The SEC proposed rule amendments that would customize the registration form and disclosure requirements for registered index-linked annuities, also known as RILAs.
The move comes after Congress passed a law in December directing the SEC to do so.
"Given the complexity and growing popularity of RILAs, it is important that investors receive the information they need — in plain English — to make informed investment decisions," SEC Chair Gary Gensler said in a news release Sept. 29. "Implementing Congress' mandate, today's proposal would require RILAs to use a registration form tailored to their characteristics. This would improve the disclosure process for these complex products."
RILAs are "a kind of annuity contract insurance companies offer to retail investors in which an investor's return is based at least in part on the performance of an index or other benchmark, over a set period of time," according to an SEC news release.
The SEC's proposed amendments would offer a "tailored form" for registering RILA offerings and enhance the disclosure framework for RILAs.
House lawmakers advanced a bill out of committee in July 2022 aimed at creating a new RILA form, as lawmakers voiced concerns that the default registration form insurers currently use includes a host of unneeded information. Congress went on to include such legislation in its year-end spending bill, which passed in December and included the retirement security package SECURE 2.0.
The Insured Retirement Institute, a Washington-based trade association, expressed its support for the SEC proposal.
"Notably, we are encouraged that under the proposal, RILA issuers would appear to be eligible for a limited exception, which is already available to variable annuity issuers, to use statutory financial statements rather than GAAP financials only if the insurer does not otherwise prepare GAAP financial statements," said Jason Berkowitz, IRI's chief legal and regulatory affairs officer, in a Sept. 29 statement. "This is a particularly critical element of the proposal, and we will be working closely with members and our industry partner organizations to fully assess this approach as well as all the other important details of the proposal."