and other 
annuities registered on Form N-4. RILAs, like variable annuities, are 
longer-term investment products that are continuously offered and must 
maintain a current registration statement and up-to-date prospectus for 
new investors as well as for existing investors that may be able to 
make additional contributions or reallocate assets. Accordingly, 
applying rule 485's simplified post-effective amendment process is a 
more appropriate framework for RILA registration statements in light of 
their similarity to variable annuities. RILA registration statements 
are routinely updated over the course of an offering and may be subject 
to material and non-material amendments over the long-term nature of 
the investment product. As such, the proposed amendments addressing the 
post-effective amendment process for RILA registration statement should 
provide benefits to current RILA issuers using Form S-1 by reducing 
administrative complexity when updating financial statements included 
in a registration statement or when making other changes to a 
registration statement through rule 485's provisions for automatic and 
immediate effectiveness.\342\ Requiring RILA issuers to rely on the 
simplified post-effective amendment process would enable these issuers 
to update their disclosures in a manner that complements and 
facilitates RILAs' offering structure and particularly provide 
efficiency in the context of combination contracts.
---------------------------------------------------------------------------

    \342\ See proposed rule 485.
---------------------------------------------------------------------------

    Requiring RILA issuers to rely on rules 485 and 497 also would 
provide a uniform post-effective amendment and prospectus filing 
framework for all issuers using Form N-4 and provide insurance 
companies that may offer one or more related insurance products, 
including index-linked options offered as part of combination annuity 
contracts, consistent filing requirements across related products. This 
should also result in enhanced efficiencies as these issuers would no 
longer be required to manage distinct filing processes for related 
products. In addition, employing the framework provided by rules 485 
and 497 would provide Commission staff with an increased degree of 
administrative efficiency by facilitating the review of amendments 
containing material changes to RILA registration statements while 
permitting amendments with non-material changes to become effective 
immediately.
    We request comment on the proposed application of rules 485 and 497 
to RILAs.
    130. Should we require RILA issuers to file post-effective 
amendments to registration statements on Form N-4 under rule 485? Are 
there additional circumstances not currently enumerated in the rule for 
which we should permit the immediate effectiveness of post-effective 
amendments?
    131. Do commenters agree that the current post-effective amendment 
process for RILA registration statements on Form S-1 may result in 
increased uncertainty and costs for RILA issuers than if the same 
issuers used the proposed post-effective amendment process under 
proposed rule 485 to amend RILA registration statements? Will using the 
process required by rule 485 mitigate these concerns?
    132. Should we require RILA issuers to file prospectuses and 
prospectus supplements under rule 497 rather than under rule 424? If 
not, what is a more appropriate process for RILA issuers to file 
prospectuses and prospectus supplements given the proposed move of RILA 
registration statements to Form N-4?
    133. How would RILA issuers be affected by the requirement to file 
the exact form of prospectus under rule 497, given rule 424 only 
requires filers to file prospectuses that contain substantive changes 
from or additions to a previously filed prospectus?
    134. Are there other filing rules that should be amended to help 
facilitate the movement of RILA registration statements to Form N-4? Is 
so, please explain what rules should be amended and the rationale for 
the suggested changes.
3. Prospectus Delivery
    We also propose to prohibit the use of rule 172 in connection with 
the offering of a RILA. Under rule 172, a final prospectus is deemed to 
precede or accompany a security for sale for purposes of Securities Act 
section 5(b)(2) as long as the final prospectus meeting the 
requirements of Securities Act section 10(a) is filed or the issuer 
will make a good faith and reasonable effort to file it with the 
Commission as part of the registration statement within the required 
rule 424 prospectus filing timeline.\343\
---------------------------------------------------------------------------

    \343\ See Rule 172(b) and (c); see also Offering Reform Release 
at n.561 and accompanying text.
---------------------------------------------------------------------------

    Registered investment companies, including variable annuity 
separate accounts, are excluded from rule 172 and therefore must 
deliver a prospectus to investors.\344\ Therefore, we are excluding 
RILA offerings from rule 172 to ensure that investors receive a 
prospectus about these complex investments and because we are proposing 
to treat offerings of RILAs like offerings of variable annuities in 
other respects. Moreover, we understand that, as a practical matter, 
RILA issuers typically do not rely on rule 172 because RILA issuers 
typically deliver prospectuses to accompany or precede other 
communications, such as annuity applications, in order to avoid those 
communications being offers that otherwise would be non-conforming 
prospectuses that violate section 5 of the Securities Act.\345\
---------------------------------------------------------------------------

    \344\ Id. at section VI.B.1.b.
    \345\ See section 2(a)(10) of the Securities Act (providing, in 
part, that a communication sent or given after the effective date of 
the registration statement shall not be deemed a prospectus if it is 
proved that prior to or at the same time with such communication a 
written prospectus meeting the requirements of section 10(a) was 
sent or given to the person to whom the communication was made). See 
also Offering Reform Release at n.561 (stating that a final 
prospectus only filed as provided in rule 172 will not be considered 
to be sent or given prior to or with a written offer within the 
meaning of this clause of section 2(a)(10)).
---------------------------------------------------------------------------

    We request comment on excluding RILA offerings from rule 172.
    135. Is our understanding correct that RILA issuers typically 
deliver prospectuses to investors to accompany or precede other 
communications, and thus do not rely on rule 172? If not, in what 
circumstances to RILA issuers typically rely on rule 172? Is there any 
reason we should permit RILA issuers to rely on rule 172 even though 
issuers cannot rely on the rule for other offerings registered on Form 
N-4?

F. Materially Misleading Statements in RILA Sales Literature

    We are proposing to amend rule 156 to make its provisions 
applicable to RILA sales literature. Under the Federal securities laws 
applicable to all securities (including RILA offerings), it

[[Page 71142]]

is unlawful for any person to use materially misleading communications 
in connection with the offer or sale of any security.\346\ Rule 156 
does not prohibit or permit any particular representations or 
presentation, rather it is an interpretive rule that provides factors 
to be weighed in considering whether a statement involving a material 
fact is or might be misleading in the specific context of investment 
company sales literature for purposes of the Federal securities laws, 
including sales literature relating to the sale of variable annuities. 
Applying this rule to RILA sales literature is consistent with the RILA 
Act in that it would provide RILA issuers guidance on ways to avoid 
presenting investors with materially misleading advertisements, which 
should help ensure that investors receive the information necessary to 
make informed decisions about these products.\347\
---------------------------------------------------------------------------

    \346\ See 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 17 CFR 240.10b-5.
    \347\ See Mutual Fund Sales Literature Interpretive Rule, 
Investment Company Act Release No. 10915 (Oct. 26, 1979); [44 FR 
64070 (Nov. 6, 1979)] (``Rule 156 Release'').
---------------------------------------------------------------------------

    Rule 156 provides guidance on whether a statement involving a 
material fact is misleading in sales literature, depending on an 
evaluation of the context in which it is made, with the rule providing 
four non-exhaustive factors to guide in this determination.\348\ While 
these factors have some relevance to the marketing of all securities, 
similarities between variable annuities and RILAs (as to how and to 
whom they are marketed), make the extension of rule 156 to RILAs 
particularly appropriate. Like investment company sales literature 
generally (and variable annuity marketing materials particularly), RILA 
advertisements discuss complex investment features, and RILA issuers 
should benefit from rule 156's contextual analysis in considering 
whether a particular representation is materially misleading. Thus, the 
proposed amendments to rule 156 would help address these concerns by 
focusing attention to specific areas of RILA sales literature that we 
have identified as being particularly susceptible to misleading 
statements.\349\
---------------------------------------------------------------------------

    \348\ See rule 156(b).
    \349\ See, e.g., Rule 156 Release (Rule 156 is ``intended to 
highlight general areas which, based on the Commission's regulatory 
experience with investment company sales literature, had proven to 
be particularly susceptible to misleading statements'').
---------------------------------------------------------------------------

    Commission staff have reviewed RILA advertisements to better 
understand how insurance companies market these products to investors. 
As part of this review, and based upon prior experience reviewing RILA 
registration statements, the staff identified common RILA marketing 
approaches that could benefit from rule 156's guidance about 
advertising statements that could be misleading under the Federal 
securities laws without appropriate context.
    For example, in the sales literature reviewed by the staff, 
insurance companies typically marketed RILAs as growth products based 
primarily on the linkage to an underlying index. Current rule 
156(b)(1)(ii) provides that a statement could be misleading because of 
``[t]he absence of explanations, qualifications, limitations or other 
statements necessary or appropriate to make such statement not 
misleading.'' Thus, if rule 156 were applied to RILAs as proposed, rule 
156 would assist insurance companies in considering whether 
representations about a RILA as a growth product would require 
qualification in light of particular RILA features, such as the 
existence and extent of any limitations on upside index performance. 
Representations that highlight downside protections of a RILA could 
similarly be misleading without the context of the cost or limitation 
of those protections (e.g., upside limitations). The same analysis 
would apply to representations that tout customization without 
discussing the trade-offs associated with that customization (e.g., 
long lock-up periods to get the best rates or having to experience a 
contract adjustment when making a change), or fail to explain that the 
insurance company has reserved the right to change or remove key 
features of the contract while surrender charges still apply. If RILA 
sales literature discussed these aspects of the contract without 
adequately explaining these limitations or the insurer's discretion to 
alter key features, that omission could make the advertisement 
misleading. Accordingly, the application of rule 156(b)(1)(ii) to RILA 
sales literature would require an insurance company to consider whether 
an advertisement would be materially misleading if it suggests a given 
RILA is a loss-avoidance vehicle or a customizable product in the 
absence of qualifying explanations or statements. Similarly, if sales 
literature advertises a particular feature of the product's bounded 
return structure (including, e.g., a specified index; an upside feature 
such as a particular ``cap rate'' or ``participation rate''; or a 
downside feature such as a ``floor'' or ``buffer'') that is not 
available for the life of the product or the full term of any surrender 
charge period, the rule would require consideration of whether the 
statement is misleading without providing additional context as to the 
insurer's discretion.
    As another example, current rule 156(b)(4) provides that 
``[r]epresentations about fees or expenses associated with an 
investment in a fund could be misleading because of statements or 
omissions made involving a material fact, including situations where 
portrayals of the fees and expenses associated with an investment in 
the fund omit explanations, qualifications, limitations, or other 
statements necessary or appropriate to make the portrayals not 
misleading.'' While RILA investors are not typically charged direct 
ongoing fees or expenses, RILAs do typically limit an investor's 
ability to participate in upside performance, and charges like contract 
adjustments can impose costs upon highlighted features such as 
guaranteed benefits. In the context of RILA sales literature, the 
proposed application of this provision of rule 156 to RILA 
advertisements would require consideration about whether 
representations or portrayals either of a RILA's costs or charges 
(e.g., advertising implying that a RILA had low costs or no ongoing 
charges), or optional benefits that are subject to a contract 
adjustment, would necessitate qualifying statements or explanations 
regarding the costs or tradeoffs to the investor to receive an 
advertised benefit or those generally associated with the RILA.\350\
---------------------------------------------------------------------------

    \350\ Insurance companies may apply a contract adjustment to the 
investors' account when an investor annuitizes or takes advantage of 
benefits like ``free withdrawal'' provisions (that typically permit 
investors to withdraw up to 10% of the contract value each year 
without paying a surrender charge), death benefits, systemic 
withdrawals, and guaranteed benefits. See The Design and Regulatory 
Framework of Registered Index-Linked Annuities, ALI CLE Conference 
on Life Insurance Products 2022 (``It is important to note that 
interim value adjustments may apply to surrenders and all types of 
`withdrawals,' such as free look payments; annuitization; death 
benefit payments; deductions for third party advisory fees; systemic 
withdrawals; and even income payments under guaranteed benefit 
riders.'')
---------------------------------------------------------------------------

    Lastly, current rule 156(b)(2)(i) states that ``[r]epresentations 
about past or future investment performance could be misleading because 
of statements or omissions made involving a material fact, including 
situations where: [p]ortrayals of past income, gain, or growth of 
assets convey an impression of the net investment results achieved by 
an actual or hypothetical investment which would not be justified under 
the circumstances, including portrayals that omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading.'' In the context of 
RILA advertising, the

[[Page 71143]]

proposed provision would require consideration of whether illustrations 
about the operation of a RILA or its features could be misleading 
because, for example, they use assumptions (such as limits on gains or 
index performance that includes dividends whereas the RILA's index does 
not include dividends) that are not currently offered or exceed what 
could be reasonably anticipated or use ``cherry picked'' data. 
Including historical index performance in an advertisement also would 
mislead investors if, for example, it suggested that the performance 
shown is predictive of future performance of the index or a RILA. On 
the other hand, using the index's historical performance to illustrate 
how a RILA works in a fair and balanced way (e.g., by showing index 
performance relative to representative limits on gains and losses, as 
some RILA advertisements currently do) would be consistent with the 
proposed extension of rule 156 to RILA advertisements, assuming those 
advertisements otherwise include appropriate caveats to ensure that the 
illustrations are not misleading.\351\ Moreover, our preliminary view 
is that purporting to show the historical performance of the RILA or 
any particular index-linked option itself would generally be materially 
misleading. This is because the terms of a RILA investment, such as 
limits on gains, change frequently, making past performance irrelevant 
to current investors who are not able to utilize those past rates in 
current market conditions. In addition, to the extent that a RILA is 
using a point-to-point crediting method, that RILA's return to an 
investor would be particularly sensitive to the specific date the 
investor purchased the RILA and when the crediting period ends for the 
index-linked option chosen by the investor.\352\ This further increases 
the likelihood of a current investor's investment experience deviating 
from the historical performance of a given RILA, even when that RILA 
had similar terms to those currently offered. Our understanding is that 
insurance companies do not currently advertise the historical 
performance of the RILA or any particular index-linked option itself.
---------------------------------------------------------------------------

    \351\ See rule 156(b)(1)(ii) (statement can be misleading 
because of ``absence of explanations, qualifications, limitations or 
other statements necessary or appropriate to make such statement not 
misleading'').
    \352\ See, e.g., OIAD Report at Section 3, Comparing RILA 
Features, Variations in Term Length and Simulated Returns; Section 
7, Conclusions, Implications of the Research: The Economics of 
RILAs.
---------------------------------------------------------------------------

    In addition to rule 156, advertisements and sales literature for 
existing N-4 issuers is subject to 17 CFR 230.482 (``rule 482''). Rule 
482 requires, among other things, enhanced disclosures in investment 
company and business development company advertisements designed to 
convey balanced information to prospective investors, particularly with 
respect to standardizing representations of a fund's past 
performance.\353\ These provisions were introduced as a result of the 
Commission's experience with fund advertisements that were creating 
unrealistic or misleading expectations through representations 
regarding past performance.\354\ Accordingly, rule 482 now permits 
funds to use performance data in their advertisements, but only 
according to standardized methodologies set forth in the rule. Unlike 
the rules applicable to most RILAs, rule 482 also permits registered 
investment companies and business development companies to provide 
advertisements and sales literature to investors without it being 
accompanied or preceded by a statutory prospectus.\355\
---------------------------------------------------------------------------

    \353\ See Amendments to Investment Company Advertising Rules, 
Investment Company Act Release No. 26195 (Sept. 29, 2003) [68 FR 
57760 (Oct. 6, 2003)] (``482 Amendment Release'').
    \354\ See id.
    \355\ See 17 CFR 230.433(b)(2).
---------------------------------------------------------------------------

    While not required by the RILA Act, we nevertheless considered 
whether RILA advertising might raise similar concerns that would 
justify amending rule 482 to include RILAs. As explained below, we have 
not yet seen sufficient evidence to support an expansion of rule 482 to 
RILAs at this time, though we acknowledge such concerns may develop in 
the future.\356\ This conclusion largely follows from the rule's 
standardized performance data requirements, which do not align with 
current practices in RILA advertisements. While variable annuity 
marketing materials frequently utilize standardized performance 
returns, this is not the case with RILA advertisements. Rather than 
relying on past performance, insurance companies typically market RILAs 
on other bases that are less amenable to standardized performance 
metrics, for example highlighting that these are flexible products 
whose features can be customized to fit a particular investor's needs. 
RILA advertising also typically does not attempt to utilize past 
performance, suggesting there is neither a need for rules prescribing 
RILA-specific past performance metrics, nor sufficient experience to 
inform the development of such metrics. For these reasons, we would not 
change rule 482 to include RILAs.
---------------------------------------------------------------------------

    \356\ As a result, RILA sales literature, as ``free writing'' 
prospectuses, would continue to be subject to 17 CFR 230.164 and 17 
CFR 230.433, as well as any other applicable rule that permits a 
communication notwithstanding the ``gun jumping'' provisions of the 
Securities Act.
---------------------------------------------------------------------------

    We request comment on the proposed application of rule 156 to RILAs 
and our proposal not to amend rule 482 to include RILAs.
    136. Would the application of rule 156 to RILA sales literature 
help to prevent or address material misstatements in those 
communications? Is there any other action we should take to address 
this concern?
    137. Are there differences between variable annuities and RILAs 
that would justify not extending rule 156 to RILA sales literature as 
proposed?
    138. Instead of extending rule 156 to RILAs, should we create a new 
rule that specifically and solely deals with materially misleading 
information in RILA sales literature? If so, what is it about RILAs 
that necessitates a RILA-specific rule about materially misleading 
sales literature, and what particular areas or topics should we address 
in a RILA-specific sales literature rule?
    139. Do commenters agree with the contextual concerns highlighted 
above with regards to the representations typically used in RILA sales 
literature? Are there other claims or suggestions in RILA sales 
literature that insurance companies use that we should be concerned 
about?
    140. Do insurance companies currently utilize any performance 
metrics in RILA advertisements? Why do insurance companies not 
currently utilize past performance in RILA sales literature to the same 
extent as variable annuity advertisements? Is there a way to 
standardize RILA past performance information? Is there a way to view 
RILA past performance information as other than as materially 
misleading?
    141. Do commenters agree that advertising the historical 
performance of a RILA or any particular index-linked option would be 
misleading in light of the customized nature of RILA contracts and the 
pace at which the RILA features that determine RILA performance are 
subject to change?
    142. Are there benefits to investors in amending rule 482 to 
include RILA advertising materials? If so, how should it be amended? 
How would we address past performance metrics for a RILA in light of 
the customized nature of RILAs and the changing nature of RILA 
features?

[[Page 71144]]

    143. Should we permit insurance companies to provide RILA sales 
literature to investors without being accompanied or preceded by a 
summary or statutory prospectus as variable annuities do? How would 
insurance companies be able to present such a complex product to 
investors in a way that they can understand?

G. Existing Commission Letters

    Certain Commission letters, or portions thereof, exempting 
insurance companies from the requirement to provide financial 
statements prepared in accordance with GAAP in connection with the 
registration of an offering of RILAs on Form S-1 based on the authority 
provided in 17 CFR 210.3-13 (``3-13 Exemptions'') would be withdrawn or 
rescinded in connection with any adoption of this proposal in light of 
the proposed change to permit RILAs to provide SAP financial statements 
on amended Form N-4 in the same way that other insurance companies are 
permitted to do so on current Form N-4.\357\ Following the compliance 
date of any final rule, some letters, or portions thereof, would be 
moot, superseded, or otherwise inconsistent with the final rule and, 
therefore, would be withdrawn or rescinded. If commenters believe that 
additional Commission letters or other actions, or portions thereof, 
should be withdrawn or rescinded, they should identify the letter or 
guidance, state why it is relevant to the proposal, how it or any 
specific portion thereof should be treated, and the reason therefor. 
Based on the proposal, 3-13 Exemptions that would be withdrawn or 
rescinded would include, but would not necessarily be limited to, all 
of the 3-13 Exemptions listed below.
---------------------------------------------------------------------------

    \357\ Rule 3-13 provides, in part, that the ``Commission may, 
upon the informal written request of the registrant, and where 
consistent with the protection of investors, permit the omission of 
one or more of the financial statements herein required or the 
filing in substitution therefor of appropriate statements of 
comparable character.'' We would not be rescinding exemptions 
provided in any of the letters outlined below provided with respect 
to non-RILA insurance products because they are not affected by this 
rulemaking.

                  Table 8--Existing Commission Letters
------------------------------------------------------------------------
                         Name                                 Date
------------------------------------------------------------------------
Great-West Life & Annuity Insurance Company and Great-         9/28/2018
 West Life & Annuity Insurance Company of New York...
Athene Annuity and Life Company......................          9/28/2018
Allianz Life Insurance Company of North America and            9/28/2018
 Allianz Life Insurance Company of New York..........
MONY Life Insurance Company of America...............           3/7/2019
Symetra Life Insurance Company and First Symetra                8/8/2019
 National Life Insurance Company of New York.........
Forethought Life insurance Company...................         10/17/2019
Nationwide Life Insurance Company....................         10/17/2019
Minnesota Life Insurance Co..........................          6/11/2020
MEMBERS Life Insurance Co............................          11/6/2020
Transamerica Life Insurance Company and Transamerica           2/11/2021
 Financial Life Insurance Company....................
Midland National Life Insurance Company..............          8/12/2021
Protective Life Insurance Company and Protective Life         10/14/2022
 and Annuity Insurance Company.......................
Everlake Life Insurance Company......................         10/21/2022
Fidelity & Guaranty Life Insurance Company and                 3/17/2023
 Fidelity & Guaranty Life Insurance Company of New
 York................................................
Delaware Life Insurance Company and Gainbridge life            4/28/2023
 Insurance Company...................................
------------------------------------------------------------------------

    We request comment on the proposed recessions.
    144. Are there any other Commission letters or actions that should 
be rescinded or withdrawn if the proposal is adopted?
    145. Are there any staff letters or guidance pieces that would be 
moot, superseded, or otherwise inconsistent with the final rule?
    146. In a future rulemaking, should we consider codification of any 
3-13 Exemptions that have been granted to other insurance products? If 
so, what considerations should the Commission consider in doing so?

H. Registered Market-Value Adjustment Annuities

    In addition to RILAs, there are other non-investment company 
insurance products that are securities under the Federal securities 
laws. Like RILAs, offerings of these securities are currently 
registered by insurance companies on Forms S-1 or S-3. For example, 
some annuity contracts that offer fixed investment options and apply 
market-value adjustment annuities (``MVAs'') to amounts withdrawn from 
such fixed options before the end of the fixed option's term (e.g., due 
to contract withdrawals, transfers to other investment options, and 
annuitization) are required to register the MVA with the Commission 
(``registered MVAs'').\358\ For these annuities, fixed options are 
either offered on their own or in a combination contract with variable 
options. Like RILAs, a significant feature of a registered MVA is the 
contract adjustment.
---------------------------------------------------------------------------

    \358\ Registered MVAs are securities because the MVA feature 
imposes certain investment risks on purchasers. See Section 3(a)(8) 
of the Securities Act and 17 CFR 230.151; see also SEC v. Variable 
Annuity Life Insurance Co. of America, 359 U.S. 65, 77 (1959).
---------------------------------------------------------------------------

    Because RILAs and registered MVAs differ only with respect to the 
manner in which interest is calculated and credited, many of the 
disclosures we are proposing for RILAs on Form N-4 would also be 
appropriate for registered MVAs. This is particularly true of the 
proposed disclosures relating to the operation of contract adjustments, 
given their importance in both a RILA and a registered MVA.
    We are not proposing to require insurance companies to register 
offerings of registered MVAs on Form N-4 at this time because the RILA 
Act does not address these securities and imposes specific timelines 
for the Commission both to propose rules and to adopt final rules. We 
request comment below, however, on whether we should also require 
insurance companies to register offerings of registered MVAs on Form N-
4. To help commenters evaluate these requests for comment, we also have 
analyzed the changes to Form N-4 we believe would be necessary to 
accommodate offerings of these securities:
     Adding registered MVAs to the list of permissible uses of 
Form N-4 on the facing page and general instructions; \359\
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    \359\ See, e.g., proposed General Instruction B.1 of Form N-4.
---------------------------------------------------------------------------

     Adjusting the definition of ``Contract Adjustment'' in the 
form to

[[Page 71145]]

account for investment options beyond index-linked options;
     In the discussion of how interest is calculated for the 
contract's fixed options in the description of the insurance company, 
registered separate account, and investment options, requiring: (1) a 
statement that an investor could lose a significant amount of money due 
to the contract adjustment if amounts are removed from a fixed option 
prior to the end of its term, (2) a description of the transactions 
subject to a contract adjustment with cross-references to the related 
disclosure in the prospectus, and (3) a prominent statement of the 
maximum amount of loss, as a percentage, an investor could experience 
from a negative contract adjustment and that this loss could be greater 
due to surrender charges and tax consequences; \360\
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    \360\ See proposed Item 6(e)(2) of Form N-4.
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     Adjusting the disclosures in the prospectus about contract 
adjustments in the charges-related disclosures to account for 
investment options beyond index-linked options having contract 
adjustments; \361\
---------------------------------------------------------------------------

    \361\ See proposed Item 7(e) of Form N-4.
---------------------------------------------------------------------------

     In the appendix of available investment options, in the 
discussion of fixed options, requiring: (1) a legend stating that if 
amounts are withdrawn from a fixed option before the end of its term, 
the insurance company may apply the contract adjustment and that this 
may result in a significant reduction in contract value; and (2) the 
provision of appropriate cross-references to the prospectus disclosure 
relating to contract adjustments; \362\
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    \362\ See proposed Item 17(c) of Form N-4.
---------------------------------------------------------------------------

     Requiring registered MVAs to provide the same disclosure 
proposed for RILAs regarding changes in accountants; \363\
---------------------------------------------------------------------------

    \363\ See proposed Item 26(c) of Form N-4. As with RILAs, if 
insurance companies were required to use Form N-4 for registered 
MVAs, they would also be permitted to use SAP in registered MVA 
registration statements to the same degree as other Form N-4 filers. 
See supra section II.D. If we were to do this, 3-13 Exemptions 
provided in connection with registered MVAs would be withdrawn or 
rescinded for the reasons discussed in section II.G above.
---------------------------------------------------------------------------

     Requiring registered MVAs to provide the same census-type 
information as we are proposing for RILAs; \364\ and
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    \364\ See proposed Item 31A of Form N-4.
---------------------------------------------------------------------------

     Requiring the same undertakings and exhibits for 
registered MVAs as we are proposing for RILAs.\365\
---------------------------------------------------------------------------

    \365\ See proposed Items 27(q) and 34(b) of Form N-4.
---------------------------------------------------------------------------

    In addition to these changes to Form N-4, if we were to require 
insurance companies to use Form N-4 to register offerings of registered 
MVAs, we would anticipate providing the same functional changes we are 
proposing for RILAs, that is, the ability to use a summary prospectus 
and the use of the same filing and marketing rules, for the same reason 
as we are proposing these changes for RILAs.\366\ For example, we could 
create a defined term ``registered market value-adjusted annuity'' in 
rule 405 that would be an annuity (1) that is deemed a security; (2) 
that is offered or sold in a registered offering; (3) that is issued by 
an insurance company that is subject to the supervision of either the 
insurance commissioner or bank commissioner of any State or any agency 
or officer performing like functions as such commissioner; (4) not 
issued by an investment company; and (5) whose value may reflect a 
positive or negative adjustment (based on calculations using a 
predetermined formula, or a change in interest rates, or some other 
factor or benchmark) if amounts are withdrawn before the end of a 
specified period. We could then use this definition to apply to 
registered MVAs those Securities Act rules we propose to apply to 
RILAs.\367\ We would also expect to have the same requirements as to 
the use of Inline XBRL for similar reasons.\368\
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    \366\ See supra sections II.C, E, and F.
    \367\ This definition mirrors that of ``registered index-linked 
annuity'' we are proposing to add to rule 405 for RILAs, other than 
the last provision which borrows from the definition of ``contract 
adjustment'' we are proposing to add to Form N-4. We could also 
consider creating a defined term in rule 405 that combines both the 
RILA and registered market-value adjusted annuity definitions for 
simplicity.
    \368\ See supra section II.B.9.
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    We request comment on whether to require insurance companies to 
register the offering of registered MVAs on Form N-4.
    147. Would it be appropriate to require insurance companies to 
register the offering of registered MVAs on Form N-4 (as proposed to be 
as amended in this proposal)? Should all of the changes suggested above 
apply to registered MVAs?
    148. Is the definition of ``registered market-value adjusted 
annuity'' included above as an example the correct one?
    149. Are there any other disclosures that would be relevant in the 
registered MVA context?

I. Technical Amendment to Form N-6

    The Commission is proposing a technical amendment to Form N-6 to 
reflect the correct placement of an amendment to this form that the 
Commission adopted in 2020 in the release titled ``Facilitating Capital 
Formation and Expanding Investment Opportunities by Improving Access to 
Capital in Private Markets'' (herein referred to as the ``Exempt 
Offering Framework Adopting Release'').\369\ In that release, the 
Commission adopted, among other amendments, amendments to certain 
instructions associated with the Exhibits items of Form N-4 and Form N-
6. The amendatory instructions in the Exempt Offering Framework 
Adopting Release erroneously referred to outdated Exhibits items of 
these forms. That is, the amendatory instructions referred to Items 24 
and 26 respectively, instead of Items 27 and 30 respectively (as 
adopted by the Commission in earlier amendments to Forms N-4 and N-6 in 
the VASP Adopting Release).\370\ The amendments we are proposing to 
Form N-4 correctly reflect the placement of the amendment that the 
Commission adopted in the Exempt Offering Framework Adopting Release in 
Item 27 of the form instead of in Item 24. We are also proposing a 
technical amendment to Item 30 of Form N-6 that correctly reflects the 
placement of the amendment that the Commission adopted in the Exempt 
Offering Framework Adopting Release in this item instead of in Item 26.
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    \369\ Facilitating Capital Formation and Expanding Investment 
Opportunities by Improving Access to Capital in Private Markets, 
Investment Company Act Release No. 34082 (Nov. 2, 2020) [86 FR 3496 
(Jan. 14, 2021)].
    \370\ See Exempt Offering Framework Adopting Release at 
amendatory instructions 50 and 51; see also VASP Adopting Release at 
section II.C.4 (Table 6).
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J. Compliance Period

    We are proposing a compliance date one year after publication of 
final amendments in the Federal Register.\371\ All initial registration 
statements and post-effective amendments that are annual updates to 
effective registration statements on Form N-4 that are filed after the 
compliance date would be required to comply with the amendments. This 
compliance period is designed to give registrants sufficient time to 
comply with the proposed changes, including to update their 
registration statements; to prepare to use rules 485 and 497 to update 
their registration statements and file prospectuses with the 
Commission; and to begin paying securities registration fees on Form 
24F-2.
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    \371\ This compliance period would apply for all of the 
amendments in this release other than the technical amendment to 
Form N-6 discussed in section II.I supra.
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    RILAs that have previously registered offerings of securities on 
Forms S-1 or S-3 would file a post-effective amendment to their 
registration statement pursuant to rule 485(a) at the

[[Page 71146]]

time of their next annual update following the compliance date, using 
Form N-4.\372\ In appropriate circumstances, we would consider requests 
by registrants with respect to existing variable annuity contracts to 
file post-effective amendments pursuant to Securities Act rule 
485(b)(1)(vii) when these post-effective amendments make conforming 
changes to comply with the proposed amendments to Form N-4.\373\
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    \372\ A post-effective amendment filed under rule 485(a) [17 CFR 
230.485(a)] generally becomes effective either 60 days or 75 days 
after filing, unless the effective date is accelerated by the 
Commission. RILA registrants generally should be able to rely on 
template filing relief, in which case they would not need to file a 
rule 485(a) filing for each RILA. See proposed amended rule 
485(b)(1)(vii). Existing RILA issuers that only issue RILAs and will 
be using the same CIK would be permitted to transition by filing a 
485APOS or 485BPOS in EDGAR. Both of these submission types allow 
the entity to keep its current Securities Act file number, and both 
allow the filer to obtain new contract IDs and the needed Form N-4 
investment company type designation in EDGAR. RILA issuers that will 
be acquiring new CIKs for their RILA offerings would need to 
transition by filing an administrative Form N-4 submission under a 
newly-issued CIK to obtain a new Securities Act file number, new 
contract IDs, and the Form N-4 investment company type (which is 
used for EDGAR purposes only).
    \373\ A post-effective amendment filed under rule 485(b) may 
become effective immediately upon filing. A post-effective amendment 
may be filed under rule 485(b) if it is filed for one or more 
specified purposes, including to make nonmaterial changes to the 
registration statement. A post-effective amendment filed for any 
purpose not specified in rule 485(b) generally must be filed 
pursuant to rule 485(a). Under rule 485(b)(1)(vii), the Commission 
may approve the filing of a post-effective amendment to a 
registration statement under rule 485(b) for a purpose other than 
those specifically enumerated in the rule. The Commission's staff 
has been delegated the authority to approve registrants' requests 
under rule 485(b)(1)(vii). 17 CFR 200.30-5(b-3)(1).
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    We also are proposing to provide a six-month delayed effective date 
for all amendments except for the amended Form N-4, amended rule 498A, 
and technical amendments to Form N-6, such that all other final 
amendments would be effective six months after publication in the 
Federal Register. Thus, we propose that a registrant would be able to 
rely on rule 498A to satisfy its obligations to deliver a RILA 
contract's statutory prospectus beginning on the effective date of the 
rule amendments, provided that the registrant is also in compliance 
with the amendments to Form N-4. The delayed effective date for 
remaining amendments would provide the Commission time to prepare the 
EDGAR system to accommodate transitioning RILA offerings onto the 
proposed framework.\374\
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    \374\ There would be no transition period associated with the 
technical amendment to Form N-6 discussed in section II.I supra.
---------------------------------------------------------------------------

    We are not delaying the effective date of the proposed changes to 
Form N-4 and rule 498A, however, to allow registrants to begin filing 
registration statements under the revised form as soon as possible. We 
believe allowing registrants to use the new form as soon as possible 
following the Commission's adoption of final amendments is consistent 
with Congress's intent in directing the Commission to prepare and 
finalize a new form for RILAs within 18 months of enactment.
    We request comment on the proposed compliance period:
    150. Would the proposed compliance period provide registrants 
sufficient time to prepare to comply with the amendments? Would more 
time be appropriate or, conversely, should we provide a shorter 
compliance period to ensure that investors receive the benefit of the 
proposed amendments more quickly?
    151. Should we provide a separate compliance period to provide more 
time for insurance companies to comply with the requirement to 
structure certain disclosure in Inline XBRL? For example, should we 
provide an additional year period after the date insurance companies 
are required to first update their disclosure?
    152. Is it appropriate to permit a registrant to rely on rule 498A 
to satisfy its obligations to deliver a RILA contract's statutory 
prospectus beginning on the effective date of the rule amendments, 
provided that the registrant is also in compliance with the amendments 
to Form N-4?

