SEC Adopts Changes to Registration Forms, Proposes Exempting Brokers from Certain Requirements
FOR IMMEDIATE RELEASE
Washington, D.C., November 13, 2002 -- The Securities and Exchange Commission today voted to adopt amendments to disclosure requirements concerning expenses for variable annuity and variable life insurance products. The Commission also voted to solicit public comment on a proposal to make permanent a pilot program that under certain circumstances exempts broker-dealer firms from requirements that they send their full balance sheet to customers.
1. Amendments to registration forms for variable annuity contracts and variable life insurance policies
The Commission voted to adopt amendments to Form N-4, the registration form for insurance company separate accounts that are registered as unit investment trusts and that offer variable annuity contracts. The amendments will revise the fee table of Form N-4 to require disclosure of the range of total expenses for all of the mutual funds offered under a variable annuity contract, rather than separate disclosure of the expenses of each fund, as Form N-4 currently requires. Use of a range of total fund expenses in the fee table of Form N-4 is intended to make fee tables for variable annuity contracts more useful and understandable to investors by streamlining the presentation of fees and charges. Complete information about the fees and expenses of each mutual fund offered through the variable annuity contract will continue to be available to investors through the separate prospectus for that fund.
The Commission also voted to adopt a conforming amendment to the fee table of Form N-6, the registration form for insurance company separate accounts that are registered as unit investment trusts and that offer variable life insurance policies, which the Commission adopted in April 2002. This conforming amendment will modify the fee table of Form N-6, consistent with the recommended amendments to the fee table of Form N-4, to require disclosure of the range of total expenses for all of the mutual funds offered through a variable life insurance policy. Compliance with these amendments will be required in filings of Forms N-4 and N-6 made after Jan. 1, 2003.
2. Proposal of amendments to broker-dealer disclosure requirements
The Commission voted to propose for comment an amendment to Rule 17a-5(c) under the Securities Exchange Act of 1934 that would codify relief the Commission granted in a pilot program that exempted broker-dealers from the requirement of Exchange Act Section 17(e)(l)(B) and Rule 17a-5(c) to send their full balance sheet and certain net capital information to their customers twice a year. To take advantage of the exemption, a broker-dealer would be required to (i) send its customers certain net capital information, (ii) send its full balance sheet to its customers upon request to a toll-free telephone number, and (iii) place its full balance sheet on its Web site. The proposed amendment contains modifications from the pilot program regarding circumstances that would disqualify a firm from taking advantage of the relief and also eliminates the requirement contained in the pilot program that broker-dealers taking advantage of the relief submit reports to the Commission concerning the number of requests for copies of their balance sheets, the number of viewings of their balance sheets on their Web sites, and customer complaints regarding the exemption. Comments on the proposed amendment should be received at the Commission within 30 days of the date of publication of the proposing release in the Federal Register.
The Commission also voted to extend interim relief for six months, to June 30, 2003. The Commission granted the relief as a two-year pilot program ending Dec. 31, 2001 (Exchange Act Release No. 42222, Dec. 10, 1999) and then extended the program for one year, to Dec. 31, 2002 (Exchange Act Release No. 45179, Dec. 20, 2001).
The full text of detailed releases concerning each of these items will be posted to the SEC Web site as soon as possible.