Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts

SECURITIES AND EXCHANGE
COMMISSION
17 CFR Parts 200, 230, 232, 239, 240, 270, and 274 [Release Nos. 33–10765; 34–88358; IC– 33814; File No. S7–23–18] RIN 3235–AK60 Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: The Securities and Exchange Commission is adopting rule and form amendments intended to help investors make informed investment decisions regarding variable annuity and variable life insurance contracts. The amendments modernize disclosures by using a layered disclosure approach designed to provide investors with key information relating to the contract’s terms, benefits, and risks in a concise and more reader-friendly presentation, with access to more detailed information available online and electronically or in paper format on request. New rule 498A under the Securities Act of 1933 will permit a person to satisfy its prospectus delivery obligations under the Securities Act for a variable annuity or variable life insurance contract by sending or giving a summary prospectus to investors and making the statutory prospectus available online. The rule also will consider a person to have met its prospectus delivery obligations for any portfolio companies associated with a variable annuity or variable life insurance contract if the portfolio company prospectuses are posted online. To implement the new disclosure framework, we are also amending the registration forms for variable annuity and variable life insurance contracts to update and enhance the disclosures to investors in these contracts, and to implement the proposed summary prospectus framework, and adopting amendments to our rules that will require variable contracts to use the Inline eXtensible Business Reporting Language (‘‘Inline XBRL’’) format for the submission of certain required disclosures in the variable contract statutory prospectus. The Commission is also taking the position that if an issuer of a 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 so long as investors are provided with the alternative disclosures or modernized alternative disclosures described below. We are also adopting certain technical and conforming amendments to our rules and forms, including amendments to rules relating to variable life insurance contracts, and rescinding certain related rules and forms. DATES: Effective dates: This rule is effective July 1, 2020, except:

• Amendatory instructions 12, 46, 48,
  and 50 to 17 CFR 230.498A, Form N– 3 (referenced in 17 CFR 239.17a and 274.11b), Form N–4 (referenced in 17 CFR 239.17b and 274.11c), and Form N– 6 (referenced in 17 CFR 239.17c and 274.11d), which are effective January 1, 2022; and
• Effective July 1, 2020, amendatory
  instructions 20, 22, and 24 to Form N– 3 (referenced in 17 CFR 239.17a and 274.11b), Form N–4 (referenced in 17 CFR 239.17b and 274.11c), and Form N– 6 (referenced in 17 CFR 239.17c and 274.11d), published June 22, 2018, at 83 FR 29158, with an effective date of January 1, 2022, are withdrawn. Compliance dates: See Section II.G. FOR FURTHER INFORMATION CONTACT:
  Daniel K. Chang, Pamela K. Ellis, Bradley Gude, James Maclean, Amy Miller (Senior Counsels) or Michael C. Pawluk (Senior Special Counsel), Investment Company Regulation Office, at (202) 551–6792; or Harry Eisenstein or Michael Kosoff (Senior Special Counsels), Disclosure Review and Accounting Office, at (202) 551–6921, Division of Investment Management, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–8549. SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission (‘‘Commission’’) is adopting 17 CFR 230.498A (new rule 498A) under the Securities Act. The Commission is also adopting amendments to the following rules:
  Commission reference CFR citation (17 CFR) Organization; Conduct and Ethics; And Information and Requests ................................................................................ §§ 200.1 through 200.800.
  Section 800 ................................................................................................................................................................... § 200.800.
  Securities Act of 1933 (‘‘Securities Act’’): 1 Rule 159A ..................................................................................................................................................................... § 230.159A. Rule 431 ........................................................................................................................................................................ § 230.431. Rule 482 ........................................................................................................................................................................ § 230.482. Rule 485 ........................................................................................................................................................................ § 230.485. Rule 496 ........................................................................................................................................................................ § 230.496. Rule 497 ........................................................................................................................................................................ § 230.497. Rule 498 ........................................................................................................................................................................ § 230.498. Form N–14 .................................................................................................................................................................... § 239.23. Regulation S–T §§ 232.10 through 232.501. Rule 11 .......................................................................................................................................................................... § 232.11. Rule 405 ........................................................................................................................................................................ § 232.405. Securities Exchange Act of 1934 (‘‘Exchange Act’’): 2 Rule 14a–16 .................................................................................................................................................................. § 240.14a–16. Rule 14a–101 ................................................................................................................................................................ § 240.14a–101. Investment Company Act of 1940 (‘‘Investment Company Act’’): 3 Rule 0–1 ........................................................................................................................................................................ § 270.0–1. Rule 6c–7 ...................................................................................................................................................................... § 270.6c–7. Rule 6c–8
  ...................................................................................................................................................................... § 270.6c–8. Rule 6e–2 ...................................................................................................................................................................... § 270.6e–2. Rule 6e–3 (former rule 6e–3(T)) ................................................................................................................................... § 270.6e–3. Rule 8b–1 ...................................................................................................................................................................... § 270.8b–1. Rule 11a–2 .................................................................................................................................................................... § 270.11a–2.