K. General Request for Comment From Retail Investors

    We are requesting input from the retail investor community relating 
to the experiences of seeking information about, and investing in, a 
RILA. We understand that RILAs are typically sold to retail investors. 
This, together with the congressional mandate to design disclosure 
requirements for RILAs with the goal of ensuring that key information 
is conveyed in terms a purchaser is able to understand, makes feedback 
from retail investors particularly relevant as we consider the 
disclosures that would be required in a RILA registration form.\375\ 
Specifically, we invite retail investors seeking to comment on their 
feedback with annuities generally and RILAs in particular to submit a 
short Feedback Flyer, available at Appendix D.
---------------------------------------------------------------------------

    \375\ See supra discussion accompanying and following footnote 
7.
---------------------------------------------------------------------------

III. Economic Analysis

A. Introduction

    We are mindful of the costs imposed by, and the benefits obtained 
from, our rules. Section 3(f) of the Exchange Act, section 2(b) of the 
Securities Act, and section 2(c) of the Investment Company Act state 
that when the Commission is engaging in rulemaking under such titles 
and is required to consider or determine whether the action is 
necessary or appropriate in (or, with respect to the Investment Company 
Act, consistent with) the public interest, the Commission shall 
consider whether the action will promote efficiency, competition, and 
capital formation, in addition to the protection of investors. Further, 
section 23(a)(2) of the Exchange Act requires the Commission to 
consider, among other matters, the impact such rules would have on 
competition and states that the Commission shall not adopt any rule 
that would impose a burden on competition not necessary or appropriate 
in furtherance of the purposes of the Exchange Act.
    We are proposing amendments to our rules designed to carry out the 
requirements of Section 101(b) Division AA, Title I of the Consolidated 
Appropriations Act, 2023, to establish a registration form for RILAs. 
The Commission is proposing to amend the form currently used by most 
variable annuity separate accounts, Form N-4, to require issuers of 
RILAs to register offerings on that form as well. To facilitate this 
amendment, the Commission is also proposing to amend certain filing 
rules and make other related amendments. In addition, we are proposing 
other amendments to Form N-4 that would apply to all issuers that use 
that form. We are also proposing to apply a current Commission rule 
that provides guidance as to when sales literature is materially 
misleading under the Federal securities laws to RILA advertisements and 
sales literature.
    While the Commission has developed a set of specific registration 
forms for variable insurance contracts, RILA issuers cannot use those 
forms because a RILA issuer is not an investment company. Currently, 
insurance companies register the offerings of RILAs on the Securities 
Act registration forms that are typically used to register traditional 
debt or equity offerings, Forms S-1 and S-3. Because Forms S-1 and S-3 
are not tailored to the particular characteristics of RILAs (or indeed 
insurance products more generally), these forms include a number of 
disclosure requirements that may be less material to investors when

[[Page 71147]]

evaluating an insurance product like a RILA and do not include line-
item requirements mandating RILA-specific information that is of 
importance to investors in these products. The inclusion of disclosures 
that are of little relevance to investors and the omission of 
information that is of importance to investors limits the usefulness of 
the information investors currently receive about RILAs and thus their 
ability to make informed investment decisions. In addition, Forms S-1 
and S-3 require the use of GAAP financial statements, rather than the 
SAP financial statements that the State insurance regulators require. 
SAP financial statements, which focus on an issuer's ability to meet 
its obligations under its insurance contracts, as regulated by State 
law, appear to provide sufficient material information for investors 
evaluating RILAs. Investors may also benefit from the lower cost 
burdens on issuers provided by the use of SAP financial statements, to 
the extent that those savings are passed along to investors. The 
proposed rule would increase the usefulness of the information provided 
to current and prospective investors in RILAs by:
     Adapting the existing registration and disclosure 
framework for variable insurance contracts to accommodate RILAs;
     Requiring RILA-specific disclosure requirements in Form N-
4, including disclosures specific to the underlying investment options, 
such as, for each available index-linked option, the index, crediting 
period, and index crediting methodology;
     Proposing amendments to Form N-4 based on our experience 
in administering the form and in reaction to our observations of 
investor testing, which would be applicable to all issuers that use 
this registration form and which are designed to improve disclosures;
     Switching the order of the Key Information Table and 
Overview of the Contract items;
     Utilizing a question and answer format for the Key 
Information Table;
     Removing an instruction that permits registrants to omit 
additional disclosure in the prospectus that repeats information 
disclosed in the Overview of the Contract or the Key Information Table; 
and
     Extending the current rule providing factors to be weighed 
in considering whether a statement involving a material fact is or 
might be misleading in the specific context of investment company sales 
literature to RILAs, in order to address misleading statements about 
RILA fees, product features, and certain performance presentations in 
RILA sales literature.
    We have considered the potential costs and benefits that would 
result from the proposed rules, as well as the potential effects on 
efficiency, competition, and capital formation. Certain potential 
economic effects of the proposed rule would stem from the statutory 
mandate, while others would stem from the discretion we are exercising. 
We discuss the potential economic effects of the proposed amendments in 
section III.C. We also consider certain alternatives to our proposed 
approach to implementing the statutory mandate, as discussed in section 
III.E. We note that, where possible, we have attempted to quantify the 
costs, benefits, and effects on efficiency, competition, and capital 
formation expected to result from the proposed rule. In some cases, 
however, we are unable to quantify the economic effects because we lack 
the information necessary to provide a reasonable and reliable 
estimate. Nevertheless, as described more fully below, the Commission 
is providing both a qualitative assessment and quantified estimate of 
the economic effects, where feasible. The Commission invites commenters 
to include estimates and data that could help it form useful estimates 
of the economic effects of the proposed amendments.

B. Baseline

1. Affected Parties
    The proposed rule would affect issuers of and investors in RILAs, 
as well as issuers of and investors in variable annuities that are 
registered on Form N-4.
a. The Market for Annuity Products
    As of January 2023, there were 90 RILAs registered with the 
Commission issued by 23 insurance companies.\376\ Among the 90 RILAs, 
50 are stand-alone RILA products, while 40 are combination contracts 
that offer index-linked options as well as variable options. The number 
of RILAs registered with the SEC on Form S-1 is 52, while the remaining 
38 are registered on Form S-3. A little over half of the registered 
RILAs (47 RILAs) report SAP financials, with the remainder (43 RILAs) 
reporting GAAP financials.\377\
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    \376\ Based on analysis of Forms S-1, S-3 and POS AM filed by 
RILA issuers.
    \377\ EDGAR Database. Certain Commission letters, or portions 
thereof, exempt insurance companies from the requirement to provide 
financial statements prepared in accordance with GAAP in connection 
with the registration of an offering of RILAs on Form S-1. See 
Section II.G.
---------------------------------------------------------------------------

    RILA contracts currently offer a variety of index-linked options. 
Specifically, RILA contracts that are currently registered with the 
Commission offer index-linked options whose returns are linked, in 
part, to between two and nine indices with an average among RILAs of 
4.3 indices.\378\ The indices associated with current RILA contracts 
commonly include the S&P 500, Russell 2000, and NASDAQ-100. RILA 
contracts offer index-linked options with less well known indices and 
ETFs as well, but with much less frequency.\379\
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    \378\ Data obtained from Forms S-1, S-3 and POS AM filed by RILA 
issuers.
    \379\ Data obtained from Forms S-1, S-3 and POS AM filed by RILA 
issuers.
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    As discussed in Section I, index-linked options whose returns are 
based, in part, on the same index may nevertheless have different 
elements that contribute to an investor's returns. Notably, different 
index-linked options whose returns are linked to the same index may 
offer different crediting periods (the set length of time for measuring 
growth of contract value based on the performance of the linked index--
for example, one or three years), crediting methodologies, and buffer 
or floor levels. RILAs that are currently registered with the 
Commission offer between 4 and 64 index-linked options, with an average 
of 22.8 index-linked options. Common crediting periods include one, 
two, three, and six years, with one year being most common. In the 
past, index-linked options with terms as long as 10 years have been 
offered, although the longest index-linked option term currently 
offered is six years. For those ``combination'' contracts that offer 
index-linked options and variable options, the number of variable 
options ranges from 1 to 100, with an average of 10.4 variable options. 
The most common variable option is a money market fund--in all 
instances of combination contracts, a money market fund (or, in one 
case, a similar liquid investment) is offered as a variable option.
    Table 9 provides information on the dollar amount of RILA sales 
from 2016 to 2022.\380\ RILA sales have increased from $7.3 billion in 
2016 to $41.1 billion in 2022, which represents a 463% increase between 
these two years.
---------------------------------------------------------------------------

    \380\ Fact Tank: Sales Data, Life Insurance Marketing and 
Research Association, https://www.limra.com/en/newsroom/fact-tank/ 
(using data from the U.S. Individual Annuity Sales surveys for Q4 
for each year from 2016 through 2022).

[[Page 71148]]



                                                           Table 9--Sales of RILAs, 2016-2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         2016             2017             2018             2019             2020             2021             2022
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sales of RILAs ($ billions)......             7.3              9.0             11.2             17.4             24.1             38.7             41.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Fact Tank: Sales Data, Life Insurance Marketing and Research Association, https://www.limra.com/en/newsroom/fact-tank/ (using data from the U.S.
  Individual Annuity Sales surveys for Q4 for each year from 2016 through 2022).

    A recent survey of insurers found that 85% of respondents believed 
in 2021 that RILA sales would increase by 10% or more over the next 
three years, 10% believed that RILA sales would increase by less than 
10%, while 5% believed that RILA sales would remain the same over that 
time period. No respondents indicated that they believed RILA sales 
would decrease.\381\ When surveyed about the factors driving the growth 
in RILA sales, the three most commonly cited reasons were: (1) 
increased understanding of RILAs among advisers and broker-dealers 
(85%), (2) the entrance of large, reputable insurers into the RILA 
market (80%), and (3) increased supply due to the entrance of large 
issuers and distributors of RILAs (80%).\382\ Respondents also 
indicated that they expected to see the largest increases in sales 
among the following distribution channels: independent agents or 
broker/dealers, captive insurance agents, regional broker/dealers, and 
wirehouses.\383\ RILAs were also the product most insurers indicated 
had ``tremendous'' growth potential over the near term.\384\
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    \381\ Cerulli Associates & Insured Retirement Institute, Custom 
Key Findings, U.S. Annuity Markets 2021: Acclimating to Industry 
Trends and Changing Demand Ex. 1 (2021) (``Cerulli Report''), 
available at https://www.irionline.org/wp-content/uploads/2022/02/IRI-Key-Findings_2021_Final_12622.pdf.
    \382\ Id. at Exhibit 2.
    \383\ Id. at Exhibit 3. Other RILA distribution channels 
include: brokerage general agencies/independent marketing 
organizations, registered investment advisers, and direct sales.
    \384\ Cerulli Report at Exhibit 5.
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    As of 2019, there were a total of 2,396 unique variable annuity 
products offered by a total of 33 companies.\385\ Net assets totaled 
$2,018.0 billion. Also in 2019, variable annuity sales totaled $98.3 
billion.\386\ Of the total sales, $62.8 billion (64% of total sales) 
were annuities within qualified plans and $35.5 (36%) were non-
qualified annuities.\387\ Investors purchased annuities across various 
distribution channels--captive agents, $34.5 billion, (35% of total 
sales); independent financial planners/NASD firms, $39.2 billion (40%); 
banks/credit unions, $9.2 billion (9%); wirehouses/regional broker-
dealers, $12.6 billion (13%); and direct response, $2.8 billion 
(3%).\388\
---------------------------------------------------------------------------

    \385\ See Insured Retirement Institute Retirement Fact Book 2020 
(``IRI Fact Book''). In 2018 (the last year for which this 
information is available in the 2020 edition), the total number of 
variable annuity contracts in force was 17.9 million, with an 
average individual contract value of $113,053.
    \386\ Id.
    \387\ Id.
    \388\ Id.
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b. Issuing Insurance Companies
    The number of insurance companies currently offering securities 
registered as RILAs with the Commission is 23, from 19 insurance 
company complexes. Out of these 23 insurance companies, 15 of them 
register RILAs on Form S-1, while the remaining 8 use Form S-3.\389\
---------------------------------------------------------------------------

    \389\ Data obtained from Forms S-1, S-3 and POS AM filed by RILA 
issuers.
---------------------------------------------------------------------------

    Insurance companies offer, on average, 4 RILA contracts, ranging 
from a maximum of 11 RILAs to a minimum of 1 RILA. The top two issuers 
offer 21 RILAs in total, or 29% of the number of existing RILA 
products.\390\
---------------------------------------------------------------------------

    \390\ Calculated using data obtained from Forms S-1, S-3 and POS 
AM filed by RILA issuers.
---------------------------------------------------------------------------

c. Investors
    In 2021 there were an estimated 83 million individuals aged 45-64 
and 56 million individuals aged 65 or older in the United States, 
representing 25 percent and 17 percent of the total population, 
respectively.\391\ The number of individuals age 65 or older is 
projected to be 65 million (19 percent of the total projected 
population) in 2025, 78 million (21 percent of the projected 
population) in 2035, 83 million (22 percent of the projected 
population) in 2045, and 90 million (24 percent of the projected 
population) in 2055.\392\
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    \391\ Annual Estimates of the Resident Population for Selected 
Age Groups by Sex for the United States: Apr. 1, 2020, to July 1, 
2021 (NC-EST2021-AGESEX). We do not have demographic data on RILA 
investors. A 2013 survey found that 86 percent of individual annuity 
investors purchased their first annuity before age 65, including 47% 
who were between the ages of 50 and 64 years old. The average age of 
investors at first purchase of an annuity is 51. The average current 
annuity investor age is 70. See The Gallup Organization and Mathew 
Greenwald & Associates for The Committee of Annuity Insurers, Survey 
of Ownership of Individual Annuity Contracts (2013).
    \392\ Projected Age Groups and Sex Composition of the 
Population: Main Projections Series for the United States, 2017-
2060. U.S. Census Bureau, Population Division: Washington, DC.
---------------------------------------------------------------------------

    Individuals that are planning for, or are already in, retirement 
face increasing challenges with respect to achieving their income goals 
for retirement. First, people are living longer. Second, traditional 
defined-benefit retirement systems that provide guaranteed income are 
being replaced with defined-contribution systems that require people to 
accumulate their own retirement savings.\393\ Evidence suggests that, 
on average, individuals may not be saving appropriately to meet their 
retirement goals. For example, one survey found that while 74 percent 
of individuals are saving for retirement: (1) 51 percent of older 
individuals have less than $50,000 saved for retirement, (2) 57 percent 
of individuals save less than 10 percent of their income, and (3) 33 
percent of individuals save less than 5 percent of their income.\394\ 
In addition to the finding that individuals may not be saving an 
appropriate amount for retirement, there is also concern that 
individuals may not be taking on an appropriate amount of financial 
risk.\395\
---------------------------------------------------------------------------

    \393\ John Y. Campbell, Restoring Rational Choice: The Challenge 
of Consumer Financial Regulation (NBER Working Paper No, 22025, 
2016), available at http://www.nber.org/papers/w22025 (``Campbell 
Paper'').
    \394\ Insured Retirement Institute, Retirement Readiness Among 
Older Workers 2021 (2021) (``IRI Survey''), available at https://www.irionline.org/wp-content/uploads/legacy/default-document-library/iri-retirement-readiness-2021_fullreport.pdf.
    \395\ See Campbell Paper. Campbell argues that individuals take 
too little financial risk and that the willingness to take financial 
risk varies with wealth--individuals with greater wealth are willing 
to take on more financial risk than individuals with less wealth.
---------------------------------------------------------------------------

    Investors may not be saving appropriately to meet their retirement 
goals for several reasons. For example, individuals may face meaningful 
burdens (e.g., search costs) when trying to identify appropriate 
investments or savings products. Once identified, investors may face 
additional burdens (e.g., acquiring and analyzing large amounts of 
information) to determine which specific investments or saving products 
among the ones identified allow investors to best meet their savings 
goals.\396\ Second, improving

[[Page 71149]]

technology has permitted the development of more complex and confusing 
financial products.\397\ As a result of the burden associated with 
identifying appropriate investments, as well as the burden of acquiring 
and analyzing information to choose among the set of appropriate 
investments, investors may spend less time and effort (i.e., resources) 
than is required to make appropriate investment decisions.
---------------------------------------------------------------------------

    \396\ John Y. Campbell, Howell E. Jackson, Brigitte C. Madrian, 
and Peter Tufano, Consumer Financial Protection, 25 J. Econ. 
Perspectives 91 (2011) (``Campbell et al. Paper''). Campbell et al. 
note that making decisions about financial products often requires 
considerable information on terms and conditions, particularly for 
financial decisions that are undertaken only infrequently.
    \397\ See Campbell Paper.
---------------------------------------------------------------------------

    Investors may not be saving appropriately for other reasons, as 
well. For example, some investors may not make the appropriate 
decisions for themselves even if they were presented with all the 
information that was required to make a decision. Decision making 
limitations may be particularly problematic in the context of saving 
for retirement because learning from experience is difficult. Investing 
in retirement products is only done infrequently and the outcomes from 
investing decisions are delayed, perhaps for decades, and are subject 
to large random shocks, so that personal experience is slow to 
accumulate and is contaminated by noise. Also, financial innovation can 
reduce the relevance of an investor's prior experiences. For example, 
prior experience investing in investment vehicles with unbounded 
returns would be less relevant for investing in RILAs (which have 
bounded returns) than it would be for investing in variable annuities 
(which have unbounded returns).\398\ Another possibility is that 
investors may have preferences that lead them to favor present 
consumption over future consumption (``present-biased preferences'') 
and, as a result, they save an inappropriate amount for 
retirement.\399\ Finally, many people have a limited financial capacity 
to save, particularly individuals already burdened with student loans 
and mortgages.
---------------------------------------------------------------------------

    \398\ See Campbell et al. Paper. The Campbell Paper identifies 
five aspects of ``financial ignorance'' that may lead to poor 
investor decision making. First, investors may lack understanding of 
basic concepts necessary to make appropriate decisions. For example, 
investors appear to lack an understanding of diversification and the 
tradeoff between risk and return. Second, investors may not 
understand the terms of financial contracts. Third, it appears that, 
rather than using all available historical data to form views about 
future returns on alternative strategies, investors rely on their 
own specific experiences to form an opinion. Fourth, individuals 
appear to not understand their own difficulties with financial 
decision making. Finally, investors appear to not understand the 
incentives faced by other parties and the effect these incentives 
have on their strategic behavior. Other studies suggest poor 
investment decisions may result from investor uncertainty and lack 
of investor familiarity with different assets. For example, 
individuals may not invest appropriately because individuals are 
unable, given historical experience, to form precise estimates of 
how they expect assets to perform in the future. See, e.g., Raymond 
Kan and Guofu Zhao (2007). Optimal Portfolio Choice with Parameter 
Uncertainty, Journal of Financial and Quantitative Analysis, 27(3), 
621-656. Rather than being unable to form precise estimates of how 
they expect assets to perform in the future, investors may not have, 
perhaps due to not having the requisite experience, the ability to 
form any expectation about how they expect an asset to perform in 
the future. If investors' ambiguity is great enough, they simply may 
choose not to invest in particular assets. See, e.g., David Easley 
and Maureen O'Hara (2009). Ambiguity and Nonparticipation: The Role 
of Regulation, Review of Financial Studies, 22(5), 1817-1843. 
Finally, investors may make poor investment decisions because they 
choose to overweight investment in assets with which they are 
familiar, and underweight, or exclude, investment assets with which 
they are less familiar. See, e.g., Gur Hubberman (2001). Familiarity 
Breeds Investment, Review of Financial Studies, 14(3), 659-680 and 
Massimo Massa and Andrei Simonov (2006). Hedging, Familiarity, and 
Portfolio Choice, Review of Financial Studies, 19(2), 633-685.
    \399\ See Campbell et al. Paper. Campbell et al. note that 
individuals with present-biased preferences favor present 
consumption which can lead an individual to make decisions today 
that reduce their future welfare in a way that the individual later 
regrets.
---------------------------------------------------------------------------

2. Current Regulatory Requirements
    As discussed in section I above, RILAs are securities for purposes 
of the Securities Act, and public offerings of RILAs, therefore, must 
be registered with the Commission.\400\ Unlike variable annuity 
contracts for which the Commission has adopted a specific registration 
form tailored to those products, insurance companies register RILA 
offerings on Form S-1 or Form S-3.
---------------------------------------------------------------------------

    \400\ See supra footnote 5 and accompanying text.
---------------------------------------------------------------------------

    Form S-1 is available to any issuer (except foreign governments and 
issuers of asset-backed securities) to register securities for which no 
other registration form is authorized or prescribed. A registration 
statement on Form S-1 contains extensive disclosure about all aspects 
of the issuer's business and financial condition and consists of two 
parts: a prospectus (Part I), and additional information not required 
to be included in the prospectus (Part II), but that is publicly 
available on the Commission's EDGAR website. Form S-1 allows 
incorporation by reference only on a very limited basis. The prospectus 
must contain financial statements meeting the requirements of 
Regulation S-X, which generally includes audited financial statements 
prepared in accordance with GAAP.\401\ Currently, disclosures about 
RILA offerings are largely unstructured. The audited financial 
statements in the prospectus, if prepared in accordance with GAAP, must 
be tagged in Inline XBRL if the Form S-1 contains a price or a price 
range.\402\ Form S-1 must be declared effective by the Commission 
before any sales of the registered securities may be made. The time 
required for Commission review will depend on the number and complexity 
of Commission comments and the issuer's ability to adequately address 
those comments. The issuer must pay the Commission registration fee 
before it files a Form S-1. The amount of the fee is based on the 
proposed maximum aggregate offering price.\403\ The issuer must 
indicate the amount of each type of security being registered and 
calculate the fee payable for each security.
---------------------------------------------------------------------------

    \401\ Certain Commission letters, or portions thereof, exempt 
insurance companies from the requirement to provide financial 
statements prepared in accordance with GAAP in connection with the 
registration of an offering of RILAs on Form S-1. As discussed in 
Section III.B.1.a, 47 RILAs report SAP financials.
    \402\ See 17 CFR 229.601(b)(101)(i)(B).
    \403\ Generally, Form S-1 (or S-3) fees paid for a withdrawn 
registration statement are available to the issuer for use with its 
future registration statements. The amount available for use as an 
offset under rule 429 under the Securities Act equals the portion of 
the filing fee paid that is associated with any unsold securities of 
the same class registered on an earlier registration statement. Once 
a filing fee has been used as an offset, those unsold securities on 
the earlier registration statement are deemed deregistered. RILAs 
are continuously offered to investors, who in many cases are long-
term investors that may make additional allocations or other 
investment decisions with respect to an investment in a RILA. 
Because RILA investors may make additional allocations or other 
investment decisions with respect to an investment, unless a prior 
RILA offering is completely unsold, RILA issuers may have increased 
difficulty in using filing fees associated with unsold securities of 
a prior offerings.
---------------------------------------------------------------------------

    Form S-3 is a ``short-form'' registration statement under the 
Securities Act that can be used by companies that have been subject to 
reporting obligations under the Exchange Act for at least one year and 
that satisfy certain other requirements.\404\ Reporting obligations 
under the Exchange Act include audited financial statements prepared in

[[Page 71150]]

accordance with GAAP and structured in Inline XBRL. A registration 
statement on Form S-3 contains extensive disclosure about all aspects 
of the issuer's business and financial condition and consists of two 
parts: a prospectus which includes, either directly or incorporated by 
reference from the issuer's Exchange Act filings, detailed information 
about the issuer (Part I), and additional information not required to 
be included in the prospectus (Part II), but that is publicly available 
on the Commission's EDGAR website.
---------------------------------------------------------------------------

    \404\ The issuer must be either organized under U.S. law with 
its principal business operations in the United States or a foreign 
private issuer that reports under the Exchange Act using the 
domestic reporting forms. The issuer must have a class of securities 
registered under section 12(b) or 12(g) of the Exchange Act, or be 
required to file reports under section 15(d) of the Exchange Act. 
The issuer must have been subject to the reporting requirements of 
the Exchange Act and have filed all reports and materials required 
under sections 13, 14, and 15(d) of the Exchange Act for the 12 
calendar months preceding the filing of Form S-3, and, with certain 
exceptions, must have timely filed all such reports and other 
materials required to be filed during the 12 calendar months and any 
portion of a month immediately preceding the filing of the 
registration statement. An issuer that meets all of the requirements 
of Form S-3 and that has a public float of $75 million or more 
(i.e., ``seasoned issuers'') may use Form S-3 to register any 
offering of debt or equity for cash.
---------------------------------------------------------------------------

    Registration using Form S-3 offers issuers advantages over 
registration using Form S-1. First, Form S-3 allows significant 
incorporation by reference, which allows for shorter prospectuses and 
makes Form S-3 easier to complete. Also, Form S-3 also allows for 
forward incorporation by reference, eliminating the need to file post-
effective amendments to keep registration statements current.
    A Form S-3 filed by a non-WKSI must be declared effective by the 
Commission. A Form S-3 receives either a full review, a targeted review 
of one or more sections of the registration statement, or no review. 
Commonly, a full review takes approximately 30 days with targeted 
reviews taking less time. The time to resolve any Commission comments 
will depend on the number and complexity of the Commission's comments. 
An issuer must pay Commission filing fees before it files Form S-3. The 
amount of the filing fee is based on the proposed maximum aggregate 
offering price.
    Under the Federal securities laws applicable to all securities 
(including RILA offerings), it is unlawful for any person to use 
materially misleading communications in connection with the offer or 
sale of any security.\405\ Rule 156 is an interpretive rule that 
provides factors to be weighed in considering whether a statement 
involving a material fact is or might be misleading in the specific 
context of investment company sales literature, including literature 
relating to the sale of variable annuities.
---------------------------------------------------------------------------

    \405\ See 15 U.S.C. 77q(a); 15 U.S.C. 78j(b); 17 CFR 240.10b-5.
---------------------------------------------------------------------------

    As discussed in section I above, in 2022 Congress enacted the RILA 
Act directing the Commission to adopt a new registration form for RILAs 
within 18 months of enactment (i.e., the end of June 2024). If the 
Commission fails to adopt the form by the end of June 2024, the RILA 
Act provides that issuers can begin registering the offering of RILAs 
on Form N-4.
3. Market Practice
    Annuities can play a role in helping investors save for retirement 
and receive guaranteed lifetime income during retirement.\406\ There 
are multiple types of annuities available to help investors who have 
different financial goals or tolerances for risk save for retirement: 
fixed annuities, variable annuities, and RILAs. Fixed annuities offer 
investors preservation of their investment by guaranteeing a minimum 
rate of return, but with little opportunity for asset growth. During 
the accumulation phase,\407\ a traditional (i.e., book value) fixed 
annuity offers investors a fixed rate of return (known in advance) for 
a given period of time.\408\ A market value adjusted annuity (see 
section II.H) is similar to a traditional annuity, but the assets are 
subject to a market value adjustment based on interest rate 
changes.\409\ Fixed index annuities guarantee a certain rate of 
return,\410\ but also provide the potential for (limited) additional 
returns based on the performance of a specified market index.\411\
---------------------------------------------------------------------------

    \406\ Id. The IRI Fact Book argues that annuities give investors 
the ability to create their own pensions. The IRI Fact Book also 
argues that, unlike mutual funds, annuities offer a wide variety of 
guarantees to protect an investor's investment. For example, death 
benefits provide principal protection in the event that an investor 
dies during a market downturn.
    \407\ During the accumulation phase, also called the savings 
phase, capital builds up. In this phase, the investor pays premiums 
into the contract to accumulate assets. See IRI Fact Book.
    \408\ Id. The IRI Fact Book also notes that fixed annuities 
involve less investment risk because they offer a guaranteed minimum 
rate of interest. The minimum rate is not affected by fluctuations 
in market interest rates.
    \409\ Id. The IRI Fact Book contends that fixed index annuities 
are designed for investors who want to partake in the benefits of a 
market-linked vehicle with a protected investment floor if there is 
a downturn in the index.
    \410\ Currently, insurance companies with a minimum A.M. Best 
Insurance Ratings of A- offer fixed rate annuities that guarantee 
between 3.70% and 5.40% for a three-year period, and between 3.20% 
and 5.25% for a ten-year period. Multi-Year Guarantee Annuities 
(MYGA), ANNUITY ADVANTAGE (accessed Aug. 17, 2023, and filtered by 
``State'' of ``- All''; ``Min AM Best'' of ``A-''; ``Years'' of 
``10''; and ``Range'' of ``Exact''), https://www.annuityadvantage.com/annuity-rates-quotes/multi-year-guarantee-annuities/?rating=4&years=10&pos=300&sort=guarantee_period_yield&limit=all.
    \411\ IRI Fact Book.
---------------------------------------------------------------------------

    Variable annuities accumulate savings based on the performance of 
the underlying investment options chosen by an investor. Typically, 
investors are able to choose among investment options that pass on the 
returns of a wide variety of mutual funds such as equity funds, bond 
funds, funds that combine equities and bonds, actively managed funds, 
index funds, domestic funds, and international funds.\412\ Depending on 
the investment options chosen, variable annuities can offer investors 
the greatest opportunity for asset growth, but they also can involve 
the greatest amount of investment-based risk, compared to other types 
of annuities.\413\
---------------------------------------------------------------------------

    \412\ Id.
    \413\ Additionally, variable annuities often involve direct 
fees, such as insurance charges, and indirect expenses, including 
management and other fees and expenses associated with the 
underlying mutual funds in which the variable annuity subaccounts 
invest. See IRI Fact Book.
---------------------------------------------------------------------------

    RILAs are an index-linked product that can be purchased by 
individual investors as part of both qualified and non-qualified 
retirement accounts.\414\ RILAs combine features of fixed-index 
annuities and variable annuities. RILAs limit or reduce downside risk 
in return for an investor accepting limited upside performance. In 
exchange for giving up the complete protection of principal offered by 
fixed annuities, a RILA investor is potentially afforded greater upside 
potential than that provided by fixed annuities, though typically less 
than the potential upside of investing in the same index within a 
variable annuity.\415\ RILAs allow investors some ability to customize 
a level of risk with which they are comfortable.\416\ Like other 
annuities, RILAs have an accumulation phase followed by a payout phase. 
The accumulation phase is divided into one or more crediting 
periods.\417\ Also like other annuities, after a ``surrender charge'' 
period (generally, 3 to 10 years following an investor's last premium 
payment), investors can usually surrender their contract at the end of 
any crediting period and receive full account value.\418\ Investors, 
however, may lose money if they withdraw early from an investment 
option or from the contract, as explained in section I.A above.
---------------------------------------------------------------------------

    \414\ Thorsten Moenig, It's RILA Time: An Introduction to 
Registered Index-Linked Annuities, 89 J. Risk & Ins. 339 (2022) 
(``Moenig Paper'').
    \415\ See IRI Fact Book.
    \416\ Id. The IRI Fact Book also contends that historically 
investors generally fell into one of two camps: those willing to 
exchange safety of principal for modest returns, and those able to 
tolerate the higher risk of being invested in securities in exchange 
for greater upside potential. RILAs address a developing demand for 
products that allow investors some ability to customize a level of 
risk with which they are comfortable. Structured annuities (i.e., 
RILAs) meet the needs of the in-between investor who wants some 
degree of certainty but also desires some upside potential.
    \417\ Id.
    \418\ Id.
---------------------------------------------------------------------------

