The SEC has adopted a “layered disclosure” approach to required disclosures to investors about annuities and variable life insurance investments.

Under an amended rule, financial professionals selling variable annuities and variable life insurance contracts will be able to use a “concise, reader-friendly prospectus” to disclose contract fees, features and risk, according to a press release from the SEC. Such a “summary prospectus” must include a table summarizing the contract’s fees, risks and other major considerations, the previous-year changes to the contract and more detail on disclosures about fees, purchases, withdrawals and other contract features, the regulatory agency says.

The rule also stipulates that the variable contract’s statutory prospectus and its Statement of Additional Information must be available free of charge and publicly accessible, according to the press release.

More detailed information about the products can then appear online, and investors will also be able to request to receive that information on paper or electronically, also for no extra charge, the SEC says.

The streamlined contracts can be used starting July 1, 2020, according to the press release. By January 1, 2022, all registration statements and annual updates must comply with the new rule and form amendments, the SEC says.

"With today’s technology and the benefits of layered disclosure, investors should not have to work through hundreds of pages of disclosure to understand these products’ risks, fees, and features in order to make informed investment decisions,” SEC chairman Jay Clayton says in a statement.

The new rule and the accompanying amendments are aimed at streamlining investor disclosures about variable annuities and variable life insurance contracts, according to the regulator.

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