4 Variable annuities allow investors to receive periodic payments for either a definite period (e.g., 20 years), or for an indefinite period (e.g., the life of the investor), and also provide a basic death benefit to protect the investor’s beneficiaries. The Continued Commission reference CFR citation (17 CFR) Rule 14a–2 .................................................................................................................................................................... § 270.14a–2. Rule 26a–1 .................................................................................................................................................................... § 270.26a–1. Rule 27i–1 (former rule 27c–1) ..................................................................................................................................... § 270.27i–1. Securities Act and Investment Company Act:
Form N–3 ...................................................................................................................................................................... §§ 239.17a and 274.11b. Form N–4 ...................................................................................................................................................................... §§ 239.17b and 274.11c. Form N–6 ...................................................................................................................................................................... §§ 239.17c and 274.11d. 1 15 U.S.C. 77a et seq. 2 15 U.S.C. 78a et seq. 3 15 U.S.C. 80a et seq. Finally, the Commission is rescinding:
Commission reference CFR citation (17 CFR) Investment Company Act:
Rule 26a–2 .................................................................................................................................................................... § 270.26a–2. Rule 27a–1 .................................................................................................................................................................... § 270.27a–1. Rule 27a–2 .................................................................................................................................................................... § 270.27a–2. Rule 27a–3 .................................................................................................................................................................... § 270.27a–3. Rule 27d–2 .................................................................................................................................................................... § 270.27d–2. Rule 27e–1 .................................................................................................................................................................... § 270.27e–1. Rule 27f–1 ..................................................................................................................................................................... § 270.27f–1. Rule 27g–1 .................................................................................................................................................................... § 270.27g–1. Rule 27h–1 .................................................................................................................................................................... § 270.27h–1. Form N–27E–1 .............................................................................................................................................................. § 274.127e–1. Form N–27F–1 .............................................................................................................................................................. § 274.127f–1. Form N–27I–1 ............................................................................................................................................................... § 274.302. Form N–27I–2 ............................................................................................................................................................... § 274.303. Securities Act and Investment Company Act:
Form N–1 ...................................................................................................................................................................... §§ 239.15 and 274.11.
TABLE OF CONTENTS
I. Introduction
A. Background
B. Overview of Final Rule and Rule and Form Amendments
II. Discussion
A. New Option to Use a Summary Prospectus for Variable Contracts
1. Initial Summary Prospectus
2. Updating Summary Prospectus
3. Interim Amendments to Contract
Statutory Prospectuses
4. Legal Effect of Use of Summary
Prospectus for Variable Contracts
5. Online Accessibility of Contract
Statutory Prospectus and Certain Other Documents Relating to the Contract
6. Other Requirements for Summary
Prospectus and Other Contract Documents
7. Incorporation by Reference
8. Filing Requirements for the Summary
Prospectus
9. Defined Terms in Final Rule
B. Optional Method To Satisfy Portfolio Company Prospectus Delivery Requirements
1. Current Delivery Practices for Portfolio
Company Prospectuses
2. New Option To Satisfy Prospectus
Delivery Requirements
C. Amendments to Registration Forms
1. General Instructions
2. Part A (Information Required in a
Prospectus)
3. Part B (Information Required in a
Statement of Additional Information)
4. Part C (Other Information)
5. Guidelines
D. Inline XBRL
E. Discontinued Variable Contracts
1. Background
2. Comments Received on Proposal
3. Commission Position on Existing
Contracts Whose Issuers Provide Alternative Disclosures to Investors
4. Commission Declines To Adopt Going￾Forward Relief
F. Technical and Conforming Amendments to Other Aspects of the Regulatory Framework for Variable Contracts G. Compliance Dates
III. Other Matters
IV. Economic Analysis
A. Introduction
B. Economic Baseline
1. Overview of Variable Products Market
2. Statutory and Regulatory Disclosure
Requirements
C. Benefits and Costs of the Rule and Form
Amendments
1. Optional Summary Prospectus Regime
2. Treatment of Discontinued Variable
Contracts
3. Changes to Forms N–3, N–4, and N–6
4. Inline XBRL
D. Effects on Efficiency, Competition, and Capital Formation E. Reasonable Alternatives
1. Mandating Summary Prospectuses