    At the end of a crediting period, the issuer credits a RILA 
investor's contract value with ``interest'' (which can be either 
positive or negative) that is based on the performance of a specified 
index,

[[Page 71151]]

subject to restrictions on the upside, through a cap and/or 
``participation rate,'' as well as some form of downside 
protection.\419\ If the index declines, the credited loss is lessened 
by either a floor (a maximum loss percentage), a buffer (index losses 
are credited to the RILA investor's contract value only when they 
exceed a certain threshold), or a downside participation rate (the loss 
credited to contract value is a certain percentage of the index 
loss).\420\ RILA downside protection mechanisms typically do not change 
over time, whereas issuers may, and likely will, change upside limits 
on gains for both new contracts as well as existing contracts to 
reflect changing market conditions.\421\ If a RILA contract offers 
downside protection in the form of a floor, then the increased 
volatility would expose the issuer to greater downside risk. To offset 
the increased downside risk, an issuer might choose to reduce its 
upside risk by lowering cap rates.\422\ If the RILA contract offers 
downside protection in the form of a buffer, then increased volatility 
would expose the issuer to reduced downside risk. The reduced downside 
risk might cause issuers to increase cap rates.\423\
---------------------------------------------------------------------------

    \419\ Id.
    \420\ Id. The Moenig Paper argues that RILAs are structurally 
similar to fixed-index annuities except that RILAs may credit 
negative returns. A fixed-index annuity can be viewed as a special 
case of a RILA with a floor of 0%. The insurer provides full 
protection on the index return in exchange for a low cap rate 
(commonly between 2% and 4%).
    \421\ See Moenig Paper.
    \422\ Id.
    \423\ Id.
---------------------------------------------------------------------------

    Also, unlike variable annuities, most RILAs do not include any 
direct ongoing fees or charges to the investor. Insurance companies, 
however, can benefit from offering RILAs in at least three ways. First, 
insurance companies can benefit from a favorable imbalance between the 
downside protections that a RILA contract offers, and the upside limits 
the contract offers.\424\ That is, insurance companies set the level of 
upside limits such that their value (to the issuer) exceeds the cost of 
providing the downside protection mechanism to investors.\425\ One 
study estimates an average annual cost to investors from the imbalance 
between the downside protections that a RILA contract offers and the 
upside limits is approximately 0.17% of the RILA investment 
amount.\426\ To assess if the findings of the study continue to be 
relevant for the current RILA market, the staff conducted an 
independent analysis of RILA contract terms. Specifically, staff 
examined 24 one-year term rates linked to the S&P 500 index, Nasdaq 100 
index, Russell 2000 index, and MSCI EAFE.\427\ These rates were offered 
by three insurance companies across a two-week interval.\428\ In 
particular, staff calculated the fair value of the portfolio, composed 
of a risk-free zero-coupon bond with one-year maturity and a collection 
of hypothetical index options with one-year expiration that would 
replicate the promised payoff for each contract.\429\ Staff used the 
Black-Scholes formula for European options to derive fair prices of 
these hypothetical index options. In estimating the implied volatility 
for each specific strike price, staff utilized an estimated one-year 
volatility surface.\430\ The volatility surface estimates the values 
for implied volatility across a range of standardized options with 
varying implied strike prices, including both calls and puts. Staff 
then linearly interpolated between the implied volatilities with 
implied strikes adjacent to the strike price of each hypothetical 
option to obtain the implied volatility. This implied volatility is 
used as an input in the Black-Scholes formula to derive the fair values 
of the options.\431\ Staff assumed that the options expire in exactly 
one year. The annual cost of each contract is defined as the difference 
between the par value and the calculated risk-neutral fair price of the 
contract, divided by the par value.\432\
---------------------------------------------------------------------------

    \424\ Id.
    \425\ We understand that for shorter crediting periods and for 
common indexes such as the S&P 500, insurance companies are able to 
use exchange-traded derivative securities to closely approximate the 
insurer's liabilities from a RILA contract at the end of each 
crediting period. For example, for a RILA with both a floor and a 
cap, the insurance company can hedge its liability by purchasing a 
call option (with an appropriate strike price given the floor) and 
selling a call (with a higher strike price that is dependent on the 
cap). The insurance company can offer a cap such that the proceeds 
from selling the call with the higher strike price exceed the cost 
of purchasing the call option with the lower strike price. For a 
RILA with a downside buffer (as opposed to a floor) and a cap, the 
process for insurance companies to hedge their liabilities is 
similar, but with a different mix of options. In the case of a RILA 
with a downside buffer and a cap, the insurance company would 
purchase a call option, sell a call option (with a higher strike 
price), and selling a put option (with a lower strike price, as 
appropriate given the downside buffer). In this case, the insurance 
company can offer a cap such that the proceeds from selling the call 
and the put exceed the cost of the call option with the lower of the 
two strike prices.
    \426\ See Moenig Paper; Public Filings on EDGAR.
    \427\ The staff obtained the term rates from Rates: Current 
rates for Allianz Index Advantage ADV Variable Annuity, Allianz, 
https://www.allianzlife.com/what-we-offer/Annuities/registered-index-linked-annuities/index-advantage-adv/rates (visited Sept. 14, 
2023); Variable Annuities, Equitable, https://equitable.com/retirement/products/variable-annuities (click ``View Performance Cap 
Rates'') (visited Sept. 14, 2023); Nationwide Defender Annuity, 
Nationwide (Sept. 1, 2023), (visited Sept. 14, 2023).
    \428\ Each contract designates a distinct set of buffer and cap 
rates with no additional features. The sample period spans from 
September 5 to 15, 2023. The Moenig Paper cited an industry survey 
as a source for the data in its analysis. We understand that the 
industry survey cited does not contain updated product-level 
contract-level details beyond the data cited in the Moenig Paper. We 
request comment on data sources (e.g., pricing vendors) that should 
be considered for these calculations. See infra section III.F.
    \429\ More specifically, the options position encompasses a long 
At-the-Money (ATM) call option, coupled with a short Out-the-Money 
(OTM) call option with strike price equal to the index value 
increased by a factor of the cap rate and a short OTM put option 
with strike price equal to the index value decreased by a factor of 
the buffer rate.
    \430\ The volatility surface data is obtained through IvyDB 
OptionMetrics.
    \431\ The other model inputs--the end-of-day S&P 500 index value 
and the risk-free interest rate--are obtained through IvyDB 
OptionMetrics.
    \432\ The staff incorporated any explicit annual product fee 
charged by the insurance company into the cost calculation. This 
analysis could be extended to incorporate several additional factors 
that differentiate the RILA from the replicating strategy that would 
be priced in a market. For example, it does not consider any 
effective difference to the investor in liquidity because of early 
withdrawal charges or penalties, differences in portfolio value 
prior to maturity, death benefits, or specific crediting methods. We 
request comment on these aspects of pricing of RILA contracts below. 
See infra section III.F.
---------------------------------------------------------------------------

    Table 10 presents the mean and median annual costs for each of the 
twenty-four contracts during the sample period. The annual costs hover 
around zero for all contracts. The mean annual costs are positive for 
nearly all of the contracts, ranging from 0.04% for contract 22 and 
0.93% for contract 20, but negative for others, such as contract 1, 
contract 2, contract 3, and contract 16. These results are consistent 
with the Moenig Paper's findings of a mean cost of 0.17%.

         Table 10--Pricing of Twenty-Four Sample RILA Contracts
------------------------------------------------------------------------
                                             Mean  (%)      Median  (%)
------------------------------------------------------------------------
Contract 1..............................           -0.30           -0.30
Contract 2..............................           -0.64           -0.64

[[Page 71152]]

 
Contract 3..............................           -0.30           -0.29
Contract 4..............................            0.57            0.61
Contract 5..............................            0.34            0.34
Contract 6..............................            0.37            0.50
Contract 7..............................            0.42            0.44
Contract 8..............................            0.39            0.40
Contract 9..............................            0.60            0.58
Contract 10.............................            0.72            0.74
Contract 11.............................            0.51            0.46
Contract 12.............................            0.09            0.09
Contract 13.............................            0.22            0.22
Contract 14.............................            0.24            0.25
Contract 15.............................            0.35            0.36
Contract 16.............................           -0.08           -0.11
Contract 17.............................            0.16            0.11
Contract 18.............................            0.12            0.13
Contract 19.............................           -0.08           -0.22
Contract 20.............................            0.93            0.93
Contract 21.............................            0.63            0.64
Contract 22.............................            0.04            0.04
Contract 23.............................            0.33            0.33
Contract 24.............................            0.38            0.38
------------------------------------------------------------------------
Note: The table summarizes the annual costs for each of the twenty-four
  contracts offered by three insurance companies during a two-week
  interval. See Rates: Current rates for Allianz Index Advantage ADV
  Variable Annuity, Allianz, https://www.allianzlife.com/what-we-offer/Annuities/registered-index-linked-annuities/index-advantage-adv/rates
  (visited Sept. 14, 2023); Variable Annuities, Equitable, https://equitable.com/retirement/products/variable-annuities (click ``View
  Performance Cap Rates'') (visited Sept. 14, 2023); Nationwide Defender
  Annuity, Nationwide (Sept. 1, 2023), https://nationwidefinancial.com/media/pdf/VAM-3629AO.pdf (visited Sept. 14, 2023). At the end of each
  business day, we employ a market price approach to compute the fair
  value of each contract. We then compare the fair value to the par
  value to derive the annual cost and incorporate any explicit product
  fee. Subsequently, we compute the mean and median annual costs for
  each contract over the two-week measurement period.

    Also, we understand that, generally, insurance companies can 
benefit from offering RILAs by investing RILA proceeds into fixed-
income securities such as corporate bonds, thereby earning a ``credit 
risk premium.'' Further, insurance companies can benefit when a RILA 
offers index-linked options whose index for measuring performance is a 
price-based index that does not account for dividend payments. For 
example, if an investor chooses an index-linked option whose 
performance is based, in part, on the S&P 500 Price Return Index, the 
credited return may be based on the point-to-point change in the S&P 
500, which does not include the dividend payments of the underlying 
stocks.\433\ The excluded dividends can act as an implicit ``fee'' on 
investors with the magnitude of the implicit fee being comparable to 
average dividend rates among the underlying index stocks.\434\
---------------------------------------------------------------------------

    \433\ See supra footnote 431.
    \434\ Id. The Moenig Paper provides the following example. If 
stock prices rise by 7% on average over the crediting period, in 
addition to paying 2% in dividends, then the RILA account would be 
credited 7%, even though investors in the underlying stocks would 
earn a 9% return. Omitting dividend payments benefits insurers by 
reducing the cost of providing a given amount of downside protection 
(e.g., through lower option prices).
---------------------------------------------------------------------------

    While most RILAs do not include any explicit ongoing fees or 
charges to the investor, RILAs typically have charges for early or mid-
term withdrawals. As discussed in section II.B.2.a, charges for early 
or mid-term withdrawals could include, surrender charges, contract 
adjustments, and transaction charges (separate from surrender 
charges).\435\
---------------------------------------------------------------------------

    \435\ See also supra footnote 431.
---------------------------------------------------------------------------

    RILAs differ from other annuity contracts in other ways as well. 
Variable annuities involve a direct investment of premiums into 
subaccount(s) that correspond to one, or more, of many mutual funds. 
RILA premiums, on the other hand, are not directly invested into the 
assets of the underlying index, and typically investors can only choose 
among index-linked options whose returns are based on a small number of 
mainstream indexes.\436\ Also, the financial guarantees common to 
variable annuities are long term and are only applied when the contract 
terminates, either at maturity or due to the investor's death, or if 
the account value reaches zero due to guaranteed withdrawals.\437\ 
These factors make variable annuity guarantees difficult to value and 
hedge due to their long-term nature (potentially 25 years, or 
more).\438\ The guarantees that RILA contracts offer as part of their 
bounded return structure, on the other hand, are short-term (i.e., they 
are limited to the crediting period of the index-linked option the 
investor selects, which is usually one, two, three, or six years) and 
tied to the performance of a common index, so that issuers can hedge 
the embedded liabilities accurately through the financial markets.\439\
---------------------------------------------------------------------------

    \436\ See Moenig Paper.
    \437\ Id.
    \438\ Id.
    \439\ Id.
---------------------------------------------------------------------------

    Further, guarantees that RILA contracts offer may be much less 
dependent on investor behavior than variable annuity guarantees. 
Variable annuity investors may have a strong incentive to surrender or 
exchange their policy when an embedded guarantee loses its value (i.e., 
moves ``out of the money'').\440\ The guarantees RILA contracts offer 
reset with the end of the crediting period of the index-linked option 
the investor selects, so such guarantees are more commonly ``at the 
money'' and investors do not have as strong of an incentive to 
surrender or exchange their policies.\441\
---------------------------------------------------------------------------

    \440\ Thorsten Moenig and Nan Zhu (2018). Lapse-and-Reentry in 
Variable Annuities, Journal of Risk and Insurance, 85(4), 911-938 
(``Moenig and Zhu Paper'').
    \441\ See Moenig Paper.

---------------------------------------------------------------------------

[[Page 71153]]

    Additionally, RILAs and variable annuities differ with respect to 
their use of proceeds. As discussed in Section II.B.4, variable annuity 
proceeds are held in separate accounts and, therefore, insulated from 
the issuer's creditors. Variable annuity proceeds in unitized sub-
accounts must be invested as the investor chooses and returns are 
credited to the account directly. Like variable annuity proceeds, RILA 
proceeds are placed into a (non-unitized) separate account. As a 
result, the proceeds are not insulated from the issuer's creditors. 
Also, RILA proceeds can be invested as the issuer sees fit.
    We understand that for index-linked options offering shorter 
crediting periods, and whose returns are based on common indexes such 
as the S&P 500 Index, insurance companies are able to invest RILA 
proceeds in exchange-traded derivative securities that closely 
approximate the issuer's liabilities from a RILA contract at the end of 
each crediting period.\442\ In doing so, insurance companies are able 
to hedge away their risk at a low cost. Further, we understand that 
insurance companies can, and do, invest the remaining proceeds into 
fixed-income securities (e.g., corporate bonds) that allow them to earn 
a ``credit risk premium.'' \443\ The credit risk premium can be an 
important source of benefits to issuers.\444\
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    \442\ Id.
    \443\ Id.
    \444\ Id.
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C. Benefits and Costs

1. Benefits
a. Use of Form N-4
    Unlike variable annuity offerings that are registered on Form N-4, 
insurance companies register RILA offerings on Forms S-1 or S-3. These 
forms include a number of disclosure requirements that are specific to 
the insurance company issuing the RILA that the Commission does not 
require in the registration statements for offerings of variable 
annuities.
    We are proposing that insurance companies use Form N-4 to register 
the offering of RILAs and we are proposing to adapt Form N-4 for that 
purpose.\445\ Because it is an existing form, we believe RILA issuers 
and investors are familiar with Form N-4. As a result of expanding the 
scope of Form N-4 to address RILAs, RILA offerings would be registered 
on the same form as variable annuities. Requiring that insurance 
companies register RILA offerings on Form N-4 would leverage insurance-
product specific disclosure requirements reflected in the form and also 
would permit the summary prospectus layered disclosure framework the 
Commission adopted in 2020 for variable annuities.
---------------------------------------------------------------------------

    \445\ See proposed General Instruction B.1 of Form N-4.
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    The following sections discuss the specific benefits deriving from 
the contents and requirements of the form in detail. In addition to 
these benefits, expanding the scope of Form N-4 to include RILAs would 
benefit investors by making it easier for them to evaluate and compare 
RILAs, and also to compare other annuity products with RILAs. For 
example, investors may require less effort to evaluate and compare 
annuity products that register using the same form. To the extent that 
investors require less effort to evaluate and compare these annuity 
products, investors may be more likely to make decisions that better 
align with their investment goals.
b. Contents of Form N-4
    The proposal is designed to facilitate the Commission's goal it 
sought to achieve in adopting Form N-4, namely to help investors make 
an informed investment decision regarding the annuity products that are 
registered on that form. The registration process on Form N-4 uses a 
layered disclosure approach designed to provide investors with key 
information relating to the contract's terms, benefits, and risks in a 
concise and more reader-friendly presentation, with access to more 
detailed information for those investors who want it. Providing 
investors with key information is particularly important in the context 
of annuity contracts since their structure is typically more complex 
than other types of investment products commonly sold to retail 
investors.
    Specifically, the proposal would update the contents of Form N-4 to 
specifically address RILAs, including by: (1) amending the form's 
general instructions; (2) amending the requirements for front and back 
cover pages; (3) updating the Key Information Table; (4) providing new 
principal disclosures regarding RILA investment options; and (5) 
providing for new contract adjustment and fee disclosures. The proposal 
would also include certain other technical and conforming amendments to 
Form N-4 and related rules designed to accommodate the inclusion of 
RILA offerings on that form as well as requiring the insurance company 
to provide disclosure in response to the remaining items on Form N-4 to 
the extent applicable.
(1) General Instructions
    The proposal would require RILA offerings registered on Form N-4 to 
comply with the general instructions of that form, including 
requirements related to: (1) using document design techniques that 
promote effective communication, (2) organizing information to make it 
easier for investors to understand, (3) including information in the 
prospectus or SAI not otherwise required so long as the additional 
information is not incomplete, inaccurate, or misleading, and does not 
obscure or impede understanding of the information that is required, 
(4) requiring Form N-4 filers to define special terms used in the 
prospectus in any presentation that clearly conveys meaning to 
investors, (5) allowing insurance companies to describe multiple 
contracts that are essentially identical in a single prospectus, (6) 
making available the dates of both the prospectus and SAI, (7) 
providing an interactive data file related to certain information on 
the form, (8) requiring insurance companies to include active 
hyperlinks, or other means of facilitating access that leads directly 
to the relevant website, for an electronic version of the prospectus, 
and (9) the use of incorporation by reference. The general instructions 
are designed to require clear and consistent disclosure to investors 
about annuity contracts currently registered on the form and to make 
clear how filers must prepare and file their registration statements.
    We believe clear disclosure benefits investors by making it easier 
for investors to evaluate and compare offerings. Concise and decision-
useful disclosures can help facilitate the investment decision-making 
process. Also, the presentation of information in a consistent manner 
could facilitate not only the evaluation and comparison among RILA 
offerings, but also could facilitate the comparison of RILAs to other 
annuity products.\446\ Further, certain investors, while aware of 
variable annuities, simply may not be aware of RILAs as an investment 
option. Presentation of information in a consistent manner on Form N-4 
could increase investor awareness of RILAs as an investment option.
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    \446\ The consistent presentation of information also could 
facilitate information collection by third parties such as 
investment advisers and data aggregators who could then, in turn, 
provide information to investors.
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(2) Front and Back Cover Pages
    The proposal would make certain changes to information currently 
required on the front and back pages of

[[Page 71154]]

a prospectus for all registrants on Form N-4. Like variable annuities 
registered on Form N-4, RILAs would be required to present certain 
information on the front and back cover pages of the prospectus. The 
proposal would require several new cover page disclosures for all Form 
N-4 issuers. One of these would provide additional information 
distinguishing among the investment options available in the annuities 
registering on Form N-4 and cross-reference the prospectus appendix 
that provides additional information about each option. These changes 
could help investors better understand what investment options are 
available under the contract, in an easily identifiable location. Also, 
the proposal would require the inclusion of three new legends that 
highlight risks that are particularly prevalent in RILAs. The new 
legends that highlight risk that are particularly prevalent in RILAs 
should benefit investors by putting them on notice of these key 
considerations at the outset, helping the investor make informed 
decisions.
(3) Key Information Table
    As required for current Form N-4 issuers, the proposal would 
require RILA issuers to provide a Key Information Table in their 
registration statements. The KIT includes a summary of five areas: (1) 
fees and expenses, (2) risks, (3) restrictions, (4) taxes, and (5) 
conflicts of interest. The KIT is important summary disclosure for 
investors that is included in the prospectus, and the proposed 
amendments to the KIT requirements are intended to highlight important 
considerations related to RILAs, including certain unique and/or opaque 
aspects of RILAs.\447\ Consistent with our layered disclosure approach 
for variable annuities registered on Form N-4, RILA issuers would be 
required to provide cross-references in the KIT to the location in the 
statutory prospectus where the subject matter is described in greater 
detail. Certain of the amended KIT requirements would apply to all Form 
N-4 issuers. In particular, in a change from the current KIT 
requirements for Form N-4 issuers, the amendments would require that 
responses in an item be presented in a Q&A format.\448\ In a change for 
all Form N-4 issuers, the proposal also would change the order in which 
the KIT appears relative to the Overview of the Contract disclosures in 
the prospectus.
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    \447\ Many of the summary points presented in the KIT are 
discussed in greater detail in other parts of the form. In this way, 
the KIT is an integral part of the layered disclosure approach the 
Commission traditionally has taken with annuity products. To ensure 
that the KIT serves this function effectively, we also are proposing 
to delete Form N-4's general instruction stating that where the 
discussion of information required by the Overview of the Contract 
(currently Item 3) or KIT (currently Item 2) also responds to the 
disclosure requirements in other items of the prospectus, 
registrants need not include additional disclosure in the prospectus 
that repeats the information disclosed in the Overview of the 
Contract or the KIT. See infra footnote 84 and accompanying text.
    \448\ Currently, such format is suggested but not required. See 
General Instruction C.3.(c) of Form N-4.
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    Overall, the proposed KIT requirements (like the current KIT 
requirements for variable annuities) are designed to provide a brief 
description of key facts about a RILA in a specific sequence and in a 
standardized presentation that is designed to be easy to read and 
navigate. We believe that a standardized presentation that is designed 
to be easy to read and navigate benefits investors by making it easier 
for investors to evaluate and compare RILA offerings. Also, the 
standardized presentation of information could facilitate not only the 
evaluation and comparison among RILA offerings, but also could 
facilitate the comparison of RILAs to other annuity products.
(4) Principal Disclosure Regarding RILA Offerings
    The proposal would amend Form N-4 to require disclosure that would 
provide investors with information about all annuities whose offerings 
are registered on Form N-4 as well as with specific information about 
RILAs and the index-linked options available under the RILA contracts. 
With regard to Form N-4 issuers generally, the proposal would require 
registrants to disclose investment option risk, early withdrawal risk, 
contract benefits risk, insurance company risk, and the risk of 
contract changes. With regard to specific information about RILAs, the 
proposal includes requirements related to: (1) information about RILAs 
generally and an overview of certain key elements of any index-linked 
option offered under the contract; (2) a more in-depth description of 
index-linked investment options available under the contract; (3) the 
inclusion of an appendix that consolidates certain summary information 
related to index-linked options and fixed options available under the 
contract (which would accompany similar information about variable 
options offered under a ``combination'' contract); and (4) certain 
principal risk disclosures relating to investing in the RILA contract 
that the prospectus describes.
    The proposed disclosure requirements are designed to provide 
additional information regarding the risk of investing in Form N-4 
issuers generally, as well as the unique aspects of RILAs and certain 
summary and detailed information about index-linked options available 
under a RILA contract. The information could benefit investors by 
making it easier for investors to evaluate and compare variable annuity 
products registered on Form N-4. The required disclosure relating to 
index-linked and fixed options available under a contract could benefit 
investors by facilitating the comparison of these investment options to 
other investment options available under the contract, as well as to 
investment options that other RILA contracts offer.
(5) Addition of Contract Adjustments and Other Amendments to Fee and 
Expense Disclosures
    RILA investors have the ability to take a withdrawal or transfer 
out their money before the end of a crediting period. If amounts are 
removed from an investment option before the end of a crediting period, 
typically an insurance company will apply an interim value adjustment 
to the investor's contract value. The IVA, which will adjust the 
contract value based on a formula, can move up and down as market 
conditions change throughout the crediting period and may adjust daily. 
The IVA is irrelevant if the investor does not move money from an 
investment option until the end of the crediting period, but it becomes 
relevant if the investor withdraws or transfer the money before the end 
of a crediting period. Similarly, a positive or negative market value 
adjustment could apply if amounts are partially or fully withdrawn from 
the contract before the end of a specified period. These contract 
adjustments, whose calculation varies by insurance company, may have a 
positive or negative effect on the value of the contract.
    We propose amendments to Form N-4 to require specific disclosures 
with respect to contract adjustments. Currently, Form N-4 requires 
variable annuity registrants to provide comprehensive information on 
the fees and expenses that investors will pay when buying, owning, and 
surrendering a contract, including expenses paid each year during the 
time the investor owns the contract. Although RILAs typically do not 
charge the explicit fees and expenses common to variable annuities, 
they do typically utilize contract adjustments. Since negative 
adjustments may result in substantial costs to investors, we believe 
that it is important to include a detailed description of

[[Page 71155]]

contract adjustments in the registration statement.
    Specifically, we are proposing to expand current disclosure 
requirements to address contract adjustments that could affect 
investors' contract value when buying, owning, and surrendering or 
making withdrawals from an investment option. We are also proposing 
certain other specific disclosures about contract adjustments, such as 
requiring disclosures about the maximum potential loss that an investor 
could experience in connection with a negative contract adjustment.
    We believe that these disclosures would benefit investors since 
they would be able to better evaluate the costs of purchasing and 
owning annuity contracts, including RILAs. In addition, these 
disclosures can make less-informed investors aware of RILAs' unique 
characteristics, which could increase investor understanding of RILAs 
as an investing option.
(6) Other Amendments to Form N-4
    The proposal would include certain other amendments to Form N-4 and 
related rules designed to accommodate the inclusion of RILA offerings 
on Form N-4. These include amendments to Form N-4's facing sheet, 
definitions, exhibit list, and required representations, as well as 
amendments to certain Securities Act rules that help to implement the 
proposal. Because these other amendments to Form N-4 and related rules 
are designed to accommodate the inclusion of RILA offerings on Form N-
4, the benefits that could accrue as a result of these other amendments 
are those that result from RILA issuers registering offerings on Form 
N-4 rather than Form S-1 or Form S-3.
    The proposal would also amend Form N-4's required exhibits list to 
add new Item 27(p) for all issuers, which would require the filing of 
any power of attorney included pursuant to rule 483(b). While this 
exhibit is already required to be filed with a Form N-4 registration 
statement under rule 483(b), practices differ in regard to the 
placement of a required power of attorney exhibit within the exhibit 
list. This amendment would benefit investors in comparing these 
exhibits for all annuity products whose offerings are registered using 
Form N-4 by standardizing the location of these exhibits in the 
registration statement. Facilitating the comparison of annuity products 
could benefit investors by helping them to invest in RILAs in a manner 
that is consistent with their overall financial needs and objectives.
    We are also proposing to add new Item 31A in Form N-4 to require 
census-type information on RILAs offered in connection with the 
applicable registration statement. Under this proposed new item, an 
insurance company would have to provide information regarding any RILA 
offered through the registration statement, as of the most recent 
calendar year-end, including (1) the name of each contract; (2) the 
number of contracts outstanding; (3) the total value of investor 
allocations attributable to index-linked options; (4) the number of 
contracts sold during the prior calendar year; (5) the gross premiums 
received during the prior calendar year; (6) the amount of contract 
value redeemed during the prior calendar year; and (7) whether the 
contract is a combination contract. The information in new Item 31A 
would help the Commission and staff in identifying trends in insurance 
companies' offerings of RILAs and have a more complete understanding of 
the marketplace for annuity securities.
    We also propose amendments to Item 34 of Form N-4 to require RILA 
issuers to include two specific undertakings in their registration 
statements on Form N-4: (1) to file, during any period in which offers 
or sales are made, through a post-effective amendment to its 
registration statement, any prospectus required by section 10(a)(3) of 
the Securities Act and, (2) that, for the purposes of determining 
liability under the Securities Act, each post-effective amendment shall 
be deemed to be a new registration statement relating to the securities 
offered therein, and the offering of such securities at that time shall 
be deemed to be the initial bona fide offering thereof. These proposed 
undertakings are the same as two undertakings RILA issuers currently 
provide in registration statements. We believe that it remains 
appropriate for RILA issuers to continue to furnish these 
representations concerning post-effective amendments to a registration 
statement as, under the proposed amendments, RILAs may be continuously 
offered on a registration statement for an indefinite amount of time.
(7) Remaining Items
    The proposal would require RILA issuers to provide disclosure in 
response to the remaining items on Form N-4 to the extent applicable. 
These are items that we have previously determined are relevant in the 
context of variable annuity offerings. Requiring RILA filers to provide 
disclosure in response to the remaining items on Form N-4 to the extent 
applicable would help ensure that comparable information is provided in 
a standardized, consistent manner for all filers using Form N-4.
    We believe standardized, consistent disclosure of comparable 
information benefits investors by making it easier for investors to 
evaluate and compare RILA offerings. Also, the presentation of 
information in a standardized, consistent manner across all filers 
using Form N-4 could facilitate not only the evaluation and comparison 
among RILA offerings, but also could facilitate the comparison of RILAs 
to variable annuities. Further, certain investors, while aware of 
variable annuities, simply may not be aware of RILAs as an investment 
option. Presentation of information in a standardized, consistent 
manner on Form N-4 could increase investor awareness of RILAs as an 
investing option. Facilitating the comparison of annuity products could 
benefit investors by helping them to invest in RILAs in a manner that 
is consistent with their overall financial needs and objectives.
(8) Inline XBRL
    The proposal would require many of the newly added disclosures on 
Form N-4 to be structured (i.e., tagged) in Inline XBRL, a structured, 
machine-readable data language.\449\ In addition, RILA issuers would 
have to tag those prospectus disclosures that Form N-4 currently 
requires to be tagged.
---------------------------------------------------------------------------

    \449\ See supra section II.B.9.
---------------------------------------------------------------------------

    Currently, disclosures about RILA offerings are largely 
unstructured; only the insurance company's financial statements, if 
reported in GAAP and included in a registration statement that includes 
a price or price range, are required to be tagged in Inline XBRL.\450\ 
Certain of the existing disclosures on Form N-4 are required to be 
tagged in Inline XBRL.\451\
---------------------------------------------------------------------------

    \450\ See supra footnote 402.
    \451\ Currently tagged disclosures include: Item 2 (Key 
Information), Item 4 (Fee Table), Item 5 (Principal Risks of 
Investing in the Contract), Item 10 (Benefits Available under the 
Contract), and Item 17 (Portfolio Companies under the Contract). See 
Instruction C.3.h of Form N-4; 17 CFR 232.405(b)(2)(iii).
---------------------------------------------------------------------------

    The proposed tagging requirements are designed to make the tagged 
disclosures more readily accessible for aggregation, comparison, 
filtering, and other analysis. As a point of comparison, XBRL 
requirements for public operating company financial statement 
disclosures have been observed to improve investor understanding of the 
disclosed

[[Page 71156]]

information.\452\ While those observations are specific to operating 
company financial statement disclosures (including footnotes), and not 
to disclosures on Form N-4, they indicate that the proposed Inline XBRL 
requirements would provide investors with increased insight into key 
features of the contract that is described in the Form N-4 registration 
statement. For example, the data tagging could allow third parties such 
as financial data aggregators to efficiently compare and otherwise 
process the disclosed information into analyses accessible to 
investors.
---------------------------------------------------------------------------

