The US Securities and Exchange Commission has introduced a new rule to simplify and streamline disclosures for investors about variable annuities and variable life insurance contracts by way of 'summary' prospecti.

The changes permit the use of concise prospecti that apprise investors of each contract's features, fees and risks. 'Layered disclosure' and 'technology' are the watchwords.

SEC Chairman Jay Clayton, who has now been in his post for 1¾ years, said: "Investors should not have to work through hundreds of pages of disclosure to...make informed investment decisions."

More detailed information about each variable annuity or variable life insurance contract has to be made available online and investors - or their wealth managers - can choose to receive it by post or email as they see fit.

New rule 498A (issued in accordance with the Securities Act 1933) permits the use of two distinct types of contract summary prospecti:

• 'initial summary' prospecti that cover variable contracts currently offered up to new investors; and
• 'updating summary' prospecti for existing investors.

An initial summary prospectus includes: a table summarising certain information about the contract's fees, risks and other important considerations; an overview of the contract; and more detailed disclosures relating to fees, purchases, withdrawals and other contract benefits. An updating summary prospectus includes a brief description of certain changes to the contract that occurred during the previous year plus the 'key information' table from the initial summary prospectus.

In certain types of variable contracts, investors allocate their investment to one or more underlying investment options (usually mutual funds). Both types of prospecti provide some information about those underlying investment options.