2. Summary Prospectuses Delivered with
Statutory Prospectuses
3. Contract-Specific Updating Summary
Prospectuses
4. Do Not Provide Updating Summary
Prospectuses
5. Inline XBRL
6. Alternatives to Form N–3, N–4, and N–
6 Amendments
7. Requiring All Variable Contracts
(Including Currently Discontinued Contracts) To Prepare Updated Registration Statements and Deliver Statutory or Summary Prospectuses
8. Alternatives to Commission’s Position
on Alternative Disclosure Contracts
V. Paperwork Reduction Act
A. Form N–3
B. Form N–4
C. Form N–6
D. Investment Company Interactive Data E. Rule 498A
VI. Regulatory Flexibility Act Certification
VII. Statutory Authority
I. Introduction
The Securities and Exchange Commission is adopting rule and form amendments that are intended to help investors make informed investment decisions regarding variable annuity 4

investor may allocate the cash value of the purchase payments to a range of investment options available under the contract, including in some cases, to a fixed account option that pays a fixed or minimum rate of interest. The investor’s account value changes depending on the performance of the investment options the investor has selected. 5 Variable life insurance contracts offer a death benefit to the investor that may be significantly larger than the amount of premiums paid, as well as the ability to accumulate cash value. Like variable annuities, a variable life insurance contract permits the investor to allocate their cash value to a variety of investment options. Because an investor will generally allocate the insurance premiums to the investment options, the investor is exposed to market risk and the cash value (and in some cases, the death benefit) will vary with the performance of these investments. 6The Commission proposed these rule and form amendments in October 2018. See Updating Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts, Investment Company Release No. 33286 (Oct. 30, 2018) [83 FR 61730 (Nov. 30, 2018)] (‘‘Proposing Release’’). 7For an overview of variable annuities and variable life insurance contracts, see Proposing Release, supra note 6, at Section I.A. The average contract value for individual variable annuities is approximately $106,187. See Insured Retirement Institute, IRI Fact Book 2019 (‘‘IRI Fact Book’’), at 167. Americans who own annuities have a median annual household income of $64,000 (80% have total annual household incomes below $100,000). Most individual annuity owners are retired. Although the average age of an annuity owner is 70, the average age at which owners purchased their first annuity is 51. See The Gallup Organization and Mathew Greenwald & Associates for The Committee of Annuity Insurers, Survey of Owners of Individual Annuity Contracts (2013) (‘‘Gallup Survey’’), at 8–9. There is limited data available regarding variable life insurance contracts, but based upon the data that is available, the Commission believes that the demographics of investors for those products are likely comparable. 8For purposes of this release, we refer to these entities as ‘‘portfolio companies.’’ 9 Variable contracts commonly offer optional benefit features as riders to the contract with their own terms and conditions, and typically for a separate charge. Riders commonly provide enhanced death benefits, as well as ‘‘living benefits’’ that may be designed to provide protection against declines in account value, longevity risk, or other risks, or to cover financial losses that result from illness, incapacity, or injury. These optional riders have become increasingly popular with variable contract investors. See, e.g., IRI Fact Book, supra note 7, at 70 (‘‘Approximately $1.8 trillion of VA assets were held by insurance companies as of the end of the fourth quarter of
2018, with an estimated $800 billion in assets under a guaranteed income benefit.’’); Gallup Survey, supra note 7, at 21 (stating that ‘‘[n]early eight in ten annuity owners (79%) who own a variable annuity report that their contract has a guaranteed lifetime withdrawal benefit.’’). 10The mortality and expense (‘‘M&E’’) risk charge, which is based on an investor’s account value, compensates the insurance company for offering certain contract features (e.g., death benefit or annuitization) and is sometimes used to pay some or all of the insurance company’s costs to sell the contract (e.g., commissions). Typical M&E charges are approximately 1.25% of account value per year for variable annuities, and 0.90% for variable life insurance. See Morningstar M&E Risk definition, available at https:// awgmain.morningstar.com/webhelp/glossary_ definitions/va_vl/pol_M_E_Risk.html. 11 Investors indirectly bear the operating fees and expenses of the portfolio companies they select as the underlying investments in their variable contracts. 12A contract may impose a ‘‘surrender charge’’ if, after purchase payments are made, an investor withdraws money from the contract during a stated period typically ranging from six to ten (or even more) years. 13These additional insurance charges are determined at the time the contract is written and vary based on the insured’s personal characteristics, such as age and health. These charges are in addition to the M&E risk charge discussed above. See supra note 10. 14For example, assets within a variable contract grow tax-deferred, and transfers between investment options under the contract are not taxable events. However, investors may face a 10% federal income tax penalty if money is withdrawn before the investor reaches 591⁄2 years old. For these and other reasons, a variable contract generally is sold as a long-term investment. and variable life insurance contracts 5 (together, ‘‘variable contracts’’ or ‘‘contracts’’).6 To improve the current disclosure framework and update the manner in which variable contract investors receive and review prospectuses and related information, we are adopting new rule 498A under the Securities Act that permits the use of a summary prospectus to satisfy statutory prospectus delivery obligations, along with other rule and form amendments intended to implement the summary prospectus framework. Investors will have access to the contract statutory prospectus and other information about the contract online (and could receive paper or electronic copies upon request), which will provide more-detailed information about the contract. Specifically, the approach under the new rule contemplates the use of two types of summary prospectuses: An ‘‘initial summary prospectus’’ to be provided to new investors, and an ‘‘updating summary prospectus’’ to be provided to existing investors. To help investors make an informed investment decision, each type of summary prospectus uses a layered disclosure approach
