SEC Adopts Tailored Disclosure Requirements for Registered Index-Linked and Market-Value Adjustment Annuities
Author: Destiny Aigbe
July 2, 2024
The Securities and Exchange Commission (SEC) has announced the adoption of new tailored disclosure requirements and offering processes for registered index-linked annuities (RILAs) and registered market-value adjustment annuities (registered MVA annuities). This regulatory change aims to enhance transparency and provide investors with critical information about these complex non-variable annuity products.
Key Highlights of the SEC's New Rule
- Adoption of Form N-4 for Non-Variable Annuities:
- The SEC will now require issuers of non-variable annuities to register their offerings on Form N-4, a form traditionally used for variable annuities. This move seeks to streamline and modernize the registration, filing, and disclosure process for these products.
- Enhanced Investor Disclosures:
- The amendments are designed to ensure investors receive clear and concise information about RILAs and registered MVA annuities. This includes a summary prospectus framework that highlights key information while providing access to more detailed disclosures for those who seek it.
- Market Growth and Investor Protection:
- The market for RILAs has seen substantial growth, with sales reaching approximately $47.4 billion in 2023, more than quintupling since 2017. SEC Chair Gary Gensler emphasized the importance of equipping investors with the necessary information to make informed decisions, especially as these complex products become more prevalent.
Understanding RILAs and Registered MVA Annuities
- Registered Index-Linked Annuities (RILAs):
- RILAs offer returns based on the performance of an index or benchmark over a set period, with limits on potential gains and losses. These products are designed to provide a balance between growth potential and downside protection.
- Registered Market-Value Adjustment (MVA) Annuities:
- These annuities provide returns based on a fixed minimum interest rate over a specified period. They often include charges and penalties for early withdrawals, similar to other annuity products.
Impact on Issuers and the SEC
The final amendments are expected to:
- Provide efficiencies for insurance companies issuing both variable and non-variable annuities.
- Enhance the SEC's ability to review and manage filings through a more unified framework.
Additionally, the amendments will apply Rule 156 to non-variable annuity advertisements and sales literature. This rule offers guidance on what constitutes materially misleading sales practices under federal securities laws, aiming to protect investors from deceptive marketing tactics.
Compliance Timeline
- The amendments will take effect 60 days after publication in the Federal Register.
- Issuers will have until May 1, 2026, to comply with most of the new Form N-4 requirements and related amendments.
- Compliance with the amendments to Rule 156 will be required from the effective date.
Conclusion
The SEC's adoption of these tailored disclosure requirements represents a significant step toward improving transparency and investor protection in the non-variable annuities market. By aligning the registration processes for variable and non-variable annuities, the SEC aims to provide a more coherent and efficient framework for issuers and investors alike.
About the Author
Destiny Aigbe
Managing Partner
Aigbe Law PLLC | Dark Alpha Capital
A Corporate and Securities Law Firm
With a robust foundation in law and finance, Destiny Aigbe has carved a distinguished career, underpinned by his pivotal role in orchestrating and managing complex transactions that have propelled companies to significant growth and market prominence. As a seasoned attorney and strategic advisor, Destiny has been instrumental in facilitating over $75 million in capital raises, demonstrating a keen acumen for securing funding and fostering investor confidence.
Destiny's leadership in the execution of six successful public listings, through meticulously structured reverse mergers and registration statements, showcases his adeptness in navigating the intricacies of the public markets and his capacity to guide companies through transformative growth phases. His involvement in five mergers as an operator further illustrates his versatile skill set, extending beyond legal expertise to include hands-on management and operational strategy, though these ventures did not involve funding.
Destiny's professional journey is marked by a commitment to excellence and a diverse range of experiences, from representing a wide spectrum of clients including public and private companies, and investment firms, to holding significant roles within the US government. His tenure with the US Department of State and the National Institutes of Health highlights his adaptability and his contribution to the advancement of entrepreneurial ventures in sectors like biotechnology and nanotechnology through strategic funding initiatives.
An alumnus of Vanderbilt University Law School, Destiny focused on Finance and Mergers & Acquisitions, further honing his expertise with a certificate in Law and Business. His foundational education in Finance was obtained with honors from the University of Maryland's Robert H. Smith School of Business, which laid the groundwork for his subsequent achievements in investment banking and legal practice.
Residing in the Washington, D.C. area, Destiny Aigbe continues to leverage his extensive experience and insightful leadership to drive innovation, growth, and success for his clients and the ventures he is involved with.
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