    \452\ See, e.g., Birt, J., Muthusamy, K. & P. Bir, XBRL and the 
Qualitative Characteristics of Useful Financial Information, 30 
Account. Res. J. 107 (2017) (finding ``financial information 
presented with XBRL tagging is significantly more relevant, 
understandable and comparable to non-professional investors''); 
Cahan, S.F., Chang, S., Siqueira, W.Z. & K. Tam, The roles of XBRL 
and processed XBRL in 10-K readability, J. Bus. Fin. Account. (2021) 
(finding 10-K file size reduces readability before XBRL's adoption 
since 2012, but increases readability after XBRL adoption, 
indicating ``more XBRL data improves users' understanding of the 
financial statements''); Efendi, J., Park, J.D. & C. Subramaniam, 
Does the XBRL Reporting Format Provide Incremental Information 
Value? A Study Using XBRL Disclosures During the Voluntary Filing 
Program, 52 Abacus 259 (2016) (finding XBRL filings have larger 
relative informational value than HTML filings).
---------------------------------------------------------------------------

c. Option To Use a Summary Prospectus
    We are proposing to amend rule 498A to permit RILA issuers, as well 
as issuers of ``combination contracts'' offering a combination of 
index-linked options and variable options, to use a summary prospectus 
to satisfy statutory prospectus delivery obligations. Investors would 
continue to have access to the RILA statutory prospectus and other 
information about the RILA contract online, with paper or electronic 
copies of this information upon request. The current summary prospectus 
rule for variable contracts uses a layered disclosure approach designed 
to provide investors directly with key information relating to the 
contract's terms, benefits, and risks in a concise and reader-friendly 
presentation, with more detailed information available elsewhere. The 
proposed amendments to rule 498A would broaden the scope of the rule to 
address RILA contracts.
    As discussed in section II.C above, the proposed amendments to rule 
498A would involve the use of two distinct types of summary 
prospectuses for RILA contracts, employing the same approach the rule 
currently uses for variable contracts. An ``initial summary 
prospectus,'' covering contracts offered to new investors, would 
include certain key information about the contract's most salient 
features, benefits, and risks, presented in plain English in a 
standardized order. The rule amendments would also require ``updating 
summary prospectuses'' to be provided to existing investors in RILA 
contracts. The updating summary prospectus would include a brief 
description of certain changes to the contract that occurred during the 
previous year, as well as a subset of the information required to 
appear in the initial summary prospectus. Certain key information about 
the index-linked options that the contract offers as investment options 
would be provided in both the initial summary prospectus and updating 
summary prospectus.
    The proposed rule would create a choice for insurance companies. 
They may meet their prospectus delivery obligations by providing the 
statutory prospectus, or they may satisfy these obligations by 
providing a summary prospectus and making statutory prospectuses and 
other required documents available online. Those insurance companies 
that expect to benefit by providing summary prospectuses would choose 
to rely on the proposed amendments to meet their prospectus delivery 
obligations. Those insurance companies that do not expect to benefit 
from this optional prospectus delivery regime would choose to continue 
to provide statutory prospectuses to investors.
    The presentation proposed for the initial summary prospectus may 
also reduce the investor effort required to compare RILA contracts, to 
consider different index-linked options that a RILA offers, or to 
compare RILA contracts with each other and with variable annuity 
contracts, when an investor considers a new investment. Information 
provided in a concise, user-friendly presentation could allow investors 
to compare information across contracts and as a result, may lead 
investors to make decisions that better align with their investment 
goals.\453\
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    \453\ Research suggests that individuals are generally able to 
make more efficient decisions when they have comparative information 
that allows them to assess relevant trade-offs. See, e.g., 
Christopher K. Hsee, George F. Loewenstein, Sally Blount, Max H. 
Bazerman (1999). Preference Reversals Between Joint and Separate 
Evaluations of Options: A Review and Theoretical Analysis, 
Psychological Bulletin, 125(5), 576-90; see also Jeffrey R. Kling, 
Sendhil Mullainathan, Eldar Shafir, Lee Vermeulen, Marian V. Wrobel 
(2012). Comparison Friction: Experimental Evidence from Medicare 
Drug Plans, Quarterly Journal of Economics, 127(1), 199-235. In a 
randomized field experiment, some senior citizens choosing between 
Medicare drug plans were randomly selected to receive a letter with 
personalized, standardized, comparative cost information. Plan 
switching was 28% in the group that received a letter with 
personalized, standardized, comparative cost information, but only 
17% in the comparison group, and the intervention caused an average 
decline in predicted consumer cost of about $100 a year among letter 
recipients.
---------------------------------------------------------------------------

    If insurance companies choose to meet their prospectus delivery 
obligations by delivering summary prospectuses to investors, with other 
documents available online, investors would then have a choice as well. 
Under the layered disclosure framework we are proposing for RILAs, 
investors would receive information in the form of a summary 
prospectus, with more detailed information available online if the 
investor chooses to access it.\454\ Thus, investors can continue to 
review the statutory prospectuses by accessing them online, or they may 
request paper or electronic delivery of statutory prospectuses on an ad 
hoc basis. Alternatively, investors may choose only to consult the 
summary prospectuses. Further, if investors want to rely on some 
combination of summary and statutory prospectuses to receive 
information about the contract, that choice is available to them as 
well. Given the Commission's experience administering the optional 
summary prospectus regime for variable annuities, we expect a majority 
of RILA issuers would choose to use summary prospectuses. Thus, we 
expect that the vast majority of investors will have the option to use 
both summary prospectuses and statutory prospectuses in their decision-
making, in whatever proportion investors think is best for their 
preferences.
---------------------------------------------------------------------------

    \454\ During investor testing, several participants felt they 
would need information beyond the information contained in the KIT 
to make a decision about a RILA. See OIAD Report at Section 5, 
Qualitative Testing, Results from Round 1.
---------------------------------------------------------------------------

    Initial Summary Prospectus. Should insurance companies issuing 
RILAs choose to use summary prospectuses, investors may benefit in a 
number of ways.\455\ The proposed initial summary prospectus for RILAs 
would be limited to describing only the contract and features currently 
available under the statutory prospectus. This focus could make more 
salient the features and risks of a RILA, thereby facilitating 
investors' evaluation of those features and risks.
---------------------------------------------------------------------------

    \455\ Some investors may prefer to read statutory prospectuses, 
and therefore, the advantages associated with summary disclosure, as 
described in this section, may not apply to those investors. The 
statutory prospectus would, under the proposed rule, be available 
online and in paper or electronic format upon request.
---------------------------------------------------------------------------

    We are proposing a standardized presentation for RILA initial 
summary prospectuses to require certain disclosure items that would be 
most relevant to investors to appear at the beginning of the initial 
summary prospectus, followed by supplemental

[[Page 71157]]

information. An initial summary prospectus must contain the information 
required by the rule, and only that information, in the order specified 
by the rule.\456\ The information would be required to appear in the 
same order, and under relevant corresponding headings, as the rule 
specifies. The required presentation could also facilitate comparisons 
of different RILA contracts, as well as comparisons between RILA 
contracts and variable annuities.
---------------------------------------------------------------------------

    \456\ Proposed rule 498A(b)(5).
---------------------------------------------------------------------------

    We believe standardized, consistent disclosure of comparable 
information benefits investors by making it easier for investors to 
evaluate and compare RILA offerings. Also, the presentation of 
information in a standardized, consistent manner could facilitate not 
only the evaluation and comparison among RILA offerings, but also could 
facilitate the comparison of RILAs to other variable annuities. 
Further, certain investors, while aware of variable annuities, simply 
may not be aware of RILAs as an investment option. Presentation of 
information in a standardized, consistent manner in an initial summary 
prospectus could increase investor awareness of RILAs as an investing 
option.
    In addition, given the time required to review a statutory 
prospectus, RILA investors may benefit from summary prospectuses 
because they offer a shorter alternative to statutory prospectus 
disclosure. There is evidence that suggests that consumers benefit from 
summary disclosures.\457\ Within the specific context of investing, 
there is evidence from related contexts that suggests that summary 
prospectuses allow investors to spend less time and effort to arrive at 
the same portfolio decision as if they had relied on a statutory 
prospectus.\458\ This research is consistent with the 2012 Financial 
Literacy Study, which showed that at least certain investors favor a 
layered approach to disclosure with the use, wherever possible, of 
summary documents containing key information about an investment 
product or service.\459\
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    \457\ There is evidence that the summarization of key 
information is useful to consumers. See, e.g., Sumit Agarwal, 
Souphala Chomsisengphet, Neale Mahoney, Johannes Stroebel, 
Regulating Consumer Financial Products: Evidence from Credit Cards 
(NBER Working Paper No. 19484, rev. 2014), available at https://www.nber.org/papers/w19484. The authors find that a series of 
requirements in the CARD Act, including provisions designed to 
promote simplified disclosure, has produced decreases in both over-
limit and late fees, saving US credit card users $20.8 billion 
annually; see also Robert L. Clark, Jennifer A. Maki & Melinda 
Sandler Morrill, Can Simple Informational Nudges Increase Employee 
Participation in a 401(k) Plan? 80 S. Econ. J. 677 (2014). The 
authors find that a flyer with simplified information about an 
employer's 401(k) plan, and about the value of contributions 
compounding over a career, had a significant effect on participation 
rates.
    \458\ See John Beshears, James J. Choi, David Laibson & Brigitte 
C. Madrian, How Does Simplified Disclosure Affect Individuals' 
Mutual Funds Choices?, in Explorations in the Economics of Aging 75 
(David A. Wise ed., 2010) (``Beshears Paper''), available at https://scholar.harvard.edu/laibson/publications/how-does-simplified-disclosure-affect-individuals-mutual-fund-choices. We note, however, 
that while the authors find evidence that investors spend less time 
making their investment decision when they are able to use summary 
prospectuses, there is no evidence that the quality of their 
investment decisions is improved. In particular, ``On the positive 
side, the Summary Prospectus reduces the amount of time spent on the 
investment decision without adversely affecting portfolio quality. 
On the negative side, the Summary Prospectus does not change, let 
alone improve, portfolio choices. Hence, simpler disclosure does not 
appear to be a useful channel for making mutual fund investors more 
sophisticated . . .'' Id. at 13 (manuscript page).
    \459\ See 2012 Financial Literacy Study.
---------------------------------------------------------------------------

    Also, investors allocate their attention selectively,\460\ and the 
sheer volume of disclosure in a statutory prospectus may discourage 
some investors from reading contract statutory prospectuses. The 
observations of a telephone survey conducted on behalf of the 
Commission with respect to mutual fund statutory prospectuses (which 
are typically shorter than variable contract statutory prospectuses, 
and shorter than RILA statutory prospectuses are expected to be under 
the proposal) are consistent with the view that the volume of 
disclosure may discourage investors from reading statutory 
prospectuses.\461\ That survey observed that many mutual fund investors 
do not read statutory prospectuses because they are long, complicated, 
and hard to understand. Responses to investor surveys in other 
contexts, also suggest that shareholders may be more likely to read 
more concise shareholder reports.\462\
---------------------------------------------------------------------------

    \460\ See George Loewenstein, Cass R. Sunstein & Russell Golman. 
(2014) Disclosure Psychology Changes Everything, 6 Ann. Rev. Econ. 
391 (2014).
    \461\ Prior to the Commission's 2009 adoption of mutual fund 
summary prospectus rules, the Commission engaged a consultant to 
conduct focus group interviews and a telephone survey concerning 
investors' views and opinions about various disclosure documents 
filed by companies, including mutual funds. During this process, 
investors participating in focus groups were asked questions about a 
hypothetical Summary Prospectus. Investors participating in the 
telephone survey were asked questions relating to several disclosure 
documents, including mutual fund prospectuses. See Abt SBI, Inc., 
Final Report: Focus Groups on a Summary Mutual Fund Prospectus (May 
2008), available at https://www.sec.gov/comments/s7-28-07/s72807-142.pdf. Although the results from the investor testing reflect 
stated investor preferences, they do not provide us with information 
with respect to the extent to which RILA investors would actually be 
more likely to read a RILA summary prospectus relative to a 
statutory prospectus.
    \462\ Tailored Shareholder Reports Adopting Release.
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    To the extent summary prospectuses increase readership of RILA 
contract disclosures, they could improve the quality and efficiency of 
portfolio allocations made on the basis of disclosed information for 
those investors who otherwise would not have read the statutory 
prospectus.
    The presentation proposed for the initial summary prospectus may 
also reduce the investor effort required to compare RILA contracts, to 
consider different index-linked options that a RILA offers, or to 
compare RILA contracts with each other and with variable annuity 
contracts, when an investor considers a new investment. Information 
provided in a concise, user-friendly presentation could allow investors 
to compare information across contracts and as a result, may lead 
investors to make decisions that better align with their investment 
goals.\463\ For example, the proposed amendments would require 
insurance companies to distill certain key product information into 
tables, which could facilitate comparison across different products.
---------------------------------------------------------------------------

    \463\ See supra footnote 453.
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    Further, the proposed framework for RILA contract summary and 
statutory prospectuses also includes design elements to facilitate 
investor use. In particular, the proposed amendments include 
requirements for linking both within the electronic version of a 
contract statutory prospectus and between the electronic versions of 
the contract statutory prospectus and the contract summary prospectus. 
The linking requirement would permit investors who use the electronic 
versions of contract prospectuses to quickly navigate between related 
sections within the contract statutory prospectus and back and forth 
between related sections of the contract summary prospectus and the 
contract statutory prospectus. Further, the proposal would also require 
that investors either be able to view the definition of each special 
term used in an online summary prospectus upon command, or to move 
directly back and forth between each special term and the corresponding 
entry in any glossary or list of definitions that the summary 
prospectus includes. This requirement would facilitate understanding of 
terms that may be confusing or unfamiliar among investors viewing the 
documents online.
    Updating Summary Prospectus. As under current rule 498A, we are not 
proposing that RILA issuers send an

[[Page 71158]]

updated initial summary prospectus to investors each year. Instead, any 
RILA issuer that relies on rule 498A would send an updating summary 
prospectus, which would provide a brief description of certain changes 
with respect to the contract that occurred within the prior year.\464\ 
The updating summary prospectus would also include certain of the 
information required in the initial summary prospectus that we consider 
most relevant to investors when considering additional investment 
decisions.\465\ Further, updating summary prospectuses for RILA 
contracts, like initial summary prospectuses, would include specific 
disclosure items appearing in a prescribed order, under relevant 
corresponding headings.\466\ An updating summary prospectus for a RILA 
contract would have to contain the information required by the rule, 
and only that information, in the order specified by the rule.
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    \464\ Proposed rule 498A(c)(1).
    \465\ See supra footnote 285 and accompanying text.
    \466\ Proposed rule 498A(c)(6).
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    The proposed updating summary prospectus for RILAs would have many 
of the same benefits for investors associated with the initial summary 
prospectus discussed above, with respect to presenting key information 
in an easier and less time-consuming manner for investors. 
Specifically, because many terms of the RILA contract do not change 
from year-to-year, the contract statutory prospectus may contain large 
amounts of disclosure that is duplicative of disclosure that the 
investor has previously received. Those changes that do occur may be 
important to investors, but the disclosure about these changes could be 
difficult for the investor to identify given the volume of prospectus 
disclosure that investors would otherwise receive, and the current lack 
of a requirement to identify new or changed information.
    Under the proposed amendments, the updating summary prospectus 
would include a concise description of important changes affecting the 
statutory prospectus disclosure relating to certain topics that 
occurred within the prior year--namely: (1) the availability of 
investment options under the contract, (2) the overview of the 
contract, (3) the KIT, (4) certain information about fees, (5) benefits 
available under the contract, (6) purchases and contract value, and (7) 
surrenders and withdrawals. These are topics that are most likely to 
entail contract changes and, for the reasons previously noted, are the 
types of contract changes most likely to be important to investors 
because they affect how investors evaluate RILA contracts and are 
relevant to investors when considering whether to continue in the 
existing option (if available) or transfer funds to a different option. 
The proposed updating summary prospectus, if used by issuers to satisfy 
their prospectus delivery obligations, would likely reduce the burden 
on investors and increase their understanding of their contract by 
highlighting certain changes to the contract made during the previous 
year, while foregoing the repetition of most information that had 
remained unchanged.
d. Use of Statutory Accounting
    The proposal would permit RILA issuers to provide financial 
statements on amended Form N-4 in the same way that insurance companies 
currently do on Form N-4.\467\ As a result of this change, the 
financial statements filed in connection with a RILA registration 
statement could be prepared in SAP to the same extent as currently 
permitted for insurance companies' financial statements filed on that 
form. We expect this approach to appropriately recognize the cost 
burdens if we were to require GAAP financial statements in cases where 
the insurance company is not otherwise required to prepare financial 
information in accordance with GAAP. In addition, SAP financial 
statements, which focus on an issuer's ability to meet its obligations 
under its insurance contracts, as regulated by State law, appear to 
provide sufficient material information for investors evaluating RILAs. 
As a result, permitting insurance companies to provide SAP financial 
statements when registering the offering of a RILA to the same extent 
as they can in connection with variable annuities on Form N-4 would be 
consistent with investor protection. Also, investors could benefit to 
the extent the reduced cost burdens provided by SAP financial 
statements are passed along to investors.
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    \467\ Certain Commission letters, or portions thereof, exempt 
insurance companies from the requirement to provide financial 
statements prepared in accordance with GAAP in connection with the 
registration of an offering of RILAs on Form S-1. As discussed in 
Section III.B.1.a, among RILA contracts that are currently 
registered with the Commission, 47 RILAs report SAP financials and 
43 RILAs report GAAP financials.
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    The proposal also would require RILAs to provide information 
relating to changes in and disagreements with accountants on accounting 
and financial disclosure as detailed in 17 CFR 229.304 (``Item 304 of 
Regulation S-K''). Further, RILAs would be required to provide as an 
exhibit any letter from the insurance company's former independent 
accountant regarding its concurrence or disagreement with the 
statements made by the insurance company in the registration statement 
concerning the resignation or dismissal as the insurance company's 
principal accountant. These items are currently provided by RILAs on 
Forms S-1 and S-3 and are designed to address the practice of ``opinion 
shopping'' for an auditor willing to support a proposed accounting 
treatment designed to help a company achieve its reporting objectives 
even though that treatment might frustrate reliable reporting.\468\ 
Because the requirements for Form N-4 filers under the proposal are the 
same as for Form S-1 and Form S-3 filers currently, we would not expect 
any additional benefits from the requirement to provide information 
relating to changes in and disagreements with accountants on accounting 
and financial disclosure.
---------------------------------------------------------------------------

    \468\ See Disclosure Amendments to Regulation S-K, Form 8-K and 
Schedule 14A Regarding Changes in Accountants and Potential Opinion 
Shopping Situations, Investment Company Act Release No. 16358 (Apr. 
12, 1988) [53 FR 12924 (Apr. 20, 1988)]; see also item 11(i) of Form 
S-1.
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e. Filing Rules
    Fee Payment Method and Amendments to Form 24F-2. The proposal would 
require RILA issuers to pay registration fees for RILAs using the same 
method that other filers on Form N-4 currently use. Issuers registering 
the offerings of RILAs on amended Form N-4 would be deemed to be 
registering an indeterminate amount of RILAs upon effectiveness of the 
registration statement. These issuers would then be required to pay 
registration fees annually based on their net sales of these 
securities, no later than 90 days after the issuer's fiscal year ends, 
on the form that is used by current Form N-4 filers to pay registration 
fees (Form 24F-2). The proposal would further specify the calculation 
method for paying RILA registration fees, consistent with the fee 
calculation methodology that applies to current Form N-4 filers. The 
proposal would also indicate when issuers can take credits for RILA 
redemptions that pre-date their use of that form and when expiring 
annuity contracts are rolled over into a new crediting period as well 
as other minor technical amendments.
    The proposed filing rules would provide benefits to insurance 
companies. Rather than registering a specific amount of securities, 
insurance companies would register an indefinite amount of securities 
upon the effective date of their registration statement. Registering an 
indefinite amount of

[[Page 71159]]

securities benefits insurance companies by eliminating the risk that a 
RILA issuer may inadvertently oversell securities with respect to a 
registration statement on Form N-4. The payment of fees on an annual 
net basis furthermore should lead to a reduction in overall filing fees 
relating to RILAs. To the extent that there are cost savings for 
issuers, some of those savings may potentially be passed on to 
investors.
    Post-Effective Amendments and Prospectus Supplements. As discussed 
in section II.E, the proposal would require RILA issuers to use the 
same framework for filing post-effective amendments to the registration 
statement as is currently used by other filers on Form N-4. First, the 
proposal would amend rule 485 under the Securities Act to require RILA 
issuers to use that rule when amending RILA registration statements on 
Form N-4. Requiring RILA issuers to use that rule when amending RILA 
registration statements on Form N-4 would permit RILA issuers to file 
post-effective amendments that become automatically effective under 
rule 485(a) after a specified period of time after the filing or, in 
certain enumerated circumstances, immediately effective under rule 
485(b). Issuers may benefit to the extent automatic effectiveness 
allows issuers to tap favorable windows of opportunity in the RILA 
market, to structure terms of RILAs on a real-time basis to accommodate 
investor demand, and to determine or change the plan of distribution in 
response to changing market conditions.
    Second, the proposal would require RILA issuers to apply rule 497 
under the Securities Act when appropriate to file RILA prospectuses and 
prospectus supplements with the Commission. Under the proposed 
amendments, a RILA issuer would be required to file every prospectus 
relating to a RILA offering that varies in form from a previously filed 
prospectus before it is first used. This approach--rather than 
requiring filing only if the issuer makes substantive changes from or 
additions to a previously-filed prospectus--may benefit both investors 
and issuers. The requirement that insurance companies file every 
prospectus that varies in form from a previously filed prospectus 
before it is first used could facilitate investor evaluation and 
comparison by making publicly available the most timely information 
currently available to investors. We would expect this benefit to be 
minimal, however, because rule 424 under the Securities Act requires 
RILA issuers only to file prospectuses that contain substantive 
changes. Prospectuses required to be filed under rule 497 that would 
not be required to file under rule 424, then, would be prospectuses 
updated with minor, non-substantive changes and likely of limited 
informational benefit to investors.
    As discussed above, certain issuers use a short-form registration 
statement on Form S-3, which requires less information than Form S-1 
and allows for significant incorporation by reference. Certain issuers 
also can rely on rule 430B under the Securities Act to omit certain 
information from the ``base'' prospectus when the registration 
statement becomes effective and later provide that information in a 
subsequent Exchange Act report (forward) incorporated by reference, a 
prospectus supplement, or a post-effective amendment. Issuers 
registering annuity product offerings on Form N-4, on the other hand, 
have limited ability to incorporate information by reference into their 
registration statements and cannot forward incorporate information from 
subsequently filed Exchange Act reports. Issuers registering annuity 
product offerings on Form N-4 also cannot rely on rule 430B to omit 
certain information from the base prospectus. Under the proposal, then, 
RILA investors would have all the information available in one location 
rather than needing to separately access the information on a website 
or request the incorporated materials. As a result, costs to investors 
for assembling and assimilating necessary information could decrease, 
with a potentially stronger effect for investors that may not have the 
technical capabilities or monetary resources to search efficiently 
through multiple information sources.
    Issuers may benefit from applying rule 497 as well. The proposed 
rule would facilitate a uniform post-effective amendment and prospectus 
filing framework for all Form N-4 filers, which would provide insurance 
companies with more consistent filing requirements across similar 
products. This, in turn, could benefit insurance companies by making it 
easier to execute such offerings and may decrease compliance costs.
f. Materially Misleading Statements in RILA Sales Literature
    The proposal would amend rule 156 to make its provisions applicable 
to RILA sales literature. Rule 156 is an interpretive rule that 
provides factors to be weighed in considering whether a statement 
involving a material fact is or might be misleading in the specific 
context of investment company sales literature, including literature 
relating to the sale of variable annuities. Proposed amendments to rule 
156 would indicate that whether a statement involving a material fact 
is misleading in RILA sales literature would depend on an evaluation of 
the context in which it is made, with the rule providing non-exhaustive 
factors to guide in this determination.
    For example, rule 156(b)(1)(ii) currently provides that a statement 
could be misleading because of the absence of explanations, 
qualifications, limitations or other statements necessary or 
appropriate to make such statement not misleading. This provision, 
where made applicable to RILA sales literature, would generally require 
an insurance company to consider whether an advertisement would be 
materially misleading if it markets the investment as a growth 
investment, a loss-avoidance vehicle, or a customizable product in the 
absence of qualifying explanations or statements. Similarly, if sales 
literature advertises a particular feature of the product's bounded 
return structure that is not available for the life of the product or 
the full term of any surrender charge period, the provision as made 
applicable to RILA sales literature would require consideration of 
whether the statement is misleading without providing additional 
context as to the issuer's discretion to make changes.
    Further, rule 156(b)(4) currently provides that representations 
about fees or expenses associated with an investment in a fund could be 
misleading because of statements or omissions made involving a material 
fact, including situations where portrayals of the fees and expenses 
associated with an investment in the fund omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading. We are proposing to 
amend this provision also to address representations about the fees or 
expenses associated with a RILA contract. In the context of RILA sales 
literature, this provision as amended would require consideration about 
whether representations or portrayals either of a RILA's costs or 
charges, or optional benefits that are subject to a contract 
adjustment, would require qualifying statements or explanations 
regarding the economic costs to the investor to receive an advertised 
benefit or those generally associated with the RILA.
    Also, rule 156(b)(2)(i) currently states that representations about 
past or future investment performance could be misleading because of 
statements or omissions made involving a material fact. This includes 
situations where

[[Page 71160]]

portrayals of past income, gain, or growth of assets convey an 
impression of the net investment results achieved by an actual or 
hypothetical investment which would not be justified under the 
circumstances, including portrayals that omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading. This provision, 
where made applicable to RILA sales literature, would require 
consideration of whether illustrations about the operation of a RILA or 
its features could be misleading because, for example, they use 
assumptions that are not currently offered or exceed what could be 
reasonably anticipated or use ``cherry picked'' data.
    By reducing the potential for misleading or fraudulent statements 
in RILA sales literature, applying rule 156 to RILAs would provide 
investors with protections and help ensure that investors receive the 
information necessary to make informed decisions about these products. 
Ensuring that investors receive the information necessary to make 
informed decisions could benefit investors by facilitating investor 
evaluation of RILAs as well as investor comparison of RILAs to other 
annuity products.
2. Costs
    The proposal could lead to certain additional costs for insurance 
companies. These costs would likely vary across insurance companies, 
depending on their existing lines of business. Costs may also vary 
depending on the extent to which insurance companies create 
prospectuses that vary in form from previously filed prospectuses and 
the frequency of certain events, such as changes in accountants and 
disagreements with accountants on accounting and financial disclosure. 
Generally, the costs would be lower for insurance companies that 
currently offer products that register on Form N-4, for those insurance 
companies that do not change or remove key features of RILAs 
frequently, and for those insurance companies that do not experience 
changes in, and disagreements with, accountants on accounting and 
financial disclosure.
    We anticipate that the costs to insurance companies would be 
comprised of both direct compliance costs and indirect costs. Direct 
costs for insurance companies would consist of internal costs (for 
compliance attorneys and other non-legal staff, such as computer 
programmers, to prepare and review the required disclosure) and 
external costs (including filing fees, outside legal and accounting 
fees, as well as any costs associated with outsourcing all or a portion 
of the Form N-4 filing responsibilities to a filing agent, software 
consultant, or other third-party service provider).
    The proposal could lead to certain costs for investors as well. Any 
portion of additional costs that is not borne by insurance companies 
would ultimately be passed on to RILA investors. Investors also may 
bear costs associated with certain proposed changes such as the 
proposed change in filing rules as well as an insurance company's 
option to use a summary prospectus.
a. Direct Costs
    Form N-4. We believe that the direct costs associated with the 
proposed amendments would be most significant for the first Form N-4 
registration statement that an insurance company would be required to 
prepare and file because the insurance company would need to 
familiarize itself with the new registration form and may need to 
configure its systems to efficiently gather the required information. 
In subsequent periods, we anticipate that insurance companies would 
incur significantly lower costs because much of the work involved in 
the initial registration statement preparation and filing is non-
recurring and because of efficiencies realized from system 
configuration and reporting automation efforts accounted for in the 
initial filing period. The costs associated with preparing and filing a 
new registration statement (on Form N-4 as opposed to Forms S-1/S-3) 
would be ameliorated to the extent an insurance company currently has 
experience and systems in place to prepare and file registration 
statements on Form N-4 (e.g., the insurance company currently offers 
variable annuities whose offerings are registered on Form N-4). We 
estimate the aggregate additional annual internal time cost to be 
$16,133,834 and the aggregate annual external cost burden to be 
$2,914,740.\469\
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    \469\ See infra Table 13.
---------------------------------------------------------------------------

    Insurance companies would also incur compliance costs to tag many 
of the newly required Form N-4 disclosures (as well as those prospectus 
disclosures that Form N-4 currently requires to be tagged) in Inline 
XBRL. Various XBRL and Inline XBRL preparation solutions have been 
developed and used by operating companies and investment companies to 
fulfill their structuring requirements, and some evidence suggests 
that, for smaller operating companies, XBRL compliance costs have 
decreased over time.\470\ We estimate the total aggregate additional 
annual internal time cost for XBRL compliance would be $308,560 and the 
aggregate annual external cost burden to be $63,000.\471\ In addition, 
22 of the 23 insurers that issue RILAs also offer variable products 
registered on Forms N-3, N-4, or N-6, all of which are currently 
structured, or otherwise have experience tagging registration 
statements.\472\
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    \470\ An AICPA survey of 1,032 public operating companies with 
$75 million or less in market capitalization in 2018 found an 
average cost of $5,850 per year, a median cost of $2,500 per year, 
and a maximum cost of $51,500 per year for fully outsourced XBRL 
creation and filing, representing a 45% decline in average cost and 
a 69% decline in median cost since 2014. See AICPA, XBRL Costs for 
Small Companies Have Declined 45% since 2014 (2018), available at 
https://us.aicpa.org/content/dam/aicpa/interestareas/frc/accountingfinancialreporting/xbrl/downloadabledocuments/xbrl-costs-for-small-companies.pdf. Note that this survey was limited to small 
operating companies. Additionally, a NASDAQ survey of 151 listed 
issuers and other respondents in 2018 found an average XBRL 
compliance cost of $20,000 per quarter, a median XBRL compliance 
cost of $7,500 per quarter, and a maximum XBRL compliance cost of 
$350,000 per quarter in XBRL costs per quarter. See Letter from 
Nasdaq, Inc. (Mar. 21, 2019); Request for Comment on Earnings 
Releases and Quarterly Reports, Securities Act Release No. 10588 
(Dec. 18, 2018) [83 FR 65601 (Dec. 21, 2018)].
    \471\ See infra Table 16.
    \472\ Based on analysis of Forms S-1, S-3, and POS AM filed by 
RILA issuers.
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    As such, to the extent these companies comply with Inline XBRL 
requirements internally rather than outsourcing to an external service 
provider, they may already be familiar with Inline XBRL software and 
may be able to leverage existing Inline XBRL preparation processes and/
or expertise in complying with the new tagging requirements. This would 
limit the compliance costs arising from the new tagging requirements 
for these issuers to only those costs related to selecting additional 
Inline XBRL tags for those new disclosures proposed to be tagged, and 
reviewing the tags selected for those disclosures. Accordingly, we do 
not anticipate that the costs associated with Form N-4 tagging would be 
significant enough to deter insurance companies from entering the 
market for RILAs. As such, we do not expect that the new and modified 
tagging requirements in this proposal would decrease competition in the 
market for RILAs.\473\
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    \473\ See also infra section III.D.
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    Option to Use a Summary Prospectus. Issuers will benefit from the 
option to use a summary prospectus to the extent that providing layered 
disclosure through a summary prospectus regime (including costs of 
producing and delivering initial summary and updating summary 
prospectuses and of making statutory prospectuses, and other

[[Page 71161]]

documents available online) is less expensive than providing statutory 
prospectuses to new investors and updated statutory prospectuses to 
existing investors annually. Insurance companies choosing to provide 
summary prospectuses would bear a one-time cost of preparing both the 
initial summary prospectus and the updating summary prospectus, as well 
as costs associated with preparing updated versions the updating 
summary prospectus in the future on at least an annual basis. We 
estimate the average annual burden to prepare initial and updating 
summary prospectuses to be $5,000 per registration.\474\
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    \474\ See Table 11, Rule 498A PRA Estimates.
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    Insurance companies that choose to provide summary prospectuses are 
required to make statutory prospectuses and other materials available 
online. We estimate the aggregate cost to comply with the proposed 
website posting requirements of the rule for documents relating to 
RILAs to be $772 per registrant.\475\ However, some of these costs may 
have already been incurred by issuers of ``combination'' contracts 
offering variable options as well as index-linked options.
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    \475\ See Table 11, Rule 498A PRA Estimates.
---------------------------------------------------------------------------