designed to provide investors with key information relating to the contract’s terms, benefits, and risks in a concise and more reader-friendly presentation, with website addresses or hyperlinks to more detailed information posted online and delivered electronically or in paper format on request. To implement this new disclosure framework, we are also amending the registration forms for variable annuity and variable life insurance contracts to update and enhance the disclosures to investors in these contracts, and requiring variable contracts to use the Inline eXtensible Business Reporting Language (‘‘Inline XBRL’’) format for the submission of certain required disclosures in the variable contract statutory prospectus. In proposing new rule 498A, the Commission discussed and solicited comment on approaches it was considering that could affect, and raise the possibility of future amendments to, certain parallel provisions of rule 498 and certain of our registration forms applicable to other types of registered investment companies. While we are not taking any such parallel actions in this document, Commission staff is currently considering the comments received and reviewing the disclosure regime for investment companies as to these and other potential amendments as part of a broader modernization initiative. A. Background To meet life insurance needs and retirement or other financial goals, investors may consider variable contracts as a way of combining insurance guarantees with the potential for long-term investment appreciation.7 Variable contracts are generally more complex than other retail investment products, such as mutual funds, in a variety of ways:

• Structure. Variable contracts
  combine both investment and insurance features. Investors generally allocate their purchase payments to a range of investment options, and the investor’s account value changes depending on the performance of the investment options selected. For most variable contracts, these investment options typically are mutual funds, which are separately registered and have their own prospectuses.8 In addition, variable contracts frequently offer a menu of optional benefits that an investor may select to customize the contract to meet his or her individual needs.9
• Fees and Expenses. Most variable
  contracts have two-level fee structures, where fees are assessed at both the contract level by the issuer (including mortality and expense risk charges,10 administrative fees, and fees for optional benefits selected by the investor) and at the portfolio company level.11 Transactional charges may also apply, some of which could be substantial, for example, in the case of withdrawals made from a contract prior to a specified number of years.12 Variable life insurance contracts also impose an additional insurance charge to cover the cost of the death benefit.13
• Taxes. Special tax rules apply to
  variable products, with both tax advantages and potential adverse tax impacts in certain circumstances.14

15For a discussion of the requirements for variable contract prospectus disclosure and delivery, see Proposing Release, supra note 6, at
Section I.B.1.
16For example, variable annuity contracts offer an average of 60 investment options, with some contracts offering more than 250 investment options. See IRI Fact Book, supra note 7, at 167. Furthermore, variable life insurance contracts offer an average of 65 investment options, with some contracts offering more than 300 investment options. These variable life figures are based on September 2019 data obtained from Morningstar Direct. 17Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies, Investment Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4546 (Jan. 26, 2009)] (‘‘2009 Summary Prospectus Adopting Release’’) (permitting the use of a summary prospectus by registered open-end management investment companies). 18Securities Offering Reform, Securities Act Release No. 8591 (July 19, 2005) [70 FR 44722 (Aug. 3, 2005)] (‘‘Securities Offering Reform’’) at n.202 and accompanying text (allowing the use of free writing prospectuses to provide information to investors and stating that a free writing prospectus is a permitted prospectus for purposes of Section 10(b) of the Securities Act and, as such, can be used without violating Section 5(b)(1) of the Securities Act). Additionally, Congress recently required the Commission to extend securities offering reform to closed-end funds (see Section 509 of the Economic Growth, Recovery Relief, and Consumer Protection Act, Pub. L. 115–174, 132 Stat. 1296 (2018)), and to business development companies (see Section 803 of the Small Business Credit Availability Act, Pub. L. 115–141, 132 Stat. 348 (2018)). The Commission proposed such rules in 2019. See Securities Offering Reform for Closed-End Investment Companies, Investment Company Act Release No. 33427 (Mar. 20, 2019) [84 FR 14448 (Apr. 10, 2019)] (‘‘Closed-End Offering Reform Release’’). 19See, e.g., Use of Electronic Media for Delivery Purposes, Investment Company Act Release No. 21399 (Oct. 6, 1995) [60 FR 53458 (Oct. 13, 1995)] (‘‘1995 Release’’) (providing Commission views on the use of electronic media to deliver information to investors, with a focus on electronic delivery of prospectuses, annual reports, and proxy solicitation materials); Use of Electronic Media by Broker￾Dealers, Transfer Agents, and Investment Advisers for Delivery of Information; Additional Examples Under the Securities Act of 1933, Securities Exchange Act of 1934, and Investment Company Act of 1940, Investment Company Act Release No. 21945 (May 9, 1996) [61 FR 24644 (May 15, 1996)] (‘‘1996 Release’’) (providing Commission views on electronic delivery of required information by broker-dealers, transfer agents, and investment advisers); Use of Electronic Media, Investment Company Act Release No. 24426 (Apr. 28, 2000) [65 FR 25843 (May 4, 2000)] (‘‘2000 Release’’) (providing updated interpretive guidance on the use of electronic media to deliver documents on matters such as telephonic and global consent, issuer liability
