ADI 2020-10 - Filing and Delivery Obligations for Certain Discontinued Variable Insurance Contracts

On March 11, 2020, the Securities and Exchange Commission (“Commission”) adopted new and amended rules and forms to, among other things, permit the use of a summary prospectus for variable annuity and variable life insurance contracts (“variable contracts”).[1]  The Commission also addressed issuers of certain variable contracts no longer offered to new investors (“discontinued contracts”) that provide alternative disclosures to investors, in lieu of filing post-effective amendments to update a registration statement and providing updated prospectuses to existing investors, based on certain staff no-action letters (“Staff Letters”).[2]

Commission Position and Withdrawal of Staff Letters

The Staff Letters will be withdrawn, effective July 1, 2020.[3]  Further, as described in the Adopting Release, the Commission took the position that if an issuer of an existing discontinued contract that is discontinued as of July 1, 2020 that provides alternative disclosures does not file post-effective amendments to update a variable contract registration statement and does not provide updated prospectuses to existing investors, this would not provide a basis for enforcement action if, among other things, the issuer provides investors with the specified alternative disclosures and the issuer has a Securities Act of 1933 registration statement with fewer than 5,000 investors as of July 1, 2020.[4]

Issuers of Discontinued Contracts Not Eligible Under Commission Position

Under certain circumstances, an issuer of an existing discontinued contract that provides alternative disclosures may not be eligible under the Commission position beginning on July 1, 2020 (for example, because the issuer has more than 5,000 investors as of that date).  Variable contract issuers generally end their fiscal year at the end of each calendar year and, pursuant to requirements under the federal securities laws, update their registration statements by May 1 of each year.  For purposes of the first year following July 1, 2020, in the staff’s view, an issuer that is not eligible under the Commission position should meet its obligations to update the registration statement for the variable contract or deliver updated prospectuses to existing investors by May 1, 2021 (the annual update subsequent to July 1, 2020).  If, however, the variable contract becomes available for sales to new investors or there is a material change to the variable contract, an issuer would need to update the registration statement for the variable contract and deliver updated prospectuses to existing investors at that time.

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ADIs are recurring publications that summarize the staff’s views regarding various requirements of the federal securities laws.

This ADI represents the views of the staff of the Division of Investment Management.  It is not a rule, regulation or statement of the Commission.  The Commission has neither approved nor disapproved its content.  This ADI, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person. Future changes in rules, regulations, and/or staff no-action and interpretive positions may supersede some or all of the information in a particular ADI.

We hope that this ADI will assist registrants in preparing their filings.  We also welcome feedback on this guidance and on any disclosure matters.  If you have any questions or feedback, please contact:

Disclosure Review and Accounting Office
Phone: 202.551.6921
Email: IMDRAO@sec.gov