    Insurance companies that rely on rule 498A to use summary 
prospectuses for variable annuities are also required to include inter- 
and intra-document linking and special terms definitions. One linking 
requirement would allow the reader to move back and forth between a 
table of contents of the contract statutory prospectus or SAI, and the 
related sections of each document. Although prospectuses and SAIs are 
not required to have individual headings corresponding to the items in 
the registration forms, we assume that the sections of a prospectus or 
SAI would correspond with the item requirements of the forms. We 
estimate that Form N-4 filers would require 27 back-and-forth internal 
links. The other linking requirement would allow the reader to move 
back and forth between each section of the summary prospectus and any 
related section of the contract statutory prospectus and SAI that 
provides additional detail. This back-and-forth movement could occur 
either directly from the summary prospectus to the relevant section of 
the statutory prospectus or SAI, or indirectly by linking from the 
summary prospectus to a table of contents in the statutory prospectus 
or SAI. For our analysis, we assume direct links as those will tend to 
be more costly when compared with indirect linking through a table of 
contents.
    An initial summary prospectus for a Form N-4 issuer includes eight 
sections. The Key Information Table has instructions stating that, 
wherever feasible, a registrant should provide cross-references or 
links to the location in the statutory prospectus where the subject 
matter is described in greater detail. There are 12 sections of the Key 
Information Table. Therefore, we estimate that there would be 18 back-
and-forth links between initial summary prospectuses and statutory 
prospectuses for a Form N-4 issuer.
    An updating summary prospectus for a Form N-4 issuer includes three 
sections, one of which, the Key Information Table, includes 12 
sections. One section is the ``Updated Information About Your 
Contract'' section. The number of links in this section would depend on 
the number of updates discussed. For example, assuming discussion of 
four updates, we estimate the number of back-and-forth links between a 
Form N-4 issuer's updating summary prospectus and statutory prospectus 
to be 16.
    The proposed rule amendments would also require that RILA investors 
either be able to view the definition of each special term used in an 
online summary prospectus upon command (e.g., by ``hovering'' the 
computer's pointer or mouse over the term), or to move directly back-
and-forth between each special term and the corresponding entry in any 
glossary or list of definitions that the summary prospectus includes. 
We assume that RILA issuers could replicate links to a glossary or the 
computer code required to implement access to definitions by 
``hovering'' over a term with little or no burden, but that there would 
be a burden associated with creating the requisite link or code for 
each special term. Accordingly, we estimate the cost to comply with the 
proposed requirement to include inter- and intra-document linking and 
special terms definitions as described above would include 6 burden 
hours and a cost of $800 annually, per registrant.\476\
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    \476\ See VASP Adopting Release at n.1084.
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    Filing the Prospectus. As discussed in section II.E, RILA issuers 
follow different processes to file prospectuses than current Form N-4 
filers. For example, a RILA issuer is required to file a prospectus 
only if the issuer makes substantive changes or additions to a 
previously-filed prospectus, whereas current Form N-4 filers are 
required to file every prospectus that varies from any previously-filed 
prospectus. Accordingly, under the proposed amendments, a RILA issuer 
would be required to file every prospectus relating to a RILA offering 
that varies in form from a previously filed prospectus before it is 
first used. The proposed requirement could increase the number of 
prospectuses required to be filed by RILAs which could, in turn, 
increase costs for issuers.\477\ For each additional prospectus 
required to be filed by RILAs, we estimate an addition internal cost 
burden of $113,659.70 and an external cost burden of $24,000.\478\
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    \477\ The potential increase in cost could be greater for Form 
S-3 filers than for Form S-1 filers. Form S-3 requires less 
information than Form S-1. Also, Form S-1 allows incorporation by 
reference only on a very limited basis. Form S-3 allows for forward 
incorporation by reference. Form S-3 filers may need to produce 
incrementally more information to file on Form N-4 than Form S-1 
filers. Transitioning to Form N-4 could be more expensive for Form 
S-3 filers than for Form S-1 filers, as a result.
    \478\ See Table 11, Rule 498A PRA Estimates. As discussed in 
footnote 477, these costs could be greater for Form S-3 filers than 
for Form S-1 filers. Also, we estimate an additional internal time 
cost of $2,436 for each additional prospectus required to be filed 
by separate account registrants.
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    Materially Misleading Statements in RILA Sales Literature. The 
proposal would amend rule 156 to make its provisions applicable to RILA 
sales literature. The cost of the proposed amendments would include the 
direct cost of analyzing advertising materials in light of the guidance 
rule 156 provides. This may require review and approval of 
advertisements beyond what occurs currently, particularly because 
determining whether a statement involving a material fact is misleading 
in RILA sales literature would depend on an evaluation of the context 
in which it is made. We expect some of these costs to be borne in the 
first year after the rule adoption. That is, these costs would be 
transition costs and not sustained beyond the first year. We estimate 
that the transition costs associated with the proposed advertising rule 
amendments would be $5,715.\479\ Also, ongoing sales literature 
activity may require internal review and approval of advertisements. We 
estimate that the costs associated with ongoing sales literature 
activity would be $1,905, annually.\480\ These costs would be borne

[[Page 71162]]

by issuers and third parties who prepare RILA advertisements.
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    \479\ We estimate an initial burden of 15 hours, per 
advertisement, to review existing advertising materials at a blended 
cost of $381 ($5,715 = 15 x $381). See Tailored Shareholder Reports 
for Mutual Funds and Exchange-Traded Funds; Fee Information in 
Investment Company Advertisements adopting release at footnote 744.
    \480\ We estimate an initial burden of 5 hours, per 
advertisement, to review existing advertising materials at a blended 
cost of $381 ($5,715 = 15 x $381). See Tailored Shareholder Reports 
for Mutual Funds and Exchange-Traded Funds; Fee Information in 
Investment Company Advertisements adopting release at footnote 745.
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b. Indirect Costs
    Form N-4. While the prospectuses and other registration statement 
disclosure required by the proposal would likely facilitate investor 
evaluation and comparison of RILAs, investors could experience certain 
transition costs under the proposal, and some investors may experience 
other ongoing costs. Transition costs would include the costs of the 
inconvenience to some investors of adapting to the new materials and to 
the changes in the presentation of information. Investors would also 
bear a one-time cost of the inconvenience of adjusting to the changes 
in the disclosures they receive. These costs are likely to be 
relatively lower for investors with less experience investing in RILAs.
    Option to Use a Summary Prospectus. While we expect that, should 
insurance companies opt to use summary prospectuses, the majority of 
investors would benefit from their disclosures, certain investors may 
incur costs. For example, although research indicates that investors 
generally prefer to receive summary disclosures there may be RILA 
investors who prefer to rely on statutory prospectuses when making 
investment decisions. While RILA statutory prospectuses would continue 
to be available online and in paper or electronic copy upon request, 
access to those statutory prospectuses would require investors to take 
additional steps, imposing some burden. For example, investors choosing 
to access the statutory prospectus online rather than requesting a 
paper copy would need to manually enter a hyperlink from a paper 
updating summary prospectus or click on a link to a website containing 
the statutory prospectus. To the extent that internet access and use 
among RILA investors is not universal, those investors without home 
internet access might experience a reduction in their ability to 
quickly and easily access statutory prospectus information.\481\ Even 
for those investors with home internet access, there may be some 
resistance to taking the additional step of accessing the statutory 
prospectus online.
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    \481\ According to the most recent U.S. census data, 
approximately 85% of U.S. households had some form of broadband 
internet access in their home in 2018, and 92% had a computer (e.g., 
desktop, laptop, tablet or smartphone). See Michael Martin, Computer 
and internet Usage in the United States: 2018, U.S. Census Bureau 
(Apr. 21, 2021), available at https://www.census.gov/library/publications/2021/acs/acs-49.html; see also Pew Research Center, 
internet/Broadband Fact Sheet (Apr. 7, 2021), available at https://www.pewresearch.org/internet/fact-sheet/internet-broadband/ 
(``Today, 93% of American adults use the internet.'' and ``Today, 
roughly three-quarters of American adults have broadband internet 
service at home.''); see also Ani Petrosyan, internet Usage in the 
United States--Statistics & Facts, Statista (Aug. 31, 2023), 
available at https://www.statista.com/topics/2237/internet-usage-in-the-united-states/#topicOverview (``Today, over 90 percent of 
Americans have access to the internet'').
---------------------------------------------------------------------------

    Use of Statutory Accounting Principles. The proposal would permit 
RILA issuers to provide financial statements on amended Form N-4 in the 
same way that insurance companies currently do on Form N-4. One 
consequence of this change would be that the financial statements filed 
in connection with a RILA registration statement could be prepared in 
SAP to the same extent as currently permitted for insurance companies' 
financial statements filed on that form. The proposed rule would create 
a choice for certain insurance companies. They may prepare their 
registration statements in SAP, or they may prepare their registration 
statements in GAAP. Those insurance companies that expect to benefit 
from preparing their registration statements in SAP (e.g., through 
reduced costs) would choose SAP. Those insurance companies that do not 
expect to benefit from the option to prepare their registration 
statements in SAP would continue to prepare their registration 
statements in GAAP. Because the proposed rule would, for certain 
issuers, create the option, but not the obligation, to prepare their 
registration statements in SAP, we do not believe this provision of the 
proposed rule would create additional costs.
    Filing and Prospectus Delivery Rules. As discussed in section II.E, 
when a RILA issuer seeks to amend a RILA registration statement on Form 
S-1, the issuer must file a post-effective amendment that is typically 
declared effective by Commission staff acting pursuant to delegated 
authority on such date as the Commission may determine. To the extent 
that investors previously benefited from the Commission staff's review 
of these filings before they become effective, allowing filings of RILA 
offerings to become automatically effective may eliminate such reviews 
and, as a result, possibly increase the costs to investors. However, 
issuers would still face liability under the Federal securities laws 
for registration statement disclosures (e.g., sections 12 and 17 of the 
Securities Act and section 10(b) and rule 10b-5 under the Exchange 
Act), which may ameliorate the potential costs associated with reduced 
staff review. Moreover, rule 485 only permits updates to become 
immediately effective in limited, enumerated circumstances, in order to 
provide an opportunity for staff review for all other changes.
    As discussed in section II.E.3, we understand that RILA issuers 
typically deliver prospectuses to accompany or precede other 
communications, such as annuity applications. It is possible that 
providing layered disclosure through a summary contract prospectus 
regime (including costs of delivering initial summary and updating 
summary prospectuses and making statutory prospectuses and other 
documents available online) could result in reduced costs for 
issuers.\482\
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    \482\ See VASP Adopting Release. In the VASP Adopting Release we 
estimate that printing and mailing expenses are $0.18 less for 
initial and updating summary prospectuses than for statutory 
prospectuses. Because we understand RILA prospectuses to not be as 
long as variable annuity prospectuses, we would expect savings among 
RILA issuers to be less than the VASP Adopting Release savings, but 
we do not have a basis for believing savings for RILA issuers will 
be of an order of magnitude less than the VASP Adopting Release 
savings. We therefore believe savings for RILA issuers will be 
between approximately $.02 and $.18. We estimate the internal cost 
time of online posting of contract documents to be $772. See infra, 
Table 11.
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    Materially Misleading Statements in RILA Sales Literature. Issuers 
and third parties involved in preparing or disseminating investment 
company advertisements may incur costs to comply with the proposed 
advertising rule amendments. While reducing the potential for 
misleading or fraudulent statements in RILA sales literature would 
provide investors with protections and help ensure that investors 
receive the information necessary to make informed decisions about 
these products, investors could bear the costs of these amendments 
through increased expenses that funds would incur to implement the 
proposal. Alternatively, if the cost of compliance with these proposed 
amendments were significant, some RILAs might reduce advertising to 
lower the extra costs of compliance. If this were to occur, investors 
who would otherwise rely on advertisements to make investment decisions 
about RILAs or compare RILAs with other investment products might have 
less complete information for these purposes.

D. Effects on Efficiency, Competition, and Capital Formation

    Efficiency. To investors, the costs of purchasing a RILA are more 
than just the dollar cost of the contract and include the value of an 
individual's time spent evaluating the contract and its various 
aspects. Further, for those

[[Page 71163]]

investors who do not gain a full understanding of the contract, there 
could be a cost stemming from a potential mismatch between an 
investor's goals and the purchased contract. Depending on the size of 
an individual's potential purchase, certain of these additional costs 
could be considerable in comparison to the monetary costs associated 
with contract purchase and could discourage investors from considering 
RILAs even in circumstances where investment in a RILA would be 
beneficial.
    For their part, insurance companies only supply RILAs to the extent 
they expect the benefits derived from providing the contracts to be 
greater than the costs of supplying the contract. For issuers, costs 
include not only those costs associated with producing and servicing 
RILAs, but also those costs associated with meeting various statutory 
and regulatory obligations.
    These costs borne by both insurance companies and individuals are 
examples of market ``frictions.'' Market frictions have the effect of 
reducing the benefits from (i.e., the efficiency of) contracting 
between market participants.\483\ Rules that reduce costs for 
investors, issuers, or both, reduce market frictions and potentially 
enhance the benefits from contracting between market participants. By 
facilitating investor evaluation and comparison of RILAs as well as 
facilitating the comparison of RILAs to other annuity contracts, the 
proposed rule could reduce frictions for investors. Requiring insurance 
companies to use a single registration form and filing process for all 
RILAs as well as all variable annuity separate accounts that are 
structured as unit investment trusts, as well as allowing RILA issuers 
to provide financial statements on amended Form N-4 in the same way 
that insurance companies currently do on Form N-4, may also reduce 
certain compliance burdens for insurance companies. In addition, 
requiring RILA issuers to tag certain key information in Inline XBRL 
would enable investors, third-party information providers, Commission 
staff, and other data users to capture and analyze that information 
more quickly and efficiently than is possible when the same information 
is provided solely in a static, text-based format.
---------------------------------------------------------------------------

    \483\ If market frictions are sufficiently large, market 
frictions could eliminate exchange altogether.
---------------------------------------------------------------------------

    These increases in efficiency could lead investors to save more 
appropriately to meet their retirement goals. For example, for existing 
RILA investors the proposal may increase the likelihood that investors 
choose to invest more or less money in RILAs in a manner that is 
consistent with their overall financial needs and objectives--a level 
that may be higher or lower than current levels. Similarly, the 
proposal may lead existing investors to choose to allocate their money 
into different investment options that the RILA offers, or different 
RILAs (or other insurance products like variable annuities) that best 
meet their needs. The proposal also may help promote investment in 
RILAs by investors who currently do not invest in RILAs, to the extent 
such investments are appropriate for them. Finally, access to clearer 
information about the contract provisions may reduce the chances that 
an investor makes mid-crediting period withdrawals or transfers or 
surrenders a RILA when the costs of doing so does not justify the 
benefits.
    Competition. If the proposed rule increases efficiency of exchange 
in the RILA market, then we may observe a change in investment in 
RILAs. For example, if there are individuals who currently do not 
invest in RILAs (or invest less than they would have) because the costs 
other than the price of the contract are too high (including the effort 
to gain sufficient understanding of the product) or they are not aware 
of RILAs as an investment, then to the extent the proposed rule lowers 
those costs or makes investor more aware of RILAs, we would expect to 
observe more investors entering the RILA market. Conversely, there may 
be RILA investors who, because of the burden, choose not to read 
statutory prospectuses. To the extent those investors are more likely 
to read summary prospectuses, those investors may decide, as a result, 
that other investments or products are better suited to their 
investment goals. This could result in fewer investments in RILAs. If 
there are insurance companies who limit their participation in the RILA 
market as a result of the requirement to register RILA offerings on 
Form S-1 or Form S-3 or because of the costs of current prospectus 
delivery requirements, those insurance companies may increase 
participation in the RILA market. To the extent that competition in a 
market is related to the size of the market, the net effect of these 
potential changes in investor demand for, and issuer supply of, RILAs 
could affect competition in the RILA market.
    The proposed rule could also affect competition by requiring that 
information about RILAs be presented in a concise, user-friendly way, 
which could allow investors to compare information across products. 
Requiring RILA issuers to tag certain key information in Inline XBRL 
could further facilitate comparisons of information across registrants 
by making it easier for investors (directly or through third-party data 
aggregators) to extract and aggregate information through automated 
means for analysis and comparison, which could increase competition 
among RILA issuers for investor capital. For example, the proposed rule 
requires issuers to distill certain key product information into 
tables. The presentation of this information in a table facilitates 
evaluation among different RILAs as well as comparison to variable 
annuities. Greater comparison among different RILAs as well as 
comparison to variable annuities could lead to greater competition. 
Furthermore, by reducing the costs associated with aggregating data 
across RILAs, the proposed Inline XBRL requirement could reduce 
barriers to entry for third-party data aggregators and induce 
competition among firms that supply information about RILAs to 
investors, including other third-party aggregators and sales agents.
    The effect on competition between insurance companies could be 
limited, however, to the extent RILA investors rely on an agent to help 
them select their RILA contract and the investment options under the 
contract and do not have access to broad comparisons across different 
RILAs (or among different investment options that the RILA offers) at 
the time of sale.\484\ Agents generally only provide their customers 
with a subset of all RILAs available in the general marketplace. Thus, 
while the product information in summary prospectuses would facilitate 
comparison across products offered by the agent, the effect would 
likely be limited to the agent's set of products rather than to the 
broader market.
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    \484\ We do not have data on the extent to which investors rely 
on agents when purchasing RILAs. In 2019, $95.5 billion of total 
variable annuity sales of $98.3 billion (97%) were through a 
distribution channel involving an agent. If investors rely on agents 
when purchasing RILAs to the same extent they do when purchasing 
variable annuities, then the vast majority of RILA investors rely on 
agents when purchasing RILAs.
---------------------------------------------------------------------------

    Capital Formation. As discussed in connection with the potential 
effects of the proposed rule on competition, if the proposed rule 
increases the efficiency of exchange in the RILA market, then we may 
observe a change in investment in RILAs. As discussed in section 
III.B.3, unlike variable annuities that involve a direct investment of 
premiums into one or more mutual funds, which in turn invest in 
underlying securities, RILA premiums are not directly invested into the 
assets of the indexes that are

[[Page 71164]]

associated with the index-linked options offered under the contract, 
but are typically invested into fixed-income securities such as 
corporate bonds. To the extent that an increase or decrease in the 
demand for RILAs is not driven by investors substituting either away 
from, or into, variable annuities or other investment vehicles as an 
alternative, we would not expect changing demand for RILAs to have any 
effect on the underlying securities. An increase or decrease in the 
demand for RILAs could, however, increase or decrease the demand for 
fixed-income securities such as corporate bonds. To the extent the 
proposed rule would cause investors to either substitute away from, or 
into, variable annuities or another investment that entail investment 
in underlying funds (which, in turn, invest in a portfolio of 
securities), there could be an effect on capital formation. If 
investors substitute away from variable annuities or other investment 
vehicles into RILAs, there could be a reduction in the demand for the 
underlying securities and, by extension, a reduction in capital 
formation. If investors substitute away from RILAs and into variable 
annuities or other investment vehicles, there could be an increase in 
the demand for the underlying securities. To the extent issuers invest 
RILA proceeds into fixed-income securities such as corporate bonds, 
there could be an increase in the demand for those securities.
    The proposed Inline XBRL requirements could increase the efficiency 
of capital formation to the extent that making disclosures available in 
a structured format reduces some of the information barriers that make 
it costly for RILA issuers to find appropriate sources of new 
investors. Smaller issuers in particular may benefit more from enhanced 
exposure to investors. If tagging certain disclosures in a structured 
format increases the availability, or reduces the cost, of collecting 
and analyzing key information about RILAs, smaller RILA issuers may 
benefit from improved coverage by third-party information providers and 
data aggregators.

E. Reasonable Alternatives

1. Creating an Entirely New Registration Form for RILAs
    The proposed rule would require the registration of RILA offerings 
on Form N-4. Most variable annuities use Form N-4, which has disclosure 
requirements tailored to these investments that provide investors with 
key information about a variable annuity's terms, benefits, and risks 
in a concise and reader-friendly presentation. Currently, insurance 
companies register RILA offerings on Forms S-1 or S-3, which allow 
registering general debt or equity offerings. Forms S-1 and S-3 require 
issuers to disclose not only information about the offering itself, but 
also extensive information about the registrant issuing the securities. 
In addition, registrants must include financial statements prepared in 
accordance with GAAP, unless an exemption has been granted pursuant to 
17 CFR 210.3-13 that permit insurance companies to substitute SAP 
financials in lieu of GAAP financials. Form N-4, on the other hand, 
allows insurance companies to file financial statements prepared in 
accordance with SAP if they do not otherwise prepare GAAP financial 
statements. As an alternative, we could have required insurance 
companies to register RILA offerings on an entirely new form.
    Form N-4 was designed for investment companies, and RILA issuers 
are not investment companies. A new form specifically tailored to RILAs 
could be more beneficial than working to fit them into an existing 
framework that was designed with a different structure in mind.
    A completely new registration form for RILA offerings could 
negatively affect investors' ability to compare different RILAs with 
variable annuities that register on Form N-4 (including ``combination'' 
contracts that offer index-linked options as well as variable options). 
Furthermore, given that we are proposing to amend Form N-4 to address 
those aspects specific to RILAs, but many of the current form 
requirements are relevant to the registration of RILA offerings, a 
completely new and separate form for RILAs would not offer much (if 
any) benefit to investors in terms of new information compared to the 
proposed amendments to Form N-4. Since most variable annuity issuers 
already use Form N-4 to register their securities, and many RILA 
contracts are offered as ``combination'' contracts, the amended Form N-
4 would efficiently provide investors with product-specific information 
about these combination contracts. As a result, investors would be able 
to compare annuity products, and the investment options that these 
products offer, with less time and effort. To the extent that investors 
use less time and effort to compare annuity products and their 
underlying investment options, investors may be more likely to make 
decisions that align better with their investment goals.
    We preliminarily believe that requiring RILA offerings to be 
registered on Form N-4 rather than on an entirely new form would also 
be more efficient for insurance companies since they would generally 
follow the same procedures they already use for the registration of 
variable annuities. Using Form N-4 to register variable annuities and 
RILA offerings would also be less costly for insurance companies than 
using Form N-4 for variable annuities and a completely new form for 
RILAs since registrants are already familiar with Form N-4. It also 
would be less costly because, if RILA offerings had to be registered on 
a form other than Form N-4, combination contracts offering variable 
options and index-linked options would have to use two separate 
registration forms.
    Commission staff would also benefit from using Form N-4 for RILAs 
because the disclosure requirements for variable annuities and RILAs 
would be located in one form only, and registration statements for 
these products would be subject to the same filing and review 
processes. This would reduce the use of resources by Commission staff 
needed to review the registration statements of RILAs and variable 
annuities.
2. Alternatives to Specific Form N-4 Amendments
    The Commission is proposing amendments to Form N-4 so that 
insurance companies can register RILA offerings using that form. While 
the substance of many of the requirements in Form N-4 would not change 
from the current version of the form, we are proposing to update some 
items to include disclosures specifically tailored to RILAs. In certain 
limited circumstances, we have changed the disclosure requirements 
provided on the form for all filers, including those registering 
variable annuities.
    As an alternative, we could have proposed more or less tailoring 
the form for RILAs. A larger number of amendments tailored to RILAs 
than the number we propose would be more costly for insurance companies 
registering RILA offerings because insurance companies that offer 
combination contracts (or that otherwise register variable annuities on 
Form N-4) would have to make more changes to their disclosure. For 
example, we could have required insurance companies to provide a 
diagram in the KIT to illustrate surrender charges and contract 
adjustments during different time periods of the contract, or 
illustrations showing how caps, floors, and/or buffers could affect an 
investor's returns across different market scenarios.
    Also, we could require insurance companies to provide information 
related to the economic tradeoffs

[[Page 71165]]

associated with index-linked options. For example, we could require the 
insurance company to compare a hypothetical investment in the index-
linked option to the value, or cost, of a combination of (i) 
derivatives that would provide the index-linked option's investment 
exposure; (ii) a fixed-income component; and (iii) the standard 
insurance features offered with the index-linked option, similar to the 
analysis in the Moenig Paper and the analysis conducted by the staff in 
section III.B.3.\485\ In such a comparison, we could either require 
that the insurance company should use the hypothetical investment 
discounted by the rate of interest the insurance company is crediting, 
or would credit, on fixed annuities with a term equal to the duration 
of the crediting periods of the index-linked option, or we could 
require the insurance company to use the value of a risk-free zero-
coupon bond with a time to maturity equal to the crediting period of 
the index-linked option, consistent with our analysis in section 
III.B.3.\486\ We could also consider requiring additional disclosure 
related to the setting of early withdrawal charges or penalties and 
their impact on such a comparison of hypothetical investments. For 
example, we could require the calculation of a disclosure similar to 
the analysis in the Moenig Paper and the analysis conducted by the 
staff in section III.B.3 to explicitly include the impact of early 
withdrawal charges or penalties on the liquidity of the investment. We 
could also require more prominent placement of these features on 
marketing or other materials, or we could require a comparison of these 
features to potential benefits of the RILA to clarify for investors 
possible trade-offs.
---------------------------------------------------------------------------

    \485\ See supra section II.B.3.b.
    \486\ Id.
---------------------------------------------------------------------------

    Conversely, a smaller number of amendments tailored to RILAs than 
the number we propose would be less costly for insurance companies. 
Since insurance companies already use Form N-4 to register variable 
annuities, and most RILA issuers offer variable annuities registered on 
Form N-4 (including, in many cases, combination contracts), we 
preliminarily believe that the costs of complying with the disclosure 
requirements of the amended form would not be substantial.
    The amendments to Form N-4 that we propose would promote investor 
understanding of RILA contracts by presenting information in a clear 
and concise manner. Proposing a larger number of amendments tailored to 
RILAs may add too much, or less relevant, information, which may 
overwhelm investors who may not have the time or capacity to process 
all the information.\487\ Proposing only a subset of amendments 
tailored to RILAs, as compared with the proposed approach, could result 
in less investor understanding relative to the understanding resulting 
from the proposed amendments.
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    \487\ See, e.g., Julie R. Agnew and Lisa R. Szykman (2005). 
Asset Allocation and Information Overload: The Influence of 
Information Display, Asset Choice, and Investor Experience, Journal 
of Behavioral Finance, 6(2), 57-70, and Alejandro Bernales, Marcela 
Valenzuela and Ilknur Zer (2023). Effects of Information Overload on 
Financial Markets: How Much Is Too Much? International Finance 
Discussion Papers 1372, Washington: Board of Governors of the 
Federal Reserve System.
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3. Require the Use of Form N-4 for Registered MVAs
    As discussed above, while we are not proposing to require insurance 
companies to register offerings of registered MVAs on Form N-4, one 
alternative would have been requiring insurance companies to register 
the offering of registered MVAs on Form N-4.\488\ These offerings are 
currently registered on Forms S-1 or S-3 but differ from RILAs only 
with respect to the manner in which interest is calculated and 
credited.\489\ As a result, many of the benefits and costs identified 
above regarding RILAs would also be true in applying the same 
registration and disclosure framework to offerings of registered MVAs, 
including potentially a change to the filing fee process to file on 
Form 24f-2 and requiring the issuers to follow rule 156. For example, 
as with RILAs, expanding the scope of Form N-4 to include registered 
MVAs would benefit investors by making it easier for them to compare 
registered MVAs, and also compare registered MVAs with other annuity 
product offerings registered using Form N-4.\490\ In particular, 
because both RILAs and registered MVAs include contract adjustments, 
the inclusion of specified disclosures about contract adjustments would 
benefit investors since they would be able to better evaluate the costs 
of purchasing and owning annuity contracts, including registered MVAs. 
Requiring the registration of registered MVAs on Form N-4 also would 
entail efficiency benefits to insurance companies that offer 
combination contracts, for example ones that include both variable 
annuities registered on Form N-4 and registered MVAs, as the use of the 
same registration form for all of these products may reduce these 
companies' compliance burdens.
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    \488\ See supra section II.H.
    \489\ Based on internal estimates, there are 45 registered MVAs 
from 15 different insurance companies. 27 of these registered MVAs 
are in combination contracts whereas 18 are standalone. 27 of these 
registered MVAs use Form S-1 and 18 use Form S-3. Lastly, 26 of 
these registered MVAs use GAAP financials and 19 use SAP.
    \490\ See supra section III.C.1.
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    Conversely, including registered MVAs on Form N-4 would also entail 
similar costs to those outlined above for the proposed registration and 
disclosure approach for RILAs. These would include direct costs to the 
insurance company, for example filing fees, as well as outside legal 
and account fees. Direct costs also would include costs associated with 
filing the first Form N-4 registration statement in connection with the 
registration of a registered MVA offering, where the insurance company 
would be required to familiarize itself with the new registration form 
and may need to configure its systems to efficiently gather the 
required information. Further, investors would bear certain indirect 
costs, such as the cost of adapting to new materials and the changes in 
the presentation of information.
    Ultimately, we determined not to propose to require insurance 
companies to register offerings of registered MVAs on Form N-4 at this 
time, but we request comment on this reasonable alternative.
4. Limiting Scope of Structured Data Requirements
    The proposed rule would require many of the newly added disclosures 
on Form N-4 to be tagged in Inline XBRL, and also would require RILA 
issuers to tag those prospectus disclosures that Form N-4 currently 
requires to be tagged. Alternatively, the Commission could have limited 
the tagging requirement to only those disclosures being added to Items 
of Form N-4 that are already tagged in Inline XBRL.\491\ Under this 
alternative, disclosures relating to: the overview of the contract; the 
description of the Insurance company, registered separate account, and 
investment options; charges; purchases and contract value; purchase of 
securities being offered; disagreements with and changes to 
accountants; information about contracts with index-linked options and 
fixed options subject to a contract adjustment; and fee representations 
and undertakings would not be tagged.
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    \491\ See supra footnote 451.
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    Limiting the scope of tagging requirements in this manner would 
result in reduced compliance burdens for insurance companies, which 
would be required to apply fewer tags to their

[[Page 71166]]

disclosures on Form N-4 filings. However, the alternative would also 
remove the informational benefits associated with making those 
disclosures available in a machine-readable manner. Furthermore, 
because Form N-4 filers already have Inline XBRL tagging obligations 
with respect to certain of the form's disclosure requirements, the 
burden reductions resulting from such an alternative would be limited.

F. Request for Comment

    Throughout this release, we have discussed the anticipated benefits 
and costs of the proposed rule and its potential effect on efficiency, 
competition, and capital formation. While we do not have comprehensive 
information on all aspects of RILA registration and reporting, we are 
using the data currently available in considering the effects of the 
proposed rule. We request and encourage any interested person to submit 
comments regarding the proposed rule, our analysis of the potential 
effects of the rules and other matters that may have an effect on the 
proposed rules. We request that commenters identify sources of data and 
information with respect to annuity contracts in general, but also with 
respect to RILAs in particular, as well as provide data and information 
to assist us in analyzing the economic consequences of the proposed 
rules. We are also interested in comments on the qualitative benefits 
and costs we have identified and any benefits and costs we may not have 
discussed. We urge commenters to be as specific as possible.
    Comments on the following questions are of particular interest.
    153. What additional qualitative or quantitative information should 
be considered as part of the baseline for the economic analysis of 
these amendments?
    154. Are the benefits and costs of proposed amendments accurately 
characterized? If not, why not? Should any of the costs or benefits be 
modified? What, if any, other costs or benefits should be taken into 
account? If possible, please offer ways of estimating these benefits 
and costs. What additional considerations can be used to estimate the 
benefits and costs of the proposed amendments?
    155. To the extent commenters believe any specific additional data 
sources would help better quantify the benefits and costs of the 
proposal, we request that commenters provide this data. In particular, 
the following data could be particular informative: historical 
information about current limits on index gains associated with the 
index-linked options offered under a RILA, quantitative data about 
contract adjustments incurred by investors who make withdrawals from an 
index-linked option or from a RILA contract before the end of a 
specified period, and/or data regarding the frequency with which RILA 
contracts are annuitized.
    156. Are the effects on competition, efficiency, and capital 
formation arising from the proposal accurately characterized? If not, 
why not?
    157. Are there any other reasonable alternatives to the proposed 
new rule that should be considered? Are there any additional benefits 
or costs that should be associated with the reasonable alternatives 
considered?
    158. We indicate that insurance companies benefit from the sale of 
RILAs in at least three ways. First, insurance companies can benefit 
from a favorable imbalance between the downside protections that a RILA 
contract offers, and the upside caps the contract offers. Second, 
insurance companies invest RILA proceeds into fixed-income securities 
such as corporate bonds, thereby earning a ``credit risk premium.'' 
Finally, insurance companies can benefit when a RILA offers index-
linked options whose index for measuring performance is a price-based 
index that does not account for dividend payments. Are we correct in 
our characterization of how insurance companies benefit from the sale 
of RILAs? In what other ways, if any, do insurance companies benefit 
from the sale of RILAs?
    159. We characterize RILAs as combining features of fixed-index 
annuities and variable annuities--limiting or reducing downside risk in 
return for an investor accepting capped upside performance. In exchange 
for giving up the complete protection of principal offered by fixed 
annuities, a RILA investor is afforded greater upside potential than 
that provided by fixed annuities, though typically less than the 
potential upside of a variable annuity. Is our characterization of 
RILAs, compared to other annuity products, correct? If not, how do 
RILAs compare to other annuity products?
    160. In Section III.B.3, we analyze the imbalance between the 
downside protections that a RILA contract offers, and the upside limits 
the contract offers. Does our analysis reflect a risk-neutral valuation 
for a RILA with a cap and buffer or floor? What alternative 
considerations should we include in calculating such a valuation? Do 
the methodological assumptions (such as generating prices through the 
linear interpolation of implied volatilities) create significant bias 
or other problems for the analysis? How do RILAs set surrender charges 
or other early withdrawal charges or penalties, and should these 
charges or penalties be considered when performing this calculation 
since they reduce the liquidity of the investment? Should we require 
additional disclosure related to early withdrawal charges, fees, or 
penalties? For example, should we require more prominent placement of 
these features on marketing or other materials, or should we require a 
comparison of these features to potential benefits of the RILA to 
clarify for investors possible trade-offs? Are there other data sources 
(e.g., pricing vendors) that should be considered for these 
calculations? Are there certain time periods or types of contracts that 
we should consider when doing these or similar calculations? What 
considerations should be used in assessing whether the cost derived in 
our analysis is large or small? Also, are other measures related to the 
economic content of downside protections and upside limits that would 
be beneficial for investors?
    161. We indicate that for shorter crediting periods and for common 
indexes such as the S&P 500, issuers are able to use exchange traded 
derivative securities to closely approximate the issuer's liabilities 
from a RILA contract at the end of each crediting period. Do issuers 
use exchange derivative securities to approximate the issuer's 
liabilities from a RILA contract? If not, how do issuers use the 
proceeds from RILA sales?
    162. Under the proposed rule, to what extent would insurance 
companies choose to meet their disclosure obligation by providing 
investors with summary prospectuses while making statutory and other 
documents available on a website? As discussed above, we expect the 
vast majority of investors will have the option to use both summary 
prospectuses and statutory prospectuses in their decision-making, in 
whatever proportion investors think is best for their preferences. To 
what extent would investors in RILA contracts whose issuers elect to 
rely on rule 498A request to receive statutory prospectuses in paper or 
electronically, or seek access to statutory prospectuses online?
    163. Would any positive or negative effect of the proposed rule on 
investors be disproportionately greater for certain investors than for 
others? If so, which investors would be disproportionately affected, to 
what extent, and how would such effects manifest? What, if any, 
additional measures could help mitigate any such disproportionate 
effects?