for website content, and legal principles that should be considered in conducting online offerings). See also Securities Offering Reform, supra note 18 (adopting rule 172 under the Securities Act providing an ‘‘access equals delivery’’ framework under which issuers and intermediaries can satisfy their final prospectus delivery obligations); Shareholder Choice Regarding Proxy Materials, Investment Company Act Release No. 27911 (July 26, 2007) [72 FR 42222 (Aug. 1, 2007)] (‘‘Shareholder Choice Regarding Proxy Materials’’) (adopting rule amendments requiring issuers to post their proxy materials on a specified website and provide shareholders with a notice of internet availability of the materials); Optional Internet Availability of Investment Company Shareholder Reports, Investment Company Act Release No. 33115 (June 5, 2018) [83 FR 29158 (June 22, 2018)] (‘‘Investment Company Shareholder Reports Release’’) (adopting 17 CFR 270.30e–3 (new rule 30e–3 under the Investment Company Act) and related rule amendments that, subject to conditions, provide certain registered investment companies, including registrants on Forms N–3, N–4, and N– 6, with an optional method to transmit shareholder reports by making such reports and other materials accessible at a website address specified in a notice to investors). 20For a discussion of the evolution of layered disclosure and the delivery of information to investors, including the Commission’s and the staff’s investor testing efforts, outreach, and other empirical research concerning investor preferences, see Proposing Release, supra note 6, at Section I.B.2. 21We estimate that as of December 31, 2018, approximately 93% of mutual funds and ETFs use summary prospectuses. This estimate is based on EDGAR data for the number of mutual funds and ETFs that filed a summary prospectus in 2018 (10,808) and the Investment Company Institute’s estimated number of mutual funds and ETFs as of December 31, 2018 (11,656). See Investment Company Institute, 2019 Investment Company Fact Book (2019), at 50, available at https://www.ici.org/ pdf/2019_factbook.pdf. 22However, the final rule departs from rule 498 in requiring two separate types of summary prospectuses. See infra Sections II.A.1 and II.A.2. We designed this framework to distinguish the information we believe new and existing investors need, and to highlight the contract features and risks that are particularly relevant to these two groups of investors, taking into account information that we understand these investors may receive through other channels (e.g., as a result of state insurance law, other regulatory requirements, and industry practice). 23The mutual fund summary prospectus rule is designed to provide investors with ‘‘streamlined and user friendly information that is key to an investment decision.’’ See Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies, Continued Investors should understand the
features, risks, and charges associated with any potential investment. Providing investors with key information is particularly important in the context of variable contracts, since their structure is typically more complex than other types of investment products. The operation of and terminology associated with these products can be difficult for investors to understand. Moreover, variable contract prospectuses are often quite lengthy (frequently more than one hundred pages), particularly in the case of products that include optional benefits. It is also common for insurers to describe different versions of the contract in one prospectus, some of which may no longer be available to new investors, leaving investors to wade through a lengthy document to find disclosures relevant to the particular contract that they purchased or are considering purchasing.15 Because insurers issuing variable contracts typically bundle prospectuses for the underlying portfolio companies together with the variable contract prospectus, the disclosures that investors receive at the time of the initial purchase and on an annual basis thereafter can be voluminous.16 We are concerned that the volume, format, and content of disclosures in the variable contract context may make it difficult for some investors to find and understand key information that they need to make an informed investment decision. Based on our experience with both layered disclosure (under the mutual fund summary prospectus) 17 and integrated disclosure (enhanced over a decade ago with securities offering reform for corporate issuers),18 our more than twenty years of experience with the use of the internet as a medium to provide information to investors,19 and on our investor testing efforts, outreach, and other empirical research concerning investors’ preferences, the Commission proposed a summary prospectus framework for variable contracts using summary and layered disclosure principles.20 B. Overview of Final Rule and Rule and Form Amendments We are adopting a new disclosure framework that, among other things, permits the use of summary prospectuses for variable contracts, with additional information available to investors online. To help investors make an informed investment decision, the new framework uses a layered disclosure approach designed to provide investors with key information relating to the contract’s terms, benefits, and risks in a concise and more reader￾friendly presentation, with access to more detailed information available online, or delivered in paper or electronic format on request. We anticipate that the framework will improve investor understanding of variable contracts. The mutual fund industry has widely adopted the use of summary prospectuses, and we expect our proposed prospectus delivery approach similarly will be widely adopted by issuers of variable contracts.21 New rule 498A builds upon our experience creating a summary prospectus option for mutual funds in 2009, but
