Expect Focus previously raised some questions about how the SEC’s summary fund prospectus proposal would apply to “underlying” funds that support variable insurance products (see Expect Focus, Vol. I, Winter 2008).

At the PLI Investment Management Institute in April 2008, panelist William “Bill” Kotapish, head of the SEC’s Office of Insurance Products, was asked some of these questions. We understood Mr. Kotapish to say:

  • Insurers would be deemed to be financial intermediaries that could deliver summary prospectuses of underlying funds.
  • Underlying funds, not insurers, would decide whether or not to deliver summary prospectuses. (Some believe that the SEC’s proposal does not answer certain concerns about liability, particularly regarding incorporation by reference. Consequently, some underlying funds may choose not to deliver summary prospectuses.)
  • If an underlying fund chooses to use summary prospectuses, an insurer could deliver full length prospectuses to some (such as new offerees) and summary prospectuses to others (such as existing contract owners).
  • Where several insurers participate in an underlying fund, some insurers could deliver summary prospectuses, notwithstanding that other insurers deliver full-length prospectuses.
  • Insurers could maintain, on their websites, the documents and links required of funds as a condition for using summary prospectuses.
  • Insurers would not be required to maintain, on their websites, information about revenue sharing payments and conflicts of interest.
  • The fact that the SEC’s proposing release did not state that the SEC would take up disclosure reform for variable insurance products and separate accounts does not mean that the SEC will not do so.
  • The SEC staff has reviewed summary variable insurance product prospectus templates developed by the ACLI and NAVA and considers them to be “a moving target.”