[[Page 71167]]

Please provide supportive data to the extent available.
    164. To what extent might reduced burdens (e.g., using SAP 
accounting rather than GAAP accounting) borne by issuers be passed on 
to existing investors? Under what circumstances, and in what form, 
would insurance companies pass benefits through to existing investors?
    165. To what extent would the proposed rule affect the ability of 
investors to understand the investment risks of RILAs and to 
efficiently allocate capital? Would investors be more likely to 
allocate additional capital to RILAs? What would be the effect on 
issuer competition for investor capital?
    166. To what extent would investors realize benefits from Inline 
XBRL tagging requirements for certain newly added disclosures on Form 
N-4, as opposed to tagging requirements for only those disclosures 
within currently tagged Form N-4 Items? How would this approach affect 
costs for insurance companies? Would there be any cost saving?
    167. To what extent would an increase or decrease in the demand for 
RILAs be driven by investors substituting either away from, or into, 
variable annuities or other investment vehicles? We assume that if 
investors do substitute away from, or into, variable annuities or other 
investment vehicles into RILAs, that the effect on capital formation 
would be small. Is our assumption correct? If not, why would the effect 
on capital formation be larger than what we assumed?

IV. Paperwork Reduction Act

    We are proposing amendments to several rules and forms that would 
modify the registration, offering, and communications processes for 
RILAs under the Securities Act. We are also proposing amendments to 
Form N-4 and related rules that would apply to all issuers of that 
form.\492\ The proposed amendments, if adopted, would implement the 
requirements relating to RILAs in the RILA Act.\493\ The proposed 
amendments would have an impact on the current collections of 
information burdens under the Paperwork Reduction Act of 1995 (``PRA'') 
of the following rules and forms: Rule 498A, Form N-4, Investment 
Company Interactive Data, and Form 24F-2. The titles for the existing 
collections of information are: (1) ``Rule 498A Summary Prospectus for 
Variable Annuity and Variable Life Insurance Contracts'' (OMB Control 
No. 3235-0765), which we would retitle to ``Rule 498A Summary 
Prospectus for Variable and Index-Linked Annuity and Variable Life 
Insurance Contracts;'' (2) ``Form N-4, Registration Statement of 
Separate Accounts Organized as Unit Investment Trust'' (OMB Control No. 
3235-0318), which we would retitle to ``Form N-4, Registration 
Statement of Separate Accounts Organized as Unit Investment Trust or of 
Index-Linked Annuity Contracts;'' (3) ``Annual Notice of Securities 
Sold Pursuant to Rule 24f-2.'' (OMB Control No. 3235-0456), which we 
would retitle to ``Annual Notice of Securities Sold Pursuant to 17 CFR 
270.24f-2 or 230.456(e);'' and (4) ``Investment Company Interactive 
Data'' (OMB Control No. 3235-0642).
---------------------------------------------------------------------------

    \492\ We are proposing amendments rules 485 and 497 of 
Regulation C (OMB Control No. 3235-0074), which describes the 
procedures to be followed in preparing and filing registration 
statements with the Commission, and rule 405 of Regulation S-T (OMB 
Control No. 3235-0424), which specifies the requirements that govern 
the electronic submission of documents. The proposed amendments 
would require RILA issuers to tag specified information in 
registration statements filed on Form N-4 or post-effective 
amendments thereto, as well as in forms of prospectuses filed 
pursuant to rule 497(c) or 497(e) under the Securities Act that 
include information that varies from the registration statement 
using Inline XBRL These burdens are included in our estimates for 
the Investment Company Interactive Data collection of information 
discussed in section IV.D below.
    \493\ See Public Law 117-328; 136 Stat. 4459 (Dec. 29, 2022).
---------------------------------------------------------------------------

    The Commission is submitting these collections of information to 
OMB for review and approval in accordance with 44 U.S.C. 3507(d) and 5 
CFR 1320.11. The hours and costs associated with preparing and filing 
the forms constitute reporting and cost burdens imposed by each 
collection of information. An agency may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless it displays a currently valid OMB control number. We discuss 
below the collection of information burdens associated with proposed 
amendments to rule 498A and Investment Company Interactive Data, as 
well as Forms N-4 and 24F-2, which are filed with the Commission and 
are not kept confidential. A description of the proposed amendments, 
including the need for the information and its proposed use, as well as 
a description of the likely respondents, can be found in Section II 
above, and a discussion of the economic effects of the proposed 
amendments can be found in Section III above.

A. Rule 498A

    We are proposing to amend rule 498A to permit RILA issuers, as well 
as issuers of ``combination contracts'' offering a combination of 
index-linked options and variable options, to use a summary prospectus 
to satisfy statutory prospectus delivery obligations. Consistent with 
current rule 498A, the proposed use of summary prospectuses for RILAs 
would be voluntary, but the rule's requirements would be mandatory for 
issuers that elect to send or give a summary prospectus in reliance 
upon proposed rule 498A. We are also proposing to make certain 
amendments to Form N-4 that would affect the variable annuity summary 
prospectuses currently provided to investors. The proposed amendments 
to rule 498A are part of a layered disclosure approach that is designed 
to provide investors with a summary prospectus to help them make 
informed investment decisions regarding RILAs, as discussed in more 
detail above. These amendments would result in a change in our estimate 
of the burdens associated with this collection of information, 
specifically to account for these additional requirements for issuers 
that use rule 498A currently and to add RILAs to the estimates.
    The respondents to these collections of information would be RILA 
issuers and registered variable annuity separate accounts. The 
information provided under rule 498A will not be kept confidential.
    In our most recent Paperwork Reduction Act submission for Rule 
498A, we estimated for rule 498A a total aggregate annual hour burden 
of 14,688 hours, and a total aggregate annual external cost burden of 
$11,559,420.\494\ We estimate that 90 RILAs would be registered using 
Form N-4 if the proposal was adopted and that that there are 419 
registrants on current Form N-4 that would be impacted by the proposed 
amendments.\495\ The summary prospectus is voluntary, so the percentage 
of RILA issuers that will choose to utilize it is uncertain. Given this 
uncertainty, we have assumed that insurance companies will choose to 
use a summary prospectus for 90% of all RILAs, which is the same as our 
current estimate for variable annuity separate accounts. The table 
below summarizes our PRA initial and ongoing annual burden estimates 
associated with the proposed amendments to rule 498A.
---------------------------------------------------------------------------

    \494\ On Nov. 13, 2020, the Office of Management and Budget 
approved this collection of information estimate for rule 498A.
    \495\ The RILA estimate is based on a review of RILA 
registration statements filed with the Commission as of May 2023 and 
the current Form N-4 registrants estimate is based on Form N-CEN 
reports through Apr. 15, 2023.

[[Page 71168]]



                                        Table 11--Rule 498A PRA Estimates
----------------------------------------------------------------------------------------------------------------
                                  Internal        Internal                                            Annual
                               initial burden   annual burden    Wage rate \2\    Internal time    external cost
                                    hours           hours                             costs           burden
----------------------------------------------------------------------------------------------------------------
                                               Proposed Estimates
----------------------------------------------------------------------------------------------------------------
                                          Separate Account Registrants
----------------------------------------------------------------------------------------------------------------
Proposed Amendments..........           \1\ 9           \1\ 6  $425 (compliance           $2,550  ..............
                                                                attorney).
Number of registrants \3\....  ..............           x 419                              x 419  ..............
Total annual burden..........  ..............           2,514                         $1,068,450  ..............
Use of summary prospectus....  ..............           x 90%                              x 90%  ..............
Total new annual burden for    ..............        2,262.60                           $961,605  ..............
 Reliance on Rule 498A.
----------------------------------------------------------------------------------------------------------------
                                                RILA Registrants
----------------------------------------------------------------------------------------------------------------
Preparation and filing of                  40       \4\ 24.67  $313 (blended           $7,709.38      \8\ $5,000
 Initial Summary Prospectus/                                    rate) \5\.
 Updating Summary Prospectus.
Online Posting of Contract                  2        \6\ 2.67  $289 (webmaster)          $771.63  ..............
 Documents.
Total burden per registrant..  ..............           27.34                           8,481.01          $5,000
Number of registrants \7\....  ..............            x 90                               x 90            x 90
Total annual burden..........  ..............        2,460.60                        $763,290.90        $405,000
Use of summary prospectus....  ..............           x 90%                              x 90%           x 90%
Total new annual burden for    ..............        2,214.54                        $686,961.81        $364,500
 Reliance on Rule 498A.
----------------------------------------------------------------------------------------------------------------
                           Estimates for Printing and Mailing by RILA Registrants \9\
----------------------------------------------------------------------------------------------------------------
Initial Summary Prospectus......................................................................        $120,000
Updating Summary Prospectus.....................................................................      $1,048,000
Total annual burden.............................................................................      $1,168,000
Use of summary prospectus.......................................................................           x 90%
Total new annual burden for Reliance on Rule 498A...............................................      $1,051,200
----------------------------------------------------------------------------------------------------------------
                                                  Total Burdens
----------------------------------------------------------------------------------------------------------------
                                  Responses       Internal                           Internal        External
                                                         hour                          hour cost            cost
                                                     estimate                           estimate        estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual                  676          14,688                         $3,900,193     $11,559,420
 burden estimates.
Aggregate proposed additional       \10\ + 83      + 4,477.14                     + 1,648,566.81    + $1,415,700
 annual burden estimates.
Revised aggregate annual                = 759     = 19,165.14                     = 5,548,759.81   = $12,975,120
 burden estimates.
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ Burden estimates also include the burden associated with the proposed amendments for separate account
  registrants that use a notice document as part of the modernized alternative disclosure framework in
  connection with discontinued variable annuity contracts. See VASP Adopting Release at section II.E. Internal
  annual burden hours represents initial burden estimates annualized over a three-year period plus three hours
  of on-going annual burden hours.
\2\ The Commission's estimates of the relevant wage rates are based on salary information for the securities
  industry compiled by the Securities Industry and Financial Markets Association's Office Salaries in the
  Securities Industry 2013. The estimated wage figures are modified by Commission staff to account for an 1,800-
  hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, overhead, and
  adjusted to account for the effects of inflation. See Securities Industry and Financial Markets Association,
  Report on Management & Professional Earnings in the Securities Industry 2013 (as adjusted to account for
  inflation, the ``SIFMA Wage Report'').
\3\ Estimate is based on a review of N-CEN reports through Apr. 15, 2023. In its most recently approved PRA
  submission, the Commission estimated that 426 registrants on Form N-4 would be subject to the information
  collection burden under current rule 498A. For the estimated burden of the proposed amendments to rule 498A,
  we have taken into account updated data regarding the number of registrants on Form N-4.
\4\ Represents initial burden estimates annualized over a three-year period plus 11 hours of ongoing annual
  burden hours.
\5\ Represents a blended wage rate of a compliance attorney ($425 per hour) and an intermediate accountant ($200
  per hour). $313 is based on the following calculation: ($425 + $200)/2 = $313 rounded to the nearest whole
  dollar.
\6\ Represents initial burden estimates annualized over a three-year period plus two hours of ongoing annual
  burden hours.
\7\ This estimate is based on the number of RILAs, as estimated through review of RILA registration statements
  filed with the Commission as of May 2023.
\8\ We estimate that each insurance company that chooses to rely on rule 498A with regards to a RILA will incur
  a one-time collective external cost burden of $10,000 per registration statement to prepare both a new initial
  summary prospectus and a new updating summary prospectus for offerings on Form N-4. We also estimate an on-
  going collective burden of $2,500 per registration statement during each subsequent year to prepare updates to
  these materials. The three-year average cost of these estimates is $5,000.
\9\ Costs associated with printing and mailing for separate account registrants are already accounted for in the
  currently approved burdens for rule 498A. Estimates for RILA issuers printing and mailing costs are based on
  the currently approved burdens for printing and mailing costs under rule 498A.
\10\ The estimated number of new responses is based on the total of the number of RILA responses under the
  proposed amendments (90 responses) and the difference between the number of responses for registered separate
  accounts under the current aggregate annual burden estimate (426 responses) and the proposed additional annual
  burden estimates (419 responses). (90 RILA responses subtracted by 7 registered separate account responses).

B. Form N-4

    Under the proposed amendments, RILA issuers would register 
offerings on Form N-4, as amended to address the features and risks of 
RILAs. We are also proposing other amendments to Form N-4 that would 
apply to all issuers that use that form. For example, we are proposing 
to switch the order of the Key Information Table and Overview of the 
Contract items, require issuers to present information in the KIT in a 
Q&A format, and to require more specific principal risk disclosures. 
These amendments would result in a change in our estimate of the 
burdens associated with this collection of information, specifically to 
account for these additional requirements for issuers that use Form N-4 
currently and to add RILAs to the estimates.
    Form N-4 generally imposes two types of reporting burdens on 
issuers that use the form: (1) the burden of preparing and filing the 
initial registration statement; and (2) the burden of preparing and 
filing post-effective amendments to a previously effective registration 
statement. In our most recent Paperwork Reduction Act submission for 
Form N-4, we estimated for Form N-4 a total aggregate annual hour 
burden of 292,487 hours, and a total aggregate annual external cost

[[Page 71169]]

burden of $33,348,866.\496\ Compliance with the disclosure requirements 
of Form N-4 is mandatory, and the responses to the disclosure 
requirements will not be kept confidential. The respondents to these 
collections of information would be RILA issuers and registered 
variable annuity separate accounts. The purpose of the information 
collection requirements on Form N-4 are to meet the filing and 
disclosure requirements of the Securities Act and Investment Company 
Act, as applicable, and to provide investors with information necessary 
to evaluate an investment in an offering of securities registered on 
the form.
---------------------------------------------------------------------------

    \496\ On Oct. 26, 2021, the Office of Management and Budget 
approved without change this burden estimate.
---------------------------------------------------------------------------

    We estimate that 90 RILA respondents and 419 separate account 
registrants would be subject to collection of information requirements 
under the proposed amendments to Form N-4.\497\ The table below 
summarizes our PRA initial and ongoing annual burden estimates 
associated with the proposed amendments to Form N-4.
---------------------------------------------------------------------------

    \497\ For RILA registrants, this estimate is based on a review 
of RILA registration statements filed with the Commission as of May 
2023. For separate account registrants, this amount is based on Form 
N-CEN reports through Apr. 15, 2023.

                                                  Table 12--Form N-4 PRA Estimates for Initial Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Internal        Internal                                                                 Annual
                                                  initial burden   annual burden             Wage rate \2\               Internal time     external cost
                                                       hours           hours                                                 costs            burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Separate Account Registrants
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed amendments.............................              12          \1\ 14  $406 (blended rate for compliance               $5,684  ..............
                                                                                   attorney and senior programmer)
                                                                                   \3\.
Estimated number of annual responses \4\........  ..............            x 42  ..................................                x 42  ..............
Total new annual burden.........................  ..............             588  ..................................            $238,728  ..............
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      RILA Issuers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed amendments to Form N-4.................             300      \5\ 390.89  $406 (blended rate for compliance          $158,701.34     \8\ $40,000
                                                                                   attorney and senior programmer)
                                                                                   \3\.
Website availability requirement \6\............  ..............             0.5  $286 (webmaster)..................                $143  ..............
Estimated number of annual responses \7\........  ..............            x 20  ..................................                x 20            x 20
Total new annual burden.........................  ..............        7,827.80  ..................................       $3,176,886.80        $800,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Total Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Responses   Internal hour                                      Internal hour cost   External cost
                                                                        estimate                                                estimate        estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current aggregate annual burden estimates.......              30           8,427  ..................................          $2,494,716        $754,740
Aggregate proposed additional annual burden             \9\ + 32      + 8,416.80  ..................................     + $3,416,614.80      + $800,000
 estimates.
Revised aggregate annual burden estimates.......            = 62     = 16,843.80  ..................................     = $5,911,330.80    = $1,554,740
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ This estimate includes the initial burden estimates annualized over a three-year period, plus 10 hours of ongoing annual burden hours.
\2\ The Commission's estimates of the relevant wage rates are based on the SIFMA Wage Report. The estimated wage figures are modified by Commission
  staff to account for an 1,800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, overhead, and adjusted to
  account for the effects of inflation.
\3\ The $406 wage rate reflects current estimates of the blended hourly rate for an in-house compliance attorney ($425) and a senior programmer ($386).
  $406 is based on the following calculation: ($425 + $386)/2 = $406 rounded to the nearest whole dollar.
\4\ The estimate of the annual number of registration statements filed on Form N-4 is based on the average annual number of filings received by the
  Commission over the past three years (Jan. 1, 2020 to Dec. 31, 2022). In its most recently approved PRA submission, the Commission estimated that
  separate accounts will make approximately 30 initial registration statement filings per year. For the estimated burden of the proposed amendments to
  Form N-4, we have taken into account updated data regarding the number of initial filings on Form N-4.
\5\ The proposed estimate includes the initial burden estimates annualized over a three-year period, plus 290.89 hours of ongoing annual burden hours.
  The ongoing annual burden is estimated to be equal to the currently approved ongoing annual burden for initial filings on Form N-4 plus 10 hours of
  ongoing annual burden hours.
\6\ The proposed amendments would require RILA issuers to separately to include information about current contract limits on gains on their websites.
  See Item 17 of proposed Form N-4.
\7\ This estimate is based on a review of Morningstar data regarding the number of new RILA product launches that occurred over the prior three calendar
  years (2020-2022), rounded to the nearest ten. Current RILA registration statements would make their first filing on proposed Form N-4 as a post-
  effective amendment. See supra footnote 195 and accompanying text.
\8\ We estimate that the external cost to prepare and file an initial registration statement on Form N-4 is $40,000 per filing.
\9\ The estimated number of new responses is based on the total of the number of RILA responses under the proposed amendments (20 responses) and the
  difference between the number of responses for registered separate accounts under the current aggregate annual burden estimate (30 responses) and the
  proposed additional annual burden estimates (42 responses). (20 RILA responses plus 12 registered separate account responses).


                                          Table 13--Form N-4 PRA Estimates for Post-Effective Amendment Filings
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Internal        Internal
                                                  initial burden   annual burden             Wage rate \2\              Internal time    Annual external
                                                       hours           hours                                                costs          cost burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Separate Account Registrants
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed amendments.............................              12           \1\ 6  $406 (blended rate for compliance             $2,436  ................
                                                                                   attorney and senior programmer)
                                                                                   \3\.
Estimated number of annual responses \4\........  ..............         x 1,016  ..................................           x 1,016  ................
Total new annual burden.........................  ..............           6,096  ..................................        $2,474,976  ................
--------------------------------------------------------------------------------------------------------------------------------------------------------

[[Page 71170]]

 
                                                                      RILA Issuers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed amendments to Form N-4.................             210      \5\ 279.95  $406 (blended rate for compliance        $113,659.70       \8\ $24,000
                                                                                   attorney and senior programmer)
                                                                                   \3\.
Website availability requirement \6\............  ..............             0.5  $286 (webmaster)..................              $143  ................
Estimated number of annual responses \7\........  ..............            x 90  ..................................              x 90              x 90
Total new annual burden.........................  ..............       25,240.50  ..................................        10,242,243        $2,160,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Total Burdens
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Responses   Internal hour  ..................................     Internal hour     External cost
                                                                        estimate                                         cost estimate          estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Current aggregate annual burden estimates.......           1,366       + 284,060  ..................................       $84,100,454     + $32,594,126
Aggregate proposed additional annual burden              \9\-260     + 31,336.50  ..................................     + $12,717,219      + $2,160,000
 estimates.
Revised aggregate annual burden estimates.......         = 1,106    = 315,369.50  ..................................      = 96,817,673     = $34,754,126
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ This estimate includes the initial burden estimates annualized over a three-year period, plus two hours of on-going annual burden hours.
\2\ The Commission's estimates of the relevant wage rates are based on the SIFMA Wage Report. The estimated wage figures are modified by Commission
  staff to account for an 1,800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, overhead, and adjusted to
  account for the effects of inflation.
\3\ The $406 wage rate reflects current estimates of the blended hourly rate for an in-house compliance attorney ($425) and a senior programmer ($386).
  $406 is based on the following calculation: ($425 + $386)/2 = $406 rounded to the nearest whole dollar.
\4\ The estimate of the annual number of post-effective amendments to registration statements on Form N-4 is based on the average annual number of
  filings received by the Commission over the past three years (Jan. 1, 2020 to Dec. 31, 2022). In its most recently approved PRA submission, the
  Commission estimated that separate accounts will make approximately 1,366 post-effective amendment filings per year on Form N-4. For the estimated
  burden of the proposed amendments to Form N-4, we have taken into account updated data regarding the number of post-effective amendment filings on
  Form N-4.
\5\ The proposed estimate includes the initial burden estimates annualized over a three-year period, plus 207.95 hours of ongoing annual burden hours.
  The ongoing annual burden is estimated to be equal to the currently approved ongoing annual burden for initial filings on Form N-4 plus an addition 2
  hours of ongoing annual burden hours.
\6\ The proposed amendments would require RILA issuers to separately to include information about current contract limits on gains on their websites.
  See Item 17 of proposed Form N-4.
\7\ This estimate is based on a review of RILA registration statements filed with the Commission as of May 2023.
\8\ We estimate that the external cost to prepare and file a post-effective registration statement on Form N-4 is approximately $24,000 per filing.
\9\ The estimated number of new responses is based on the total of the number of RILA responses under the proposed amendments (90 responses) and the
  difference between the number of responses for registered separate accounts under the current aggregate annual burden estimate (1,366 responses) and
  the proposed additional annual burden estimates (1,016 responses). (90 RILA responses subtracted by 350 registered separate account responses).


                                  Table 14--Total Burden Estimates for Form N-4
----------------------------------------------------------------------------------------------------------------
                                                               Internal
                                               Responses     annual burden     Internal time     Annual external
                                                               hours \1\           costs           cost burden
----------------------------------------------------------------------------------------------------------------
                                   Total Burden Estimates Including Amendments
----------------------------------------------------------------------------------------------------------------
Current aggregate annual burden estimates.           1,366         292,487         $86,595,170       $33,348,866
Aggregate proposed additional annual                  -228   + 39,753.30 +    + $16,133,833.80      + $2,914,740
 burden estimates.........................
Revised aggregate annual burden hours.....         = 1,168    = 332,240.30      = $102,729,004     = $36,263,606
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ This estimate includes the initial burden estimates annualized over a three-year period.

C. Form 24F-2

    Under the proposed amendments, insurance companies would be 
required to pay applicable securities registration fees relating to 
RILAs in arrears on Form 24F-2. Consistent with the other elements of 
this proposal, these proposed amendments are designed to require 
insurance companies to use the same framework to pay securities 
registration fees for RILAs that they do for variable annuities. Form 
24F-2 is the annual notice of securities sold by certain funds that 
accompanies the payment of registration fees with respect to the 
securities sold during the fiscal year, net of securities redeemed or 
repurchased during the year. Compliance with Form 24F-2 is mandatory. 
Responses to this form are not kept confidential.
    In our most recent Paperwork Reduction Act submission for Form 24F-
2, we estimated for Form 24F-2 a total aggregate annual hour burden of 
27,176 hours, and a total aggregate annual external cost burden of 
$0.\498\ The likely respondents to the proposed amendments would 
include RILA issuers and current Form 24F-2 filers, which open-end 
investment companies, unit investment trusts, registered closed-end 
investment companies that make periodic repurchase offers under 17 CFR 
270.23c-3, and face-amount certificate companies. We estimate that 90 
RILA respondents would be subject to these proposed amendments and 
would file one Form 24F-2 filing each per year.\499\ The table below 
summarizes our PRA initial and ongoing annual burden estimates 
associated with the proposed amendments to Form 24F-2.
---------------------------------------------------------------------------

    \498\ On May 14, 2021, the Office of Management and Budget 
approved this burden estimate.
    \499\ This estimate is based on a review of RILA registration 
statements filed with the Commission as of May 2023. We do not 
believe that the proposed amendments to Form 24F-2 will affect the 
estimated burdens associated with current Form 24F-2 filers. We have 
not amended the currently approved burdens for current Form 24F-2 
filers with more recent data for the purposes of this PRA estimate.

[[Page 71171]]



                                       Table 15--Form 24F-2 PRA Estimates
----------------------------------------------------------------------------------------------------------------
                                 Internal        Internal
                              initial burden   annual burden   Wage rate \2\    Internal time   Annual external
                                   hours           hours                            costs         cost burden
----------------------------------------------------------------------------------------------------------------
                                               Proposed Estimates
----------------------------------------------------------------------------------------------------------------
Clerical work to file Form                 3           \1\ 3  $82 (compliance            $246                 $0
 24f-2.                                                        clerk).
Submission in a structured                 3           \1\ 3  $316                       $948                 $0
 data format.                                                  (programmer).
Total annual burden per       ..............               6  ...............          $1,194  .................
 response.
Number of annual responses    ..............            x 90  ...............            x 90               x 90
 \3\.
Total new annual burden.....  ..............             540  ...............        $107,460                 $0
----------------------------------------------------------------------------------------------------------------
                                  Total Estimated Burdens Including Amendments
----------------------------------------------------------------------------------------------------------------
                                   Responses        Internal                    Internal time    Annual external
                                               annual burden                            costs        cost burden
                                                       hours
----------------------------------------------------------------------------------------------------------------
Current aggregate annual               6,794          27,176  ...............      $4,633,508                 $0
 burden.
Aggregate proposed                      + 90           + 540  ...............      + $107,460               + $0
 additional annual burden
 estimates.
Revised aggregate burden             = 6,884        = 27,716  ...............    = $4,140,968               = $0
 estimates.
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ The proposed estimate includes the initial burden estimates annualized over a three-year period, plus 2
  hours of ongoing annual burden hours.
\2\ The Commission's estimates of the relevant wage rates are based on the SIFMA Wage Report. The estimated wage
  figures are modified by Commission staff to account for an 1,800-hour work-year and multiplied by 5.35 to
  account for bonuses, firm size, employee benefits, overhead, and adjusted to account for the effects of
  inflation.
\3\ This estimate is based on a review of RILA registration statements filed with the Commission as of May 2023.

D. Investment Company Interactive Data

    The Investment Company Interactive Data collection of information 
references current requirements for certain registered investment 
companies and BDCs to submit to the Commission in Inline XBRL certain 
information provided in response to specified form and rule 
requirements included in their registration statements and Exchange Act 
reports. We are proposing amendments to Form N-4, as well as rule 405 
of Regulation S-T, that would require certain new structured data 
reporting requirements for RILA issuers.\500\ The proposed amendments 
would require RILA issuers to tag specified information in registration 
statements filed on Form N-4 or post-effective amendments thereto, as 
well as in forms of prospectuses filed pursuant to rule 497(c) or 
497(e) under the Securities Act that include information that varies 
from the registration statement using Inline XBRL.\501\ The purpose of 
the information collection is to make information regarding RILAs 
easier for investors to analyze and to help automate regulatory filings 
and business information processing, and to improve consistency across 
all types of investment products offered on Form N-4 with respect to 
the accessibility of information they provide to the market.
---------------------------------------------------------------------------

    \500\ The Investment Company Interactive Data collection of 
information do not impose any separate burden aside from that 
described in our discussion of the burden estimates for this 
collection of information.
    \501\ See supra section II.B.9.
---------------------------------------------------------------------------

    Insurance companies that use Form N-4 to register variable 
annuities are currently required to tag certain registration statement 
disclosure items using Inline XBRL.\502\ For the insurance companies 
that would now be registering RILAs on Form N-4, our proposed data 
tagging requirements would represent new burdens. Nevertheless, RILA 
issuers generally do have prior experience submitting filings to the 
Commission in Inline XBRL. The vast majority of insurance companies 
that currently register RILAs on Forms S-1 and S-3 also separately file 
Form N-4 to register variable annuities and variable life insurance 
products or currently tag their RILA registration statements and are 
thus familiar with the current Form N-4 tagging requirements.\503\ In 
addition, insurance companies that register RILAs on Forms S-1 and S-3 
that file GAAP financial statements must tag them using Inline 
XBRL.\504\ Given this prior experience, we do not expect the proposed 
tagging requirements to be as burdensome to many RILA issuers as it 
would be for issuers that would be going through the Inline XBRL 
tagging and submission process for the first time.
---------------------------------------------------------------------------

    \502\ See General Instruction C.3(h) of current Form N-4. As 
discussed above, some of the proposed items would also require 
certain variable annuity issuers to provide a few additional 
disclosures, which though relatively minor, would also have to 
tagged.
    \503\ Based on analysis of Forms S-1, S-3, and POS AM filed by 
RILA issuers, 22 of the 23 insurance companies that issue RILAs also 
offer variable products registered on Forms N-3, N-4, or N-6, all of 
which are currently structured, or otherwise have experience tagging 
registration statements.
    \504\ See Inline XBRL Filing of Tagged Data, Securities Act 
Release No. 10514 (June 28, 2018) [83 FR 40846 (Aug. 16, 2018)].
---------------------------------------------------------------------------

    In our most recent Paperwork Reduction Act submission for the 
Investment Company Interactive Data collection of information, we 
estimated a total annual hour burden of 323,724 hours, and a total 
annual external cost burden of $16,041,450.\505\ Compliance with the 
interactive data requirements is mandatory, and the responses will not 
be confidential.
---------------------------------------------------------------------------

    \505\ This estimate is based on the last time the PRA renewal 
for the Investment Company Interactive Data information collection 
was approved in 2023. See ICR Reference No. 202212-3235-007, 
available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202212-3235-007.
---------------------------------------------------------------------------

    The table below summarizes our PRA estimates for the burdens 
associated with the proposed tagging requirements that would apply to 
RILAs that file with the Commission on Form N-4.

                                  Table 16--Investment Company Interactive Data
----------------------------------------------------------------------------------------------------------------
                                 Internal        Internal
                              initial burden   annual burden   Wage rate \2\    Internal time   Annual external
                                   hours         hours \1\                          costs         cost burden
----------------------------------------------------------------------------------------------------------------
                                                Proposed Burdens
----------------------------------------------------------------------------------------------------------------
Proposed disclosures for                   1           \4\ 1  $406 (blended              $406            \5\ $50
 current N-4 filers \3\.                                       rate for
                                                               compliance
                                                               attorney and
                                                               senior
                                                               programmer).
Number of current N-4 filers  ..............           x 400  ...............           x 400              x 400
 \6\.

[[Page 71172]]

 
Total new burden estimates    ..............             400  ...............        $162,400            $20,000
 for current N-4 filers.
Proposed Form N-4                          9           \8\ 4  $406 (blended            $1,624           \9\ $700
 disclosures for RILAs \7\.                                    rate for
                                                               compliance
                                                               attorney and
                                                               senior
                                                               programmer).
Number of RILAs \10\........  ..............            x 90  ...............            x 90               x 90
Total new burden estimates    ..............             360  ...............        $146,160            $63,000
 for RILAs.
Total new aggregate annual    ..............        \11\ 760  ...............   \12\ $308,560       \13\ $63,000
 burden.
----------------------------------------------------------------------------------------------------------------
                              Total Proposed Estimated Burdens Including Amendments
----------------------------------------------------------------------------------------------------------------
                                   Responses   Internal hour                    Internal hour      External cost
                                                    estimate                    cost estimate           estimate
----------------------------------------------------------------------------------------------------------------
Current aggregate annual              14,702         323,724  ...............     $27,066,240        $16,041,450
 burden estimates.
Proposed additional annual              + 90           + 760  ...............      + $308,560          + $63,000
 burdens.
Revised aggregate annual              14,792         324,484  ...............     $27,374,800        $16,124,450
 burden estimates.
----------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a 3-year period.
\2\ The PRA estimates assume that the types of professionals that will be involved in complying with the new
  interactive data requirements. The Commission's estimates of the relevant wage rates are based on the SIFMA
  Wage Report. The $406 wage rate reflects current estimates of the blended hourly rate for an in-house
  compliance attorney ($425) and a senior programmer ($386). $406 is based on the following calculation: ($425 +
  $386)/2 = $406. This estimate represents the average burden for a filer on Form N-4 that is currently subject
  to interactive data requirements.
\3\ Estimated incremental burden for a variable annuity Form N-4 filer that is subject to the form's current
  interactive data requirements.
\4\ Includes initial burden estimates annualized over a three-year period, plus 0.67 hour of ongoing annual
  burden hours. The estimate of 1 hour is based on the following calculation: ((1 initial hour/3) + 0.67 hour of
  additional ongoing burden hours) = 1 hour.
\5\ Estimated incremental external cost for Form N-4 variable annuity registrants that already submit certain
  information using Inline XBRL.
\6\ Based on Form N-CEN filing data for 2022, we estimate that 400 variable annuity registrants file on Form N-
  4.
\7\ Estimated average burden for a RILA that files on Form N-4 that is currently subject to interactive data
  requirements on other Commission forms.
\8\ Includes initial burden estimates annualized over a three-year period, plus 1 hour of ongoing annual
  burdens. The estimate of 4 hours is based on the following calculation: ((9 initial hours/3) + 1 hour of
  additional ongoing burden hours) = 4 hours.
\9\ We estimate an incremental external cost for RILAs that would be newly filing on Form N-4 of $700 to reflect
  one-time compliance and initial set-up costs. Because RILAs are currently subject to Inline XBRL tagging
  requirements on other forms, we do not estimate any burdens related to one time-costs associated with becoming
  familiar with structured data requirements (e.g., the acquisition of new software or the services of
  consultants).
\10\ Estimated number of RILAs that currently file on Forms S-1 and S-3.
\11\ 760 hours = (400 variable annuity registrants x 1 hour = 400) + (90 RILAs x 4 hours = 360).
\12\ $308,560 internal time cost = (400 variable annuity registrants x $406 = $162,400) + (90 RILAs x $1,624 =
  $146,160).
\13\ $63,000 annual external cost = (400 variable annuity registrants x $50 = $20,000) + (90 RILAs x $700 =
  $63,000).