with certain differences intended to reflect the nature of variable contracts.22 Like the Commission’s mutual fund summary prospectus rule, the summary prospectus under rule 498A is meant to highlight key information of variable contracts that we believe will help an investor make an informed investment decision.23

Investment Company Act Release No. 28064 (Nov. 21, 2007) [72 FR 67790 (Nov. 30, 2007)] (‘‘2007 Summary Prospectus Proposing Release’’), at
Section I; see also Richard J. Wirth, What’s Puzzling
You . . . Is the Nature of Variable Annuity Prospectuses, 34 Western New England Law Review 127 (2012) (‘‘Informed decision-making demands that consumers have enough of an understanding of what’s for sale and what trade-offs are being asked of them in order to make an informed decision about whether or not to buy a product.’’). 24See infra Section II.A. 25See infra Section II.A.5. 26See infra Section II.B. 27This option will not apply to Form N–3 registrants, which do not have underlying portfolio companies due to their single-tier investment company structure. 28See infra Section II.C. 29The Commission first adopted the registration form for variable annuities over 30 years ago, and adopted the registration form for variable life insurance over 15 years ago. See Registration Forms for Insurance Company Separate Accounts that Offer Variable Annuity Contracts, Investment Company Act Release No. 14575 (June 14, 1985) [50 FR 26145 (June 25, 1985)] (‘‘Forms N–3 and N–4 Adopting Release’’); Registration Form for Insurance Company Separate Accounts Registered as Unit Investment Trusts That Offer Variable Life Insurance Policies, Investment Company Act Release No. 25522 (Apr. 12, 2002) [67 FR 19848 (Apr. 23, 2002)] (‘‘Separate Accounts Offering Variable Life Release’’). 30See infra Section II.D. 31See infra Section II.E. 32See infra Section II.F. Because variable contracts typically include a number of optional benefits and underlying investment options, a summary could not, by its nature, include all relevant aspects and details regarding each of these contract features. The variable contract summary prospectus is designed to be a succinct summary of the contract’s key terms and benefits and most significant risks, making it easier to read and more understandable for investors. This summary prospectus will serve as the cornerstone of a layered disclosure framework that alerts investors to the availability of more detailed information in the statutory prospectus and in other locations, and will be tailored to the unique aspects of these products. As a result, investors will have ready access to key information in connection with an investment decision. The main elements of the new disclosure framework include:

• Option to use summary
  prospectus.24 New rule 498A permits the use of two distinct types of contract summary prospectuses: (1) Initial summary prospectuses covering variable contracts currently offered to new investors; and (2) updating summary prospectuses for existing investors. The initial summary prospectus will include certain key information about the contract’s most salient features, benefits, and risks, presented in plain English in a standardized order. The updating summary prospectus will include a brief description of certain changes to the contract that occurred during the previous year, as well as a subset of the information required to be in the initial summary prospectus. Certain key information about the portfolio companies will be provided in both the initial summary prospectus and updating summary prospectus.
• Availability of variable contract
  statutory prospectus and other materials.25 New rule 498A requires the variable contract statutory prospectus, as well as the contract’s statement of additional information (‘‘SAI’’), to be publicly accessible, free of charge, at a website address specified on or hyperlinked in the cover of the summary prospectus. An investor who receives a contract summary prospectus may request the contract statutory prospectus and SAI to be sent in paper or electronically, at no cost to the investor.
• Optional method to satisfy portfolio
  company prospectus delivery requirements.26 New rule 498A provides an optional method for satisfying portfolio company prospectus delivery obligations by making portfolio company summary and statutory prospectuses available online at the website address specified on or hyperlinked in the variable contract summary prospectus, with certain key information about the portfolio companies provided in the variable contract’s summary prospectus.27 Investors may request and receive those disclosures in paper or electronically at no cost. This new option for satisfying portfolio company prospectus delivery requirements is only available for portfolio companies available as investment options through variable contracts that use contract summary prospectuses.
• Form amendments.28 We are
  amending Forms N–3, N–4, and N–6— the registration forms for variable contracts—to update and enhance the disclosure regime for these investment products.29 The amendments are intended to consolidate certain summary information in a condensed presentation, reflect industry developments (e.g., the prevalence of optional benefits in today’s variable contracts), and otherwise improve disclosures provided to variable contract investors.
• Inline XBRL.30 With respect to
  contracts currently offered to new investors, registrants will be required to use the Inline XBRL format for the submission of certain information. This requirement is intended to harness technology to provide a mechanism for allowing investors, Commission staff, data aggregators, financial analysts, and other data users to efficiently analyze and compare the available information about variable contracts, as required by their particular needs and circumstances.
• Discontinued Variable Contracts.31
  We are taking the position that if an issuer of a 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 so long as investors are provided with the alternative disclosures or modernized alternative disclosures described below.
• Other Amendments.32 We are
  adopting certain technical and conforming amendments to our rules to reflect the proposed new regime for variable contract summary prospectuses. We are also adopting certain technical amendments to rules relating to variable life insurance contracts, as well as rescinding certain rules and forms.