E. Request for Comment

    We request comment on whether our estimates are reasonable. 
Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments 
to: (1) evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information will have practical 
utility; (2) evaluate the accuracy of the Commission's estimate of the 
burden of the proposed collection of information; (3) determine whether 
there are ways to enhance the quality, utility, and clarity of the 
information to be collected; and (4) determine whether there are ways 
to minimize the burden of the collection of information on those who 
are to respond, including through the use of automated collection 
techniques or other forms of information technology. Persons wishing to 
submit comments on the collection of information requirements of the 
proposed amendments should direct them to the OMB Desk Officer for the 
Securities and Exchange Commission, 
[email protected], and should send a copy to 
Vanessa Countryman, Secretary, Securities and Exchange Commission, 100 
F Street NE, Washington, DC 20549-1090, with reference to File No. S7-
16-23. OMB is required to make a decision concerning the collections of 
information between 30 and 60 days after publication of this release; 
therefore a comment to OMB is best assured of having its full effect if 
OMB receives it within 30 days after publication of this release. 
Requests for materials submitted to OMB by the Commission with regard 
to these collections of information should be in writing, refer to File 
No. S7-16-23, and be submitted to the Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549-2736.

V. Regulatory Flexibility Certification

    Section 3(a) of the Regulatory Flexibility Act of 1980 
(``Regulatory Flexibility Act'') \506\ requires the Commission, when 
issuing a rulemaking proposal, to prepare and make available for public 
comment an initial regulatory flexibility analysis that describes the 
impact of the proposed rule and form amendments on small entities 
unless we certify that the rule and form amendments, if adopted, would 
not have a significant economic impact on a substantial number of small 
entities.\507\ Pursuant to 5 U.S.C. 605(b), we hereby certify that the 
proposed amendments to Forms N-4 and 24F-2, rules 313 and 405 of 
Regulation S-T, and rules 156, 172, 405, 415, 424, 456, 457, 485, 497, 
and 498A under the Securities Act, would not, if adopted, have a 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \506\ 5 U.S.C. 603(a).
    \507\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    We are proposing amendments to Form N-4 pursuant to the authority 
set forth in the Securities Act, particularly sections 6, 7, 8, 10, 19, 
and 28 thereof [15 U.S.C. 77f, 77g, 77h, 77j, 77s, and 77z-3], the 
Exchange Act, particularly sections 3, 4, 10, 12, 13, 14, 15, 17, 23, 
35A, and 36 thereof [15 U.S.C. 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78q, 
78w, 78ll, and 78mm]; the Investment Company Act, particularly sections 
8, 30, and 38 thereof [15 U.S.C. 80a-8, 80a-29, and 80a-37], and the 
RILA Act, particularly section 101 thereof [Pub. L. 117-328, div. AA, 
title I, 136 Stat. 4459 (2022)]. Form-N-4 is the registration form 
currently used by most variable annuity separate accounts. These 
proposed amendments would implement the requirements relating to RILAs 
contained in the RILA Act by allowing Form N-4 to also be used for the 
registration of RILAs.
    The proposed amendments would add to Form N-4 new disclosure 
requirements that specifically address

[[Page 71173]]

the features and risks of RILAs. Specifically, the proposal would amend 
the contents of Form N-4, including the form's general instructions, 
requirements for front and back cover pages, the key information table, 
principal disclosures regarding RILA investment options, and contract 
adjustment and fee disclosures. These amendments would apply only to 
insurance companies registering RILAs. We are also proposing applying 
the form's existing disclosure requirements to RILAs where appropriate. 
For example, we are proposing to permit insurance companies to provide 
financial statements on amended Form N-4 regarding RILAs in the same 
way that that they do under the current Form N-4 for variable 
annuities, including permitting the use of SAP to the same extent as 
variable annuities.
    In addition to adding RILAs to Form N-4, we are proposing 
amendments to the form that would be applicable to all issuers, which 
are designed to improve disclosures based upon our experience in 
administering the form and feedback received in investor testing. For 
example, we are proposing to switch the order of the key information 
table and overview of the contract items in the prospectus to require 
more specific principal risk disclosures. All Form N-4 filers would be 
subject to these proposed amendments.
    To facilitate to the inclusion of RILAs on Form N-4, we are 
proposing amending Form 24F-2, rules 313 and 405 of Regulation S-T, and 
rules 156, 172, 405, 415, 424, 456, 457, 485, 497, and 498A, pursuant 
to authority set forth in the Securities Act, particularly sections 6, 
7, 8, 10, and 19(a), and 28 thereof [15 U.S.C. 77e, 77f, 77g, 77h, 77j, 
and 77s, and 77z-3(a)], the Exchange Act, particularly sections 3, 4, 
10, 12, 13, 14, 15, 17, 23, 35A, and 36 thereof [15 U.S.C. 78c, 78d, 
78j, 78l, 78m, 78n, 78o, 78q, 78w, 78ll, and 78mm]; the Investment 
Company Act, particularly sections 8, 30, and 38 thereof [15 U.S.C. 
80a-8, 80a-29, and 80a-37], and the RILA Act, particularly section 101 
thereof [Pub. L. 117-328, div. AA, title I, 136 Stat. 4459 (2022)]. For 
example, the proposed amendment to rule 498A would permit RILA issuers 
to use a summary prospectus to satisfy statutory prospectus delivery 
obligations, and the proposed amendments to rules 485 and 497 would 
make those rules applicable to RILA issuers when amending RILA 
registration statements on Form N-4 or when filing prospectuses and 
prospectus supplements with the Commission.\508\ The proposed 
amendments to Form 24F-2, Rule 313 of Reg S-T, and rules 456 and 457 
would require insurance companies to pay securities registration fees 
relating to RILA offerings according to the same method used for 
variable annuities. Because we propose subjecting RILA offerings to an 
investor communication framework similar to the framework applicable to 
variable annuity offerings, the proposed amendments to rule 172 would 
exclude RILA offerings from that rule's provisions. The proposed 
amendment of rule 405 of Reg S-T would require inline XBRL tagging of 
RILA-specific disclosures, while the proposed amendment of rule 405 
would add a new defined term for RILAs to facilitate their registration 
on Form N-4 and to simplify references to RILAs in our proposed rule 
amendments. The proposed amendments to rule 156 would require RILA 
issuers to comply with the rule's guidance as to when sales literature 
is materially misleading under the Federal securities laws.
---------------------------------------------------------------------------

    \508\ Relatedly, we propose amending rule 424 to specify that 
RILA issuers must use rule 497 rather than rule 424 when filing 
prospectuses and prospectus supplements, and making similar 
amendments to rule 415 to exempt RILA offerings from its provisions, 
consistent with the framework applied to existing N-4 issuers.
---------------------------------------------------------------------------

    For purposes of the Securities Act and the Regulatory Flexibility 
Act, generally, an issuer, other than an investment company, will be 
considered a small entity if it has net assets of $5 million or less as 
of the end of its most recent fiscal year, and the issuer's offering 
does not exceed $5 million.\509\ RILA issuers are not investment 
companies and based on a review of EDGAR filings of existing RILA 
issuers, we do not expect any RILA issuers will be treated as small 
entities. The analysis is different for existing N-4 filers (i.e., 
variable annuity issuers), as the insurance company separate accounts 
registering variable annuities are deemed to be investment companies. 
Generally, for purposes of the Investment Company Act and the 
Regulatory Flexibility Act, an investment company is a small entity if, 
together with other investment companies in the same group of related 
investment companies, it has net assets of $50 million or less as of 
the end of its most recent fiscal year.\510\ Because State law 
generally treats separate account assets as the property of the 
sponsoring insurance company, rule 0-10 aggregates each separate 
account's assets with the assets of the sponsoring insurance company, 
together with assets held in other sponsored separate accounts.\511\ As 
a result, the Commission expects few, if any, separate account to be 
treated as small entities.
---------------------------------------------------------------------------

    \509\ 17 CFR 230.157 (defining ``small business'' or ``small 
organization'' under the Securities Act for purposes of the 
Regulatory Flexibility Act); 15 U.S.C 77c(b)(1) (defining ``small 
entity'' to mean ``small business,'' ``small organization,'' or 
``small governmental jurisdiction'').
    \510\ 17 CFR 270.0-10(a).
    \511\ 17 CFR 270.0-10(b).
---------------------------------------------------------------------------

    For this reason, we believe that the proposed amendments would not, 
if adopted, have a significant economic impact on a substantial number 
of small entities.
    The Commission encourages written comments on the certification. We 
solicit comment as to whether the proposed form and rule amendments 
could have an effect on small entities that has not been considered. We 
ask that commenters describe the nature of any impact on small entities 
and provide empirical data to support the extent of the impact.

VI. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''), the Commission must advise OMB whether a 
proposed regulation constitutes a 184 ``major'' rule. Under SBREFA, a 
rule is considered ``major'' where, if adopted, it results in or is 
likely to result in:
     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment, or 
innovation.
    We request comment on whether our proposal would be a ``major 
rule'' for purposes of SBREFA. We solicit comment and empirical data 
on:
     The potential effect on the U.S. economy on an annual 
basis;
     Any potential increase in costs or prices for consumers or 
individual industries; and
     Any potential effect on competition, investment, or 
innovation.
    Commenters are requested to provide empirical data and other 
factual support for their views to the extent possible.

Statutory Authority

    The amendments contained in this release are being proposed under 
the authority set forth in the Securities Act, particularly sections 6, 
7, 8, 10, 19, and 28 thereof [15 U.S.C. 77a et seq.]; the Exchange Act, 
particularly sections 3, 4, 10, 12, 13, 14, 15, 17, 23, 35A, and 36 
thereof [15 U.S.C. 78a et seq.]; the Investment Company Act, 
particularly, Sections 8, 30, and 38 thereof, and the

[[Page 71174]]

RILA Act, particularly section 101 thereof [Pub. L. 117-328, div. AA, 
title I, 136 Stat. 4459 (2022)].

List of Subjects

17 CFR Part 230

    Advertising, Confidential business information, Investment 
companies, Reporting and recordkeeping requirements, Securities.

17 CFR Part 232

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, Securities.

17 CFR Part 239

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

Text of Rule and Form Amendments

    For reasons set forth in the preamble, we are proposing to amend 
title 17, chapter II of the Code of Federal Regulations as follows:

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
1. The authority citation for part 230 continues to read in part as 
follows:

    Authority:  15 U.S.C. 77b, 77b note, 77c, 77d, 77f, 77g, 77h, 
77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78o-
7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 80a-29, 80a-
30, and 80a-37, and Pub. L. 112-106, sec. 201(a), sec. 401, 126 
Stat. 313 (2012), unless otherwise noted.
* * * * *
    Sections 230.400 to 230.499 issued under secs. 6, 8, 10, 19, 48 
Stat. 78, 79, 81, and 85, as amended (15 U.S.C. 77f, 77h, 77j, 77s).
    Sec. 230.457 also issued under secs. 6 and 7, 15 U.S.C. 77f and 
77g.
* * * * *
0
2. Revise Sec.  230.156 to read as follows:


Sec.  230.156   Investment company and registered index-linked annuity 
sales literature.

    (a) Under the Federal securities laws, including section 17(a) of 
the Securities Act of 1933 (15 U.S.C. 77q(a)) and section 10(b) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and Sec.  240.10b-5 
of this chapter (Rule 10b-5) thereunder, it is unlawful for any person, 
directly or indirectly, by the use of any means or instrumentality of 
interstate commerce or of the mails, to use sales literature which is 
materially misleading in connection with the offer or sale of 
registered index-linked annuity (as defined in Sec.  230.405 (Rule 
405)) securities or securities issued by an investment company. Under 
these provisions, sales literature is materially misleading if it:
    (1) Contains an untrue statement of a material fact; or
    (2) Omits to state a material fact necessary in order to make a 
statement made, in the light of the circumstances of its use, not 
misleading.
    (b) Whether or not a particular description, representation, 
illustration, or other statement involving a material fact is 
misleading depends on evaluation of the context in which it is made. In 
considering whether a particular statement involving a material fact is 
or might be misleading, weight should be given to all pertinent 
factors, including, but not limited to, those listed below.
    (1) A statement could be misleading because of:
    (i) Other statements being made in connection with the offer of 
sale or sale of the securities in question;
    (ii) The absence of explanations, qualifications, limitations or 
other statements necessary or appropriate to make such statement not 
misleading; or
    (iii) General economic or financial conditions or circumstances.
    (2) Representations about past or future investment performance 
could be misleading because of statements or omissions made involving a 
material fact, including situations where:
    (i) Portrayals of past income, gain, or growth of assets convey an 
impression of the net investment results achieved by an actual or 
hypothetical investment which would not be justified under the 
circumstances, including portrayals that omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading; and
    (ii) Representations, whether express or implied, about future 
investment performance, including:
    (A) Representations, as to security of capital, possible future 
gains or income, or expenses associated with an investment;
    (B) Representations implying that future gains or income may be 
inferred from or predicted based on past investment performance; or
    (C) Portrayals of past performance, made in a manner which would 
imply that gains or income realized in the past would be repeated in 
the future.
    (3) A statement involving a material fact about the characteristics 
or attributes of an investment company or registered index-linked 
annuity could be misleading because of:
    (i) Statements about possible benefits connected with or resulting 
from services to be provided or methods of operation which do not give 
equal prominence to discussion of any risks or limitations associated 
therewith;
    (ii) Exaggerated or unsubstantiated claims about management skill 
or techniques, characteristics of the investment company or registered 
index-linked annuity or an investment in securities issued by such 
company, services, security of investment or funds, effects of 
government supervision, or other attributes; and
    (iii) Unwarranted or incompletely explained comparisons to other 
investment vehicles or to indexes.
    (4) Representations about the fees or expenses associated with an 
investment in the fund or registered index-linked annuity could be 
misleading because of statements or omissions made involving a material 
fact, including situations where portrayals of the fees and expenses 
associated with an investment in the fund or registered index-linked 
annuity omit explanations, qualifications, limitations, or other 
statements necessary or appropriate to make the portrayals not 
misleading.
    (c) For purposes of this section, the term sales literature shall 
be deemed to include any communication (whether in writing, by radio, 
or by television) used by any person to offer to sell or induce the 
sale of securities of any investment company or registered index-linked 
annuity. Communications between issuers, underwriters and dealers are 
included in this definition of sales literature if such communications, 
or the information contained therein, can be reasonably expected to be 
communicated to prospective investors in the offer or sale of 
securities or are designed to be employed in either written or oral 
form in the offer or sale of securities.
    (d) Nothing in this section may be construed to prevent a business 
development company or a registered closed-end investment company from 
qualifying for an exemption under Sec.  230.168 or Sec.  230.169.
0
3. Amend Sec.  230.172 by revising paragraph (d) to read as follows:


Sec.  230.172   Delivery of prospectuses.

* * * * *
    (d) Exclusions. This section shall not apply to any:
    (1) Offering of any investment company registered under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), other than a 
registered closed-end investment company;
    (2) A business combination transaction as defined in Sec.  
230.165(f)(1);
    (3) Offering registered on Form S-8 (Sec.  239.16b of this 
chapter); or

[[Page 71175]]

    (4) Offering of any registered index-linked annuity (as defined in 
Sec.  230.405 (Rule 405)) securities.
0
4. Amend Sec.  230.405 by adding in alphabetical order definitions for 
``Form available solely to investment companies registered under the 
Investment Company Act of 1940'' and ``Registered index-linked 
annuity'' to read as follows:


Sec.  230.405   Definitions of terms.

* * * * *
    Form available solely to investment companies registered under the 
Investment Company Act of 1940. A form available solely to investment 
companies registered under the Investment Company Act of 1940 includes 
the form used to register the offering of securities of a registered 
index-linked annuity for purposes of the Securities Act of 1933.
* * * * *
    Registered index-linked annuity. The term registered index-linked 
annuity means an annuity or an option available under an annuity:
    (1) That is deemed a security;
    (2) That is offered or sold in a registered offering;
    (3) That is issued by an insurance company that is the subject to 
the supervision of either the insurance commissioner or bank 
commissioner of any State or any agency or officer performing like 
functions as such commissioner;
    (4) That is not issued by an investment company; and
    (5) Whose value, either during the accumulation period or after 
annuitization or both, will earn positive or negative interest based, 
in part, on the performance of any index, rate, or benchmark.
* * * * *
0
5. Amend Sec.  230.415 by revising paragraph (b) to read as follows:


Sec.  230.415   Delayed or continuous offering and sale of securities.

* * * * *
    (b) This section shall not apply to any registration statement 
pertaining to a registered index-linked annuity (as defined in Sec.  
230.405 (Rule 405)), securities issued by a face-amount certificate 
company, or redeemable securities issued by an open-end management 
company or unit investment trust under the Investment Company Act of 
1940 or any registration statement filed by any foreign government or 
political subdivision thereof.
0
6. Amend Sec.  230.424 by revising paragraph (f) to read as follows:


Sec.  230.424   Filing of prospectuses, number of copies.

* * * * *
    (f) This section shall not apply with respect to prospectuses of an 
investment company registered under the Investment Company Act of 1940 
(other than a registered closed-end investment company) or prospectuses 
that pertain to a registered index-linked annuity (as defined in Sec.  
230.405 (Rule 405)). References to ``form of prospectus'' in paragraphs 
(a), (b), and (c) of this section shall be deemed also to refer to the 
form of Statement of Additional Information.
* * * * *
0
7. Amend Sec.  230.456 by adding paragraph (e) to read as follows:


Sec.  230.456   Date of filing; timing of fee payment.

* * * * *
    (e)(1) Notwithstanding paragraph (a) of this section, where a 
registration statement relates to an offering of registered index-
linked annuity (as defined in Sec.  230.405 (Rule 405)) securities, an 
issuer shall be deemed to register an offering of an indeterminate 
amount of such securities and shall, not later than 90 days after the 
end of any fiscal year during which it has publicly offered such 
securities, pay a registration fee to the Commission calculated in 
accordance with Sec.  230.457(u) (Rule 457(u)) and file Form 24F-2 
(referenced in 17 CFR 274.24) with the Commission.
    Instruction 1 to paragraph (e)(1): To determine the date on which 
the registration fee must be paid, the first day of the 90-day period 
is the first calendar day of the fiscal year following the fiscal year 
for which the registration fee is to be paid. If the last day of the 
90-day period falls on a Saturday, Sunday, or Federal holiday, the 
registration fee is due on the first business day thereafter.
    (2) When registering an offering of an indeterminate amount of 
registered index-linked annuity securities pursuant to paragraph (e)(1) 
of this section, the securities sold will be considered registered, for 
purposes of section 6(a) of the Act, if the registration fee has been 
paid and the issuer has filed a Form 24F-2 filing pursuant to paragraph 
(e)(1) of this section not later than the end of the 90-day period.
    (3) A registration statement filed in accordance with the 
registration fee payment provisions of paragraph (e)(1) of this section 
will be considered filed as to the securities identified in the 
registration statement for purposes of this section and section 5 of 
the Act when it is received by the Commission, if it complies with all 
other requirements under the Act, including this part.
    (4) For purposes of this section, if an issuer ceases operations, 
the date the issuer ceases operations will be deemed to be the end of 
its fiscal year. In the case of a liquidation, merger, or sale of all 
or substantially all of the assets (``merger'') of the issuer, the 
issuer will be deemed to have ceased operations for the purposes of 
this section on the date the merger is consummated; provided, however, 
that in the case of a merger of an issuer or a series of an issuer 
(``Predecessor'') with another issuer or a series of an issuer 
(``Successor''), the Predecessor will not be deemed to have ceased 
operations and the Successor will assume the obligations, fees, and 
redemption credits of the Predecessor incurred pursuant to this section 
if the Successor:
    (i) Had no assets or liabilities, other than nominal assets or 
liabilities, and no operating history immediately prior to the merger;
    (ii) Acquired substantially all of the assets and assumed 
substantially all of the liabilities and obligations of the 
Predecessor; and
    (iii) The merger is not designed to result in the Predecessor 
merging with, or substantially all of its assets being acquired by, an 
issuer (or a series of an issuer) that would not meet the conditions of 
paragraph (e)(4)(i) of this section.
    (5) An issuer paying the fee required by paragraph (e)(1) of this 
section or any portion thereof more than 90 days after the end of the 
fiscal year of the issuer shall pay to the Commission interest on 
unpaid amounts, calculated based on the interest rate in effect at the 
time of the interest payment by reference to the ``current value of 
funds rate'' on the Treasury Department's Bureau of Fiscal Service 
internet site at https://fiscal.treasury.gov/, or by calling (202) 874-
6995, and using the following formula: I = (X) (Y) (Z/365), where: I = 
Amount of interest due; X = Amount of registration fee due; Y = 
Applicable interest rate, expressed as a fraction; Z = Number of days 
by which the registration fee payment is late. The payment of interest 
pursuant to this paragraph (e)(5) shall not preclude the Commission 
from bringing an action to enforce the requirements of this paragraph 
(e).
    (6) An immaterial or unintentional failure to comply with a 
requirement of this paragraph (e) will not result in a violation of 
section 6(a) of the Act (15 U.S.C. 77f(a)), so long as:

[[Page 71176]]

    (i) A good faith and reasonable effort was made to comply with the 
requirement; and
    (ii) In the case of a late payment of a registration fee, the 
issuer pays the registration fee and any interest due thereon as soon 
as practicable after discovery of the failure to pay the registration 
fee.
0
8. Amend Sec.  230.457 by revising paragraph (u) to read as follows:


Sec.  230.457   Computation of fee.

* * * * *
    (u) Where an issuer elects or is required to register an offering 
of an indeterminate amount of exchange-traded vehicle securities in 
accordance with Sec.  230.456(d) (Rule 456(d)) or registered index-
linked annuity securities (as defined in Sec.  230.405 (Rule 405)) in 
accordance with Sec.  230.456(e) (Rule 456(e)), the registration fee is 
to be calculated in the following manner:
    (1) Determine the aggregate sale price of such securities sold 
during the fiscal year.
    (2) Determine the sum of:
    (i) The aggregate redemption or repurchase price of such securities 
redeemed or repurchased during the fiscal year; and
    (ii) The aggregate redemption or repurchase price of such 
securities redeemed or repurchased during a prior fiscal year that were 
not used previously to reduce registration fees payable to the 
Commission, if the prior fiscal year ended no earlier than August 1, 
2021 in the case of exchange traded vehicle securities, or [EFFECTIVE 
DATE OF THE FINAL RULE] in the case of registered index-linked annuity 
securities.
    (3) Subtract the amount in paragraph (u)(2) of this section from 
the amount in paragraph (u)(1) of this section. If the resulting amount 
is positive, the amount is the net sales amount. If the resulting 
amount is negative, it is the amount of redemption credits available 
for use in future years to offset sales.
    (4) The registration fee is calculated by multiplying the net sales 
amount by the fee payment rate in effect on the date of the fee 
payment. If the issuer determines that it had net redemptions or 
repurchases for the fiscal year, no registration fee is due.
0
9. Amend Sec.  230.485 by revising the section heading and paragraphs 
(a)(1) and (b) introductory text to read as follows:


Sec.  230.485   Effective date of post-effective amendments filed by 
certain registered investment companies or issuers offering registered 
index-linked annuities.

    (a) * * *
    (1) Except as otherwise provided in this section, a post-effective 
amendment to a registration statement filed by a registered open-end 
management investment company, unit investment trust or, separate 
account as defined in section 2(a)(37) of the Investment Company Act of 
1940 [15 U.S.C. 80a-2(a)(37)] or to register an offering of a 
registered index-linked annuity securities (as defined in Sec.  230.405 
(Rule 405)) shall become effective on the sixtieth day after the filing 
thereof, or a later date designated by the registrant on the facing 
sheet of the amendment, which date shall be no later than eighty days 
after the date on which the amendment is filed.
* * * * *
    (b) Immediate effectiveness. Except as otherwise provided in this 
section, a post-effective amendment to a registration statement filed 
by a registered open-end management investment company, unit investment 
trust or separate account as defined in section 2(a)(37) of the 
Investment Company Act of 1940 [15 U.S.C. 80a-2(a)(37)] or to register 
an offering of a registered index-linked annuity securities shall 
become effective on the date upon which it is filed with the 
Commission, or a later date designated by the registrant on the facing 
sheet of the amendment, which date shall be not later than thirty days 
after the date on which the amendment is filed, except that a post-
effective amendment including a designation of a new effective date 
pursuant to paragraph (b)(1)(iii) of this section shall become 
effective on the new effective date designated therein, Provided, that 
the following conditions are met:
* * * * *
0
10. Amend Sec.  230.497 by revising the section heading and paragraphs 
(c) and (e) to read as follows:


Sec.  230.497   Filing of investment company or registered index-linked 
annuity prospectuses--number of copies.

* * * * *
    (c) For investment companies filing on Sec. Sec.  239.15A and 
274.11A of this chapter (Form N-1A), Sec. Sec.  239.17a and 274.11b of 
this chapter (Form N-3), Sec. Sec.  239.17b and 274.11c of this chapter 
(Form N-4), or Sec. Sec.  239.17c and 274.11d of this chapter (Form N-
6), or an offering of registered index-linked annuities (as defined in 
Rule 405 (Sec.  230.405)) being filed on Form N-4, within five days 
after the effective date of a registration statement or the 
commencement of a public offering after the effective date of a 
registration statement, whichever occurs later, 10 copies of each form 
of prospectus and form of Statement of Additional Information used 
after the effective date in connection with such offering shall be 
filed with the Commission in the exact form in which it was used. 
Investment companies filing on Forms N-1A, N-3, N-4, or N-6 and issuers 
of registered index-linked annuities filing on Form N-4 must, if 
applicable pursuant to General Instruction C.3.(g) of Form N-1A, 
General Instruction C.3.(h) of Form N-3, General Instruction C.3.(h) of 
Form N-4, or General Instruction C.3.(h) of Form N-6, submit an 
Interactive Data File (as defined in Sec.  232.11 of this chapter).
* * * * *
    (e) For investment companies filing on Sec. Sec.  239.15A and 
274.11A of this chapter (Form N-1A), Sec. Sec.  239.17a and 274.11b of 
this chapter (Form N-3), Sec. Sec.  239.17b and 274.11c of this chapter 
(Form N-4), or Sec. Sec.  239.17c and 274.11d of this chapter (Form N-
6), or an offering of registered index-linked annuities being filed on 
Form N-4, after the effective date of a registration statement, no 
prospectus that purports to comply with Section 10 of the Act (15 
U.S.C. 77j) or Statement of Additional Information that varies from any 
form of prospectus or form of Statement of Additional Information filed 
pursuant to paragraph (c) of this section shall be used until five 
copies thereof have been filed with, or mailed for filing to the 
Commission. Investment companies filing on Forms N-1A, N-3, N-4, or N-6 
and issuers of registered index-linked annuities filing on Form N-4 
must, if applicable pursuant to General Instruction C.3.(g) of Form N-
1A, General Instruction C.3.(h) of Form N-3, General Instruction 
C.3.(h) of Form N-4, or General Instruction C.3.(h) of Form N-6, submit 
an Interactive Data File (as defined in Sec.  232.11 of this chapter).
* * * * *
0
11. Revise Sec.  230.498A to read as follows:


Sec.  230.498A   Summary Prospectuses for separate accounts offering 
variable annuity and variable life insurance contracts, and contracts 
offering registered index-linked options.