  Table 1 summarizes the various
  requirements—under the current prospectus delivery regime, and under the new optional summary prospectus regime—for information to either be (1) delivered to all investors, (2) made available online, or (3) delivered to those investors who so request:

33See, e.g., Comment Letter of Brighthouse Financial (Feb. 15, 2019) (‘‘Brighthouse Comment Letter’’); Comment Letter of the American Council of Life Insurers (Feb. 15, 2019) (‘‘ACLI Comment Letter’’); Comment Letter of the Committee of Annuity Insurers (Feb. 14, 2019) (‘‘CAI Comment Letter’’); Comment Letter of the Investment Company Institute (Feb. 15, 2019) (‘‘ICI Comment Letter’’); Comment Letter of the Independent Directors Council (Feb. 15, 2019) (‘‘IDC Comment Letter’’); Comment Letter of the Center for Capital Markets Competitiveness (Feb. 15, 2019) (‘‘CCMC Comment Letter’’); Comment Letter of Pacific Life Insurance Company (Feb. 15, 2019) (‘‘Pacific Life Comment Letter’’); Comment Letter of Jackson National Life (Feb. 15, 2019) (‘‘Jackson Comment Letter’’); Comment Letter of Donnelly Financial Solutions (Mar. 12, 2019) (‘‘Donnelly Financial Comment Letter I’’); Comment Letter of Donnelly Financial Solutions (Oct. 24, 2019); Comment Letter of Capital Research and Management Company (Mar. 14, 2019) (‘‘Capital Group Comment Letter’’); Comment Letter of Transamerica (Mar. 15, 2019) (‘‘Transamerica Comment Letter’’); Comment Letter of Lincoln Financial Group (Feb. 13, 2019) (‘‘Lincoln Comment Letter’’); Comment Letter of the National Association of Insurance and Financial Advisors (Feb. 14, 2019) (‘‘NAIFA Comment Letter’’); Comment Letter of TIAA (Feb. 15, 2019) (‘‘TIAA Comment Letter’’); Comment Letter of Wells Fargo Advisors (Mar. 14, 2019) (‘‘WFA Comment Letter’’); Comment Letter of the Financial Services Institute (Mar. 15, 2019) (‘‘FSI Comment Letter’’); Comment Letter of the Association for Advanced Life Underwriting (Mar. 15, 2019) (‘‘AALU Comment Letter’’); Comment Letter of the Insured Retirement Institute (Mar. 15, 2019) (‘‘IRI Comment Letter I’’). One commenter asked us to clarify that all insurance products where the value of the contract will vary depending on investment performance are included within the scope of this proposal. See Comment Letter of the AARP (Mar. 15, 2019) (‘‘AARP Comment Letter’’). Because the scope of our proposal was limited to variable contracts registered on Forms N–3, N–4, and N–6, it does not extend to indexed annuities that register securities on Forms S–1 and S–3. 34See CAI Comment Letter. 35See ACLI Comment Letter.
II. Discussion
A. New Option To Use a Summary Prospectus for Variable Contracts We are adopting, substantially as proposed, new rule 498A, which provides a new option for a person to satisfy its prospectus delivery obligations for variable contracts under
Section 5(b)(2) of the Securities Act by:
(1) Sending or giving to new investors key information contained in a variable contract statutory prospectus in the form of an initial summary prospectus; (2) sending or giving to existing investors each year a brief description of certain changes to the contract, and a subset of the information in the initial summary prospectus, in the form of an updating summary prospectus; and (3) providing the statutory prospectus and other materials online. Under the new rule, a registrant (or the financial intermediary distributing the variable contract) relying on the rule must send the variable contract statutory prospectus and other materials to an investor in paper or electronic format upon request. Commenters broadly supported our proposed layered disclosure approach.33 One commenter stated that ‘‘a layered disclosure approach, as set forth in proposed Rule 498A, will vastly improve investors’ experiences with respect to purchasing and owning variable products.’’ 34 Another commenter observed that ‘‘the parallel approaches proposed in the rule properly mirror the sensible, constructive approaches adopted in the mutual fund summary disclosure initiative,’’ and predicted that such approach ‘‘can be expected to work equally well in the context of variable contracts.’’ 35 A third commenter, finding that the proposal ‘‘appropriately balances the goals of investor protection with a better investor experience,’’ endorsed the use of variable contract ER01MY20.000</GPH>

36See Brighthouse Comment Letter.
37See Comment Letter of Mark Bowler (Feb. 11,
2019) (‘‘M. Bowler Comment Letter’’).