    (a) Definitions. For purposes of this section:
    Class means a class of a Contract that varies principally with 
respect to distribution-related fees and expenses.
    Contract means a Variable Annuity Contract, a Variable Life 
Insurance Contract, or a RILA Contract as defined in this section, 
respectively, as well as any Variable Annuity Contract or RILA Contract 
that offers a combination of

[[Page 71177]]

Index-Linked Options, Variable Options, and/or Fixed Options.
    Fixed Option means an Investment Option under a Contract pursuant 
to which the value of the Contract (for a Form N-3 or Form N-4 
Registrant, either during an accumulation period or after 
annuitization, or both) will earn interest at a rate specified by the 
Company, subject to a minimum guaranteed rate under the Contract.
    Index-Linked Option means an Investment Option offered under a 
Contract, pursuant to which the value of the Contract, either during an 
accumulation period or after annuitization, or both, will earn positive 
or negative interest based, in part, on the performance of a specified 
index, rate, or benchmark (such as a registered exchange-traded fund 
that tracks an index).
    Initial Summary Prospectus means the initial summary prospectus 
described in paragraph (b) of this section.
    Insurance Company means the insurance company issuing the Contract, 
which company is subject to State supervision. The Insurance Company 
may also be the depositor or sponsor of any Registered Separate Account 
in which the Contract participates.
    Investment Option means a Fixed Option, an Index-Linked Option, 
and/or a Variable Option, as applicable.
    Portfolio Company means any company in which a Registrant on Form 
N-4 or Form N-6 invests and which may be selected as a Variable Option 
by the investor.
    Portfolio Company Prospectus means the Statutory Prospectus of a 
Portfolio Company and a summary prospectus of a Portfolio Company 
permitted by Sec.  230.498.
    Registered Separate Account means a separate account (as defined in 
section 2(a)(14) of the Securities Act (15 U.S.C. 77b(a)(14)) that has 
an effective registration statement on Sec. Sec.  239.17a and 274.11b 
of this chapter (Form N-3), Sec. Sec.  239.17b and 274.11c of this 
chapter (Form N-4), or Sec. Sec.  239.17c and 274.11d of this chapter 
(Form N-6) and that has a current prospectus that satisfies the 
requirements of section 10(a) of the Act (15 U.S.C. 77j(a)).
    Registrant means, as applicable, a Registered Separate Account or 
the Insurance Company.
    RILA Contract means any accumulation contract or annuity contract, 
any portion thereof, or any unit of interest or participation therein, 
issued by an Insurance Company, that offers Index-Linked Options.
    Statement of Additional Information means the statement of 
additional information required by Part B of Form N-1A, Form N-3, Form 
N-4, or Form N-6.
    Statutory Prospectus means a prospectus that satisfies the 
requirements of section 10(a) of the Act (15 U.S.C. 77j(a)).
    Summary Prospectus refers to both the Initial Summary Prospectus 
and the Updating Summary Prospectus.
    Updating Summary Prospectus means the updating summary prospectus 
described in paragraph (c) of this section.
    Variable Annuity Contract means any accumulation contract or 
annuity contract, any portion thereof, or any unit of interest or 
participation therein, issued by an Insurance Company, pursuant to 
which the value of the contract, either during an accumulation period 
or after annuitization, or both, varies according to the investment 
experience of a Portfolio Company.
    Variable Life Insurance Contract means a life insurance contract, 
issued by an Insurance Company, that provides for death benefits and 
cash values that may vary with the investment performance of any 
separate account.
    Variable Option means:
    (1) In the context of a Registrant on Form N-4 or Form N-6, an 
Investment Option under any Contract pursuant to which the value of the 
Contract (for a Form N-4 Registrant, either during an accumulation 
period or after annuitization, or both) varies according to the 
investment experience of a Portfolio Company;
    (2) In the context of a Registrant on Form N-3, any portfolio of 
investments in which a Registrant on Form N-3 invests and which may be 
selected as an option by the investor.
    (b) General Requirements for Initial Summary Prospectus. An Initial 
Summary Prospectus that complies with this paragraph (b) will be deemed 
to be a prospectus that is authorized under section 10(b) of the Act 
(15 U.S.C. 77j(b)) and section 24(g) of the Investment Company Act (15 
U.S.C. 80a-24(g)) for the purposes of section 5(b)(1) of the Act (15 
U.S.C. 77e(b)(1)).
    (1) Scope of Initial Summary Prospectus. An Initial Summary 
Prospectus may only describe a single Contract (but may describe more 
than one Class of the Contract) currently offered by the Registrant 
under the Statutory Prospectus to which the Initial Summary Prospectus 
relates.
    (2) Cover Page or Beginning of Initial Summary Prospectus. Include 
on the front cover page or the beginning of the Initial Summary 
Prospectus:
    (i) The Insurance Company's name;
    (ii) The name of the Contract, and the Class or Classes if any, to 
which the Initial Summary Prospectus relates;
    (iii) A statement identifying the document as a ``Summary 
Prospectus for New Investors'';
    (iv) The approximate date of the first use of the Initial Summary 
Prospectus;
    (v) The following legend, which for Initial Summary Prospectuses of 
Contracts registered on Form N-4 would be included along with the 
statements described in Item 1(a)(6) through (8) of Form N-4:
    This Summary Prospectus summarizes key features of the [Contract].
    Before you invest, you should also review the prospectus for the 
[Contract], which contains more information about the [Contract's] 
features, benefits, and risks. You can find this document and other 
information about the [Contract] online at [__]. You can also obtain 
this information at no cost by calling [__] or by sending an email 
request to [__].
    You may cancel your [Contract] within 10 days of receiving it 
without paying fees or penalties. In some states, this cancellation 
period may be longer. Upon cancellation, you will receive either a full 
refund of the amount you paid with your application or your total 
contract value. You should review the prospectus, or consult with your 
investment professional, for additional information about the specific 
cancellation terms that apply.
    Additional information about certain investment products, including 
[variable annuities/registered index-linked annuities/variable life 
insurance contracts], has been prepared by the Securities and Exchange 
Commission's staff and is available at Investor.gov.
    (A) A Registrant may modify the legend so long as the modified 
legend contains comparable information.
    (B) The legend must provide a website address, other than the 
address of the Commission's electronic filing system; toll-free 
telephone number; and email address that investors can use to obtain 
the Statutory Prospectus and other materials, request other information 
about the Contract, and make investor inquiries. The website address 
must be specific enough to lead investors directly to the Statutory 
Prospectus and other materials that are required to be accessible under 
paragraph (h)(1) of this section, rather than to the home page or other 
section of the website on which the materials are posted. The website 
could be a central site with prominent links to each document. The 
legend may indicate, if applicable, that the Statutory Prospectus and 
other information are

[[Page 71178]]

available from a financial intermediary (such as a broker-dealer) 
through which the Contract may be purchased or sold. If a Registered 
Separate Account that has an effective registration statement on Form 
N-3 relies on Sec.  270.30e-3 of this chapter to transmit a report, the 
legend must also include the website address required by Sec.  270.30e-
3(c)(1)(iii) of this chapter if different from the website address 
required by this paragraph (b)(2)(v)(B).
    (C) The paragraph of the legend regarding cancellation of the 
Contract may be omitted if not applicable. If this paragraph is 
included in the legend, the paragraph must be presented in a manner 
reasonably calculated to draw investor attention to that paragraph.
    (D) The legend may include instructions describing how a 
shareholder can elect to receive prospectuses or other documents and 
communications by electronic delivery.
    (3) Back Cover Page or Last Page of Initial Summary Prospectus.
    (i) If a Registrant incorporates any information by reference into 
the Summary Prospectus, include a legend identifying the type of 
document (e.g., Statutory Prospectus) from which the information is 
incorporated and the date of the document. If a Registrant incorporates 
by reference a part of a document, the legend must clearly identify the 
part by page, paragraph, caption, or otherwise. If information is 
incorporated from a source other than the Statutory Prospectus, the 
legend must explain that the incorporated information may be obtained, 
free of charge, in the same manner as the Statutory Prospectus.
    (ii) Include on the bottom of the back cover page or the last page 
of the Initial Summary Prospectus the EDGAR contract identifier for the 
contract in type size smaller than that generally used in the 
prospectus (e.g., 8-point modern type).
    (4) Table of Contents. An Initial Summary Prospectus may include a 
table of contents meeting the requirements of Sec.  230.481(c).
    (5) Contents of Initial Summary Prospectus. An Initial Summary 
Prospectus must contain the information required by this paragraph 
(b)(5) with respect to the applicable registration form, and only the 
information required by this paragraph (b)(5), in the order provided in 
paragraphs (b)(5)(i) through (ix) of this section, except that, for an 
Initial Summary Prospectus related to a Contract registered on Form N-
4, provide the information provided in paragraph (b)(5)(ii) before the 
information provided by paragraph (b)(5)(i).
    (i) Under the heading ``Important Information You Should Consider 
About the [Contract],'' the information required by Item 2 of Form N-3, 
Item 3 of Form N-4, or Item 2 of Form N-6.
    (ii) Under the heading ``Overview of the [Contract],'' the 
information required by Item 3 of Form N-3, Item 2 of Form N-4, or Item 
3 of Form N-6.
    (iii) Under the heading ``Standard Death Benefits,'' the 
information required by Item 10(a) of Form N-6.
    (iv) Under the heading ``Benefits Available Under the [Contract],'' 
the information required by Item 11(a) of Form N-3 or Item 10(a) of 
Form N-4. Under the heading ``Other Benefits Available Under the 
[Contract],'' the information required by Item 11(a) of Form N-6.
    (v) Under the heading ``Buying the [Contract],'' the information 
required by Item 12(a) of Form N-3, Item 11(a) of Form N-4, or Item 
9(a) through (c) of Form N-6.
    (vi) Under the heading ``How Your [Contract] Can Lapse,'' the 
information required by Item 14(a) through (c) of Form N-6.
    (vii) Under the heading ``Making Withdrawals: Accessing the Money 
in Your [Contract],'' the information required by Item 13(a) of Form N-
3, Item 12(a) of Form N-4, or Item 12(a) of Form N-6.
    (viii) Under the heading ``Additional Information About Fees,'' the 
information required by Item 4 of Form N-3, Item 4 of Form N-4, or Item 
4 of Form N-6.
    (ix) Under the heading ``Appendix: [Portfolio Companies] 
[Investment Options/Portfolio Companies] Available Under the 
Contract,'' include as an appendix the information required by Item 18 
of Form N-3, Item 17 of Form N-4, or Item 18 of Form N-6. 
Alternatively, an Initial Summary Prospectus for a Contract registered 
on Form N-3 may include the information required by Item 19 of Form N-
3, under the heading ``Additional Information About Investment Options 
Available Under the Contract.''
    (c) General Requirements for Updating Summary Prospectus. An 
Updating Summary Prospectus that complies with this paragraph (c) will 
be deemed to be a prospectus that is authorized under section 10(b) of 
the Act (15 U.S.C. 77j(b)) and section 24(g) of the Investment Company 
Act (15 U.S.C. 80a-24(g)) for the purposes of section 5(b)(1) of the 
Act (15 U.S.C. 77e(b)(1)).
    (1) Use of Updating Summary Prospectus. A Registrant may only use 
an Updating Summary Prospectus if the Registrant uses an Initial 
Summary Prospectus for each currently offered Contract described under 
the Statutory Prospectus to which the Updating Summary Prospectus 
relates.
    (2) Scope of Updating Summary Prospectus. An Updating Summary 
Prospectus may describe one or more Contracts (and more than one Class) 
described under the Statutory Prospectus to which the Updating Summary 
Prospectus relates.
    (3) Cover Page or Beginning of Updating Summary Prospectus. Include 
on the front cover page or at the beginning of the Updating Summary 
Prospectus:
    (i) The Insurance Company's name;
    (ii) The name of the Contract(s) and the Class or Classes, if any, 
to which the Updating Summary Prospectus relates;
    (iii) A statement identifying the document as an ``Updating Summary 
Prospectus'';
    (iv) The approximate date of the first use of the Updating Summary 
Prospectus; and
    (v) The following legend, which must meet the requirements of 
paragraphs (b)(2)(v)(A), (B), and (D) of this section, as applicable, 
and for Updating Summary Prospectuses of Contracts registered on Form 
N-4 would be included along with the statements described in Item 
1(a)(6) through (8) of Form N-4:
    The prospectus for the [Contract] contains more information about 
the [Contract], including its features, benefits, and risks. You can 
find the current prospectus and other information about the [Contract] 
online at [__]. You can also obtain this information at no cost by 
calling [__] or by sending an email request to [__].
    Additional information about certain investment products, including 
[variable annuities/registered index-linked annuities/variable life 
insurance contracts], has been prepared by the Securities and Exchange 
Commission's staff and is available at Investor.gov.
    (4) Back Cover Page or Last Page of Updating Summary Prospectus. 
Include on the bottom of the back cover page or the last page of the 
Updating Summary Prospectus:
    (i) The legend required by paragraph (b)(3)(i) of this section; and
    (ii) The EDGAR contract identifier(s) for each contract in type 
size smaller than that generally used in the prospectus (e.g., 8-point 
modern type).
    (5) Table of Contents. An Updating Summary Prospectus may include a 
table of contents meeting the requirements of Sec.  230.481(c).

[[Page 71179]]

    (6) Contents of Updating Summary Prospectus. An Updating Summary 
Prospectus must contain the information required by this paragraph 
(c)(6) with respect to the applicable registration form, in the order 
provided in paragraphs (c)(6)(i) through (iv) of this section.
    (i) If any changes have been made with respect to the Contract 
after the date of the most recent Updating Summary Prospectus or 
Statutory Prospectus that was sent or given to investors with respect 
to the availability of Investment Options (for Registrants on Form N-3) 
or Portfolio Companies (for Registrants on Forms N-4 and N-6) under the 
Contract (including, for RILA Contracts, a change to any of the 
features of the Index-Linked Options disclosed in the table that Item 
17(b) of Form N-4 requires), or the disclosure that the Registrant 
included in response to Item 2 (Key Information), Item 3 (Overview of 
the Contract), Item 4 (Fee Table), Item 11 (Benefits Available Under 
the Contract), Item 12 (Purchases and Contract Value), or Item 13 
(Surrenders and Withdrawals) of Form N-3; Item 2 (Overview of the 
Contract), Item 3 (Key Information), Item 4 (Fee Table), Item 10 
(Benefits Available Under the Contract), Item 11 (Purchases and 
Contract Value), or Item 12 (Surrenders and Withdrawals) of Form N-4; 
and Item 2 (Key Information), Item 3 (Overview of the Contract), Item 4 
(Fee Table), Item 9 (Premiums), Item 10 (Standard Death Benefits), Item 
11 (Other Benefits Available Under the Contract), Item 12 (Surrenders 
and Withdrawals), or Item 14 (Lapse and Reinstatement) of Form N-6, 
include the following as applicable, under the heading ``Updated 
Information About Your [Contract]'':
    (A) The following legend: ``The information in this Updating 
Summary Prospectus is a summary of certain [Contract] features that 
have changed since the Updating Summary Prospectus dated [date]. This 
may not reflect all of the changes that have occurred since you entered 
into your [Contract].''
    (B) As applicable, provide a concise description of each change 
specified in paragraph (c)(6)(i) of this section. Provide enough detail 
to allow investors to understand the change and how it will affect 
investors, including indicating whether the change only applies to 
certain Contracts described in the Updating Summary Prospectus.
    (ii) In addition to the changes specified in paragraph (c)(6)(i) of 
this section, a Registrant may provide a concise description of any 
other information relevant to the Contract within the time period that 
paragraph (c)(6)(i) of this section specifies, under the heading 
``Updated Information About Your [Contract].'' Any additional 
information included pursuant to this paragraph (c)(6)(ii) should not, 
by its nature, quantity, or manner of presentation, obscure or impede 
understanding of the information that paragraph (c)(6)(i) of this 
section requires.
    (iii) Under the heading ``Important Information You Should Consider 
About the [Contract],'' provide the information required by Item 2 of 
Form N-3, Item 3 of Form N-4, or Item 2 of Form N-6.
    (iv) Under the heading ``Appendix: [Portfolio Companies/Investment 
Options/Portfolio Companies] Available Under the [Contract],'' include 
as an appendix the information required by Item 18 of Form N-3, Item 17 
of Form N-4, or Item 18 of Form N-6. Alternatively, an Updating Summary 
Prospectus for a Contract registered on Form N-3 may include, under the 
heading ``Additional Information About [Investment Options] Available 
Under the [Contract],'' the information required by Item 19 of Form N-
3.
    (d) Incorporation by Reference into a Summary Prospectus. (1) 
Except as provided by paragraph (d)(2) of this section, information may 
not be incorporated by reference into a Summary Prospectus. Information 
that is incorporated by reference into a Summary Prospectus in 
accordance with paragraph (d)(2) of this section need not be sent or 
given with the Summary Prospectus.
    (2) A Registrant may incorporate by reference into a Summary 
Prospectus any or all of the information contained in the Registrant's 
Statutory Prospectus and Statement of Additional Information, and any 
information from the Registrant's reports under Sec.  270.30e-1 of this 
chapter that the Registrant has incorporated by reference into the 
Registrant's Statutory Prospectus, provided that:
    (i) The conditions of paragraphs (b)(2)(v)(B), (c)(3)(v), and (h) 
of this section are met;
    (ii) A Registrant may not incorporate by reference into a Summary 
Prospectus information that paragraphs (b) and (c) of this section 
require to be included in an Initial Summary Prospectus or Updating 
Summary Prospectus, respectively; and
    (iii) Information that is permitted to be incorporated by reference 
into the Summary Prospectus may be incorporated by reference into the 
Summary Prospectus only by reference to the specific document that 
contains the information, not by reference to another document that 
incorporates such information by reference.
    (3) For purposes of Sec.  230.159, information is conveyed to a 
person not later than the time that a Summary Prospectus is received by 
the person if the information is incorporated by reference into the 
Summary Prospectus in accordance with paragraph (d)(2) of this section.
    (e) Terms used in the Summary Prospectus. Define special terms used 
in the Initial Summary Prospectus and Updating Summary Prospectus using 
any presentation style that clearly conveys their meaning to investors, 
such as the use of a glossary or list of definitions.
    (f) Transfer of the Contract Security. Any obligation under section 
5(b)(2) of the Act (15 U.S.C. 77e(b)(2)) to have a Statutory Prospectus 
precede or accompany the carrying or delivery of a Contract security in 
an offering registered on Form N-3, Form N-4, or Form N-6 is satisfied 
if:
    (1) A Summary Prospectus is sent or given no later than the time of 
the carrying or delivery of the Contract security (an Initial Summary 
Prospectus in the case of a purchase of a new Contract, or an Updating 
Summary Prospectus in the case of additional purchase payments in an 
existing Contract);
    (2) The Summary Prospectus is not bound together with any materials 
except Portfolio Company Prospectuses for Portfolio Companies available 
as Variable Options under the Contract, provided that:
    (i) All of the Portfolio Companies are available as investment 
options to the person to whom such documents are sent or given; and
    (ii) A table of contents identifying each Portfolio Company 
Prospectus that is bound together, and the page number on which each 
document is found, is included at the beginning or immediately 
following a cover page of the bound materials.
    (3) The Summary Prospectus that is sent or given satisfies the 
requirements of paragraph (b) or (c) of this section, as applicable, at 
the time of the carrying or delivery of the Contract security; and
    (4) The conditions set forth in paragraph (h) of this section are 
satisfied.
    (g) Sending Communications. A communication relating to an offering 
registered on Form N-3, Form N-4, or Form N-6 sent or given after the 
effective date of a Contract's registration statement (other than a 
prospectus permitted or required under section 10 of the Act) shall not 
be deemed a

[[Page 71180]]

prospectus under section 2(a)(10) of the Act (15 U.S.C. 77b(a)(10)) if:
    (1) It is proved that prior to or at the same time with such 
communication a Summary Prospectus was sent or given to the person to 
whom the communication was made;
    (2) The Summary Prospectus is not bound together with any 
materials, except as permitted by paragraph (f)(2) of this section;
    (3) The Summary Prospectus that was sent or given satisfies the 
requirements of paragraph (b) or (c) of this section, as applicable, at 
the time of such communication; and
    (4) The conditions set forth in paragraph (h) of this section are 
satisfied.
    (h) Availability of the Statutory Prospectus and Certain Other 
Documents.
    (1) The current Initial Summary Prospectus, Updating Summary 
Prospectus, Statutory Prospectus, Statement of Additional Information, 
and in the case of a Registrant on Form N-3, the Registrant's most 
recent annual and semi-annual reports to shareholders under Sec.  
270.30e-1 of this chapter, are publicly accessible, free of charge, at 
the website address specified on the cover page or beginning of the 
Summary Prospectuses, on or before the time that the Summary 
Prospectuses are sent or given and current versions of those documents 
remain on the website through the date that is at least 90 days after:
    (i) In the case of reliance on paragraph (f) of this section, the 
date that the Contract security is carried or delivered; or
    (ii) In the case of reliance on paragraph (g) of this section, the 
date that the communication is sent or given.
    (2) The materials that are accessible in accordance with paragraph 
(h)(1) of this section must be presented on the website in a format, or 
formats, that:
    (i) Are human-readable and capable of being printed on paper in 
human-readable format;
    (ii) Permit persons accessing the Statutory Prospectus or Statement 
of Additional Information for the Contract to move directly back and 
forth between each section heading in a table of contents of such 
document and the section of the document referenced in that section 
heading; provided that, in the case of the Statutory Prospectus, the 
table of contents is either required by Sec.  230.481(c) or contains 
the same section headings as the table of contents required by Sec.  
230.481(c); and
    (iii) Permit persons accessing a Summary Prospectus to move 
directly back and forth between:
    (A) Each section of the Summary Prospectus and any section of the 
Statutory Prospectus and Contract Statement of Additional Information 
that provides additional detail concerning that section of the Summary 
Prospectus; or
    (B) Links located at both the beginning and end of the Summary 
Prospectus, or that remain continuously visible to persons accessing 
the Summary Prospectus, and tables of contents of both the Statutory 
Prospectus and the Contract Statement of Additional Information that 
meet the requirements of paragraph (h)(2)(ii) of this section.
    (iv) Permit persons accessing the Summary Prospectus to view the 
definition of each special term used in the Summary Prospectus (as 
required by paragraph (e) of this section) upon command (e.g., by 
moving or ``hovering'' the computer's pointer or mouse over the term, 
or selecting the term on a mobile device); or permits persons accessing 
the Contract Summary Prospectus to move directly back and forth between 
each special term and the corresponding entry in any glossary or list 
of definitions in the Contract Summary Prospectus (as described in 
paragraph (e) of this section).
    (3) Persons accessing the materials specified in paragraph (h)(1) 
of this section must be able to permanently retain, free of charge, an 
electronic version of such materials in a format, or formats, that meet 
each of the requirements of paragraphs (h)(2)(i) and (ii) of this 
section.
    (4) The conditions set forth in paragraphs (h)(1) through (3) of 
this section shall be deemed to be met, notwithstanding the fact that 
the materials specified in paragraph (h)(1) of this section are not 
available for a time in the manner required by paragraphs (h)(1) 
through (3) of this section, provided that:
    (i) The Registrant has reasonable procedures in place to ensure 
that the specified materials are available in the manner required by 
paragraphs (h)(1) through (3) of this section; and
    (ii) The Registrant takes prompt action to ensure that the 
specified documents become available in the manner required by 
paragraphs (h) through (3) of this section, as soon as practicable 
following the earlier of the time at which it knows or reasonably 
should have known that the documents are not available in the manner 
required by paragraphs (h)(1) through (3) of this section.
    (i) Other Requirements (1) Delivery upon request. If paragraph (f) 
or (g) of this section is relied on with respect to a Contract, the 
Registrant (or a financial intermediary through which the Contract may 
be purchased) must send, at no cost to the requestor and by U.S. first 
class mail or other reasonably prompt means, a paper copy of the 
Contract Statutory Prospectus, Contract Statement of Additional 
Information, and in the case of a Registrant on Form N-3, the 
Registrant's most recent annual and semi-annual reports to shareholders 
under Sec.  270.30e-1 of this chapter, to any person requesting such a 
copy within three business days after receiving a request for a paper 
copy. If paragraph (f) or (g) of this section is relied on with respect 
to a Contract, the Registrant (or a financial intermediary through 
which Contract may be purchased) must send, at no cost to the 
requestor, and by email, an electronic copy of any of the documents 
listed in this paragraph (i)(1) to any person requesting a copy of such 
document within three business days after receiving a request for an 
electronic copy. The requirement to send an electronic copy of a 
document may be satisfied by sending a direct link to the online 
document; provided that a current version of the document is directly 
accessible through the link from the time that the email is sent 
through the date that is six months after the date that the email is 
sent and the email explains both how long the link will remain useable 
and that, if the recipient desires to retain a copy of the document, he 
or she should access and save the document.
    (2) Greater prominence. If paragraph (f) or (g) of this section is 
relied on with respect to a Contract, the Summary Prospectus shall be 
given greater prominence than any materials that accompany the Summary 
Prospectus.
    (3) Convenient for reading and printing. If paragraph (f) or (g) of 
this section is relied on with respect to a Contract:
    (i) The materials that are accessible in accordance with paragraph 
(h)(1) of this section must be presented on the website in a format, or 
formats, that are convenient for both reading online and printing on 
paper; and
    (ii) Persons accessing the materials that are accessible in 
accordance with paragraph (h)(1) of this section must be able to 
permanently retain, free of charge, an electronic version of such 
materials in a format, or formats, that are convenient for both reading 
online and printing on paper.
    (4) Website addresses. If paragraph (f) or (g) of this section is 
relied on with respect to a Contract, any website address that is 
included in an electronic version of the Summary Prospectus

[[Page 71181]]

must include an active hyperlink or provide another means of 
facilitating access through equivalent methods or technologies that 
lead directly to the relevant website address. This paragraph (i)(4) 
does not apply to electronic versions of a Summary Prospectus that are 
filed on the EDGAR system.
    (5) Compliance with this paragraph (i) not a condition to reliance 
on paragraph (f) or (g) of this section. Compliance with this paragraph 
(i) is not a condition to the ability to rely on paragraph (f) or (g) 
of this section with respect to a Contract, and failure to comply with 
this paragraph (i) does not negate the ability to rely on paragraph (f) 
or (g) of this section.
    (j) Portfolio Company Prospectuses--(1) Transfer of the Portfolio 
Company security. Any obligation under section 5(b)(2) of the Act to 
have a Statutory Prospectus precede or accompany the carrying or 
delivery of a Portfolio Company security is satisfied if, and 
information contained in the documents referenced in paragraph 
(j)(1)(ii) of this section is conveyed for purposes of Sec.  230.159 
when:
    (i) An Initial Summary Prospectus is used for each currently 
offered Contract described under the related registration statement;
    (ii) A summary prospectus is used for the Portfolio Company (if the 
Portfolio Company is registered on Form N-1A); and
    (iii) The current summary prospectus, Statutory Prospectus, 
Statement of Additional Information, and most recent annual and semi-
annual reports to shareholders under Sec.  270.30e-1 of this chapter 
for the Portfolio Company are publicly accessible, free of charge, at 
the same website address referenced in paragraph (h)(1) of this 
section, and are accessible under the conditions set forth in 
paragraphs (h)(1), (h)(2)(i) and (ii), and (h)(3) and (4) of this 
section, with respect to the availability of documents relating to the 
Contract.
    (2) Communications. Any communication relating to a Portfolio 
Company (other than a prospectus permitted or required under section 10 
of the Act) shall not be deemed a prospectus under section 2(a)(10) of 
the Act (15 U.S.C. 77b(a)(10)) if the conditions set forth in paragraph 
(j)(1) of this section are satisfied.
    (3) Other requirements. The materials referenced in paragraph 
(j)(1)(iii) of this section must be delivered upon request, presented, 
and able to be retained under the conditions set forth in paragraphs 
(i)(1) and (3) of this section. Compliance with this paragraph (j)(3) 
is not a condition to the ability to rely on paragraph (j)(1) or (2) of 
this section, and failure to comply with this paragraph (j)(3) does not 
negate the ability to rely on paragraph (j)(1) or (2) of this section.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
12. The general authority citation for part 232 continues to read as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c), 
80a-8, 80a-29, 80a-30, 80a-37, 80b-4, 80b-6a, 80b-11, 7201 et seq.; 
and 18 U.S.C. 1350, unless otherwise noted.
* * * * *
0
13. Amend Sec.  232.313 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  232.313   Identification of investment company type and series 
and/or class (or contract).

    (a) Registered investment companies, business development 
companies, and offerings of registered index-linked annuities must 
indicate their investment company type, based on whether the 
registrant's last effective registration statement or amendment (other 
than a merger/proxy filing on Form N-14 (Sec.  239.23 of this chapter) 
was filed on Form N-1 (Sec. Sec.  239.15 and 274.11 of this chapter), 
Form N-1A (Sec. Sec.  239.15A and 274.11A of this chapter), Form N-2 
(Sec. Sec.  239.14 and 274.11a-1 of this chapter), Form N-3 (Sec. Sec.  
239.17A and 274.11b of this chapter), Form N-4 (Sec. Sec.  239.17b and 
274.11c of this chapter), Form N-5 (Sec. Sec.  239.24 and 274.5 of this 
chapter), Form N-6 (Sec. Sec.  239.17c and 274.11d of this chapter), 
Form S-1 (Sec.  239.11 of this chapter), Form S-3 (Sec.  239.13 of this 
chapter), or Form S-6 (Sec.  239.16 of this chapter) in those EDGAR 
submissions identified in the EDGAR Filer Manual.
    (b) Registered investment companies or offerings of registered 
index-linked annuities whose last effective registration statement or 
amendment (other than a merger/proxy filing on Form N-14 (Sec.  239.23 
of this chapter) was filed on Form N-1A (Sec. Sec.  239.15A and 274.11A 
of this chapter), Form N-3 (Sec. Sec.  239.17A and 274.11b of this 
chapter), Form N-4 (Sec. Sec.  239.17b and 274.11c of this chapter), or 
Form N-6 (Sec. Sec.  239.17c and 274.11d of this chapter) must, under 
the procedures set forth in the EDGAR Filer Manual:
    (1) Provide electronically, and keep current, information 
concerning their existing and new series and/or classes (or contracts, 
in the case of separate accounts), including series and/or class 
(contract) name and ticker symbol, if any, and be issued series and/or 
class (or contract) identification numbers;
    (2) Deactivate for EDGAR purposes any series and/or class (or 
contract, in the case of separate accounts) that are no longer offered, 
go out of existence, or deregister following the last filing for that 
series and/or class (or contract, in the case of separate accounts), 
but the registrant must not deactivate the last remaining series unless 
the registrant deregisters; and
    (3) For those EDGAR submissions identified in the EDGAR Filer 
Manual, include all series and/or class (or contract) identifiers of 
each series and/or class (or contract) on behalf of which the filing is 
made.
* * * * *
0
14. Amend Sec.  232.405 by revising paragraphs (a)(3)(i) introductory 
text, (a)(3)(ii), (b)(1) introductory text, (b)(2) introductory text, 
(b)(2)(iii), and the final sentence of Note 1 to the section to read as 
follows:


Sec.  232.405   Interactive Data File Submissions.

* * * * *
    (a) * * *
    (3) * * *
    (i) If the electronic filer is not a management investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a separate account as defined in Section 2(a)(14) of the 
Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 
Company Act of 1940, a registered index-linked annuity issuer as 
defined in Rule 405 under the Securities Act (17 CFR 232.405), a 
business development company as defined in Section 2(a)(48) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), a unit 
investment trust as defined in Section 4(2) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-4), or a clearing agency that provides a 
central matching service, and is not within one of the categories 
specified in paragraph (f)(1)(i) of this section, as partly embedded 
into a filing with the remainder simultaneously submitted as an exhibit 
to:
* * * * *
    (ii) If the electronic filer is a management investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a separate account (as defined in Section 2(a)(14) of the 
Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 
Company Act of 1940, a registered index-linked annuity issuer as 
defined in Rule 405 under the Securities Act (17 CFR 232.405), a 
business development company as defined in Section 2(a)(48) of the

[[Page 71182]]

Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), a unit 
investment trust as defined in Section 4(2) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-4), or a clearing agency that provides a 
central matching service, and is not within one of the categories 
specified in paragraph (f)(1)(ii) of this section, as partly embedded 
into a filing with the remainder simultaneously submitted as an exhibit 
to a filing that contains the disclosure this section requires to be 
tagged; and
* * * * *
    (b) * * *
    (1) If the electronic filer is not a management investment company 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a separate account (as defined in Section 2(a)(14) of the 
Securities Act (15 U.S.C. 77b(a)(14)) registered under the Investment 
Company Act of 1940, a registered index-linked annuity issuer as 
defined in Rule 405 under the Securities Act (17 CFR 232.405), a 
business development company as defined in Section 2(a)(48) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), a unit 
investment trust as defined in Section 4(2) of the Investment Company 
Act of 1940 (15 U.S.C. 80a-4), or a clearing agency that provides a 
central matching service, an Interactive Data File must consist of only 
a complete set of information for all periods required to be presented 
in the corresponding data in the Related Official Filing, no more and 
no less, from all of the following categories:
* * * * *
    (2) If the electronic filer is an open-end management investment 
company registered under the Investment Company Act of 1940, a separate 
account (as defined in Section 2(a)(14) of the Securities Act) 
registered under the Investment Company Act of 1940 (15 U.S.C. 80a et 
seq.), a registered index-linked annuity issuer as defined in Rule 405 
under the Securities Act (17 CFR 232.405), a unit investment trust as 
defined in Section 4(2) of the Investment Company Act of 1940 (15 
U.S.C. 80a-4), or a clearing agency that provides a central matching 
service, an Interactive Data File must consist of only a complete set 
of information for all periods required to be presented in the 
corresponding data in the Related Official Filing, no more and no less, 
from the information set forth in:
* * * * *
    (iii) Items 2(b)(2), 2(d), 3, 4, 5, 6(a) (instruction), 6(c)(1), 
6(d), 7(e), 10, 17, 26(c), and 31A of Sec. Sec.  239.17b and 274.11c of 
this chapter (Form N-4);
* * * * *
    Note 1 to Sec.  232.405: * * * For an issuer that is a management 
investment company or separate account registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a et seq.), a registered index-linked 
annuity issuer as defined in Rule 405 under the Securities Act (17 CFR 
232.405), a business development company as defined in Section 2(a)(48) 
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(48)), or a 
unit investment trust as defined in Section 4(2) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-4), General Instruction C.3.(g) of 
Form N-1A, General Instruction I of Form N-2, General Instruction 
C.3.(h) of Form N-3, General Instruction C.3.(h) of Form N-4, General 
Instruction C.3.(h) of Form N-6, General Instruction 2.(l) of Form N-
8B-2 (Sec.  274.12 of this chapter), General Instruction 5 of Form S-6, 
and General Instruction C.4 of Form N-CSR, as applicable, specifies the 
circumstances under which an Interactive Data File must be submitted.

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
15. The general authority citation for part 239 continues to read as 
follows:

    Authority:  15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-
3, 77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 
78ll, 78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 
80a-26, 80a-29, 80a-30, 80a-37; and sec. 71003 and sec. 84001, Pub. 
L. 114-94, 129 Stat. 1321, unless otherwise noted.
* * * * *
0
16. Revise Form N-4 (referenced in Sec. Sec.  239.17b and 274.11c).

    Note:  Form N-4 is attached as Appendix A to this document. Form 
N-4 does not appear in the Code of Federal Regulations.

0
17. Amend Form N-6 (referenced in Sec. Sec.  239.17c and 274.11d) by 
revising Instruction 3 to Item 30.

    Note:  Form N-6 is attached as Appendix B to this document. Form 
N-6 will not appear in the Code of Federal Regulations.

    18. Add Sec.  239.66 to read as follows:


Sec.  239.66   Form 24F-2, annual filing of securities sold pursuant to 
registration of certain investment company securities and registered 
index-linked annuities.

    Form 24F-2 shall be used as the annual report filed by face amount 
certificate companies, open-end management companies, unit investment 
trusts, and registered index-linked annuities pursuant to Sec. Sec.  
230.456, Sec.  230.457, or 270.24f-2 of this chapter for reporting 
securities sold during the fiscal year.
0
19. Revise Form 24F-2 (referenced in Sec. Sec.  239.66 and 274.24).

    Note:  Form 24F-2 is attached as Appendix C to this document. 
Form 24F-2 will not appear in the Code of Federal Regulations.

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
20. The authority citation for part 274 continues to read as follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and 80a-37, unless 
otherwise noted.
* * * * *
0
21. Revise Sec.  274.24 to read as follows:


Sec.  274.24   Form 24F-2, annual filing of securities sold pursuant to 
registration of certain investment company securities and registered 
index-linked annuities.

    Form 24F-2 shall be used as the annual report filed by face amount 
certificate companies, open-end management companies, unit investment 
trusts, and registered index-linked annuities pursuant to Sec. Sec.  
230.456, 230.457, or 270.24f-2 of this chapter for reporting securities 
sold during the fiscal year.

    By the Commission.

    Dated: September 29, 2023.
Vanessa Countryman,
Secretary.

    Note:  The following appendices will not appear in the Code of 
Federal Regulations.

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[FR Doc. 2023-21986 Filed 10-12-23; 8:45 am]
BILLING CODE 8011-01-C