38See Comment Letter of the Consumer Federation of America (Feb. 27, 2019) (‘‘CFA Comment Letter’’) (stating that the Commission should test the summary prospectuses to determine whether the proposed disclosure effectively conveys key information to investors before finalizing the rule); NAIFA Comment Letter; AARP Comment Letter. See also Comment Letter of Miles Brooks (Nov. 28, 2019) (asserting the Commission should not regulate a disclosure regime on variable contracts). 39Proposing Release, supra note 6, at Section I.B.2. 40See supra note 33. The Proposing Release was accompanied by a ‘‘Feedback Flier’’ that solicited investor feedback about the primary components of the initial summary prospectus, which was also generally supported by respondents. See, e.g., Comment Letter of Betsy Nedar (‘‘Nedar Comment Letter’’) (Nov. 6, 2018); J. Topolski Comment Letter (Nov. 16, 2018); Anonymous Comment Letter (Nov. 11, 2018) (‘‘Anonymous Comment Letter I’’); Anonymous Comment Letter (Dec. 26, 2018) (‘‘Anonymous Comment Letter II’’); Velazquez Comment Letter (Feb. 8, 2019); Comment Letter of Bernard Mihayo (Nov. 5, 2019); Yinan Ying Comment Letter (Dec. 10, 2019). 41See ACLI Comment Letter. 42See AARP Comment Letter; Comment Letter of Better Markets (Feb. 14, 2019) (‘‘Better Markets Comment Letter’’). 43See supra note 21. 44See infra Section IV.C.1. 45See 2009 Summary Prospectus Adopting Release, supra note 17, at 66–67. 46Rule 498A(f)(1). For an initial purchase of a variable contract, the initial summary prospectus must be ‘‘sent or given no later than the time of the carrying or delivery of the contract security.’’ See infra Section II.A.4. 47One commenter, citing academic research, stated that to the extent summary disclosure reduces information overload, it could, in turn, increase financial literacy. See ACLI Comment Letter. This comment letter, together with other similar comment letters discussing the costs and benefits of the proposed rulemaking, are discussed in greater detail in Section IV. See infra note 1038 and accompanying and following text. We believe simplicity and clarity are of heightened importance in a prospectus in connection with an initial purchase decision for a variable contract because of the long-term nature and complexity of these products. We also note that, unlike other investment products, variable contract investors typically have a state-mandated ‘‘free look’’ opportunity to return the contract for a full refund of premiums or purchase payments within a limited number of days following contract issuance. See Proposing Release, supra note 6, at nn.65 and accompanying text. summary prospectuses ‘‘as the lynchpin of a new variable contract disclosure framework.’’ 36 Some commenters expressed reservations about key aspects of the proposal. One commenter stated that the initial summary prospectus should provide the information needed to make an investment decision without having to refer to other documents,37 essentially
rejecting the layered disclosure framework. Three commenters were skeptical that certain aspects of the proposed initial summary prospectus would result in better investor comprehension of how a variable contract works, and recommended that we engage in investor testing to validate our assumptions.38 After considering the comments received on the proposal, we are adopting rule 498A and the general summary prospectus framework substantially as proposed, with several modifications reflecting considerations raised by commenters. As discussed in the Proposing Release, our proposal built on our experience with both layered disclosure (under the mutual fund summary prospectus) and integrated disclosure (enhanced over a decade ago with securities offering reform for corporate issuers), as well as more than 20 years of experience with the use of the internet as a medium to provide information to investors.39 We drew on our investor testing efforts in developing the proposed summary prospectus framework, and specifically solicited feedback from investors and other market participants on hypothetical initial and updating summary prospectuses, which we received in response to our ‘‘feedback form’’ and in numerous comment letters.40 We also received comments on whether the use of the summary prospectus should be mandatory instead of voluntary as proposed. One commenter stated that the use of the summary prospectus should be voluntary to give insurers the flexibility to tailor their disclosure practices to best fit their situations.41 Two commenters supported mandatory compliance to ensure that variable contract investors receive summary disclosures to aid their investment decisions.42 After considering such comments and evaluating our prior experience with the mutual fund summary prospectus, we continue to believe that reliance on rule 498A should be optional. This will give insurers the opportunity to gradually transition to the new summary prospectus regime while minimizing disruption to their current registration and business processes. Although approximately 93% of mutual funds currently use a summary prospectus, it took nearly eight years after the adoption of the mutual fund summary prospectus framework for the industry to reach that threshold.43 We believe that insurers may similarly need a period of time to transition to the new regime given the diversity of variable contracts (and corresponding diversity of disclosure for variable contracts) and the fact that the variable contract summary prospectus regime will differ from the mutual fund summary prospectus framework in several key ways (e.g., the use of an initial and an updating summary prospectus, and the new layered disclosure approach to satisfying portfolio company prospectus delivery obligations). Some variable contracts offer few (or no) optional benefits and few investment options. Because these contracts have fairly straightforward disclosure documents, the advantages of the summary
prospectus regime may be less compelling for these products, as compared to more complex variable products with numerous optional benefits and investment options (which tend to have longer and more complicated prospectuses). Registrants will likely assess the relative benefit of using a summary prospectus based on the types of products they offer and the length of their current prospectuses—as well as the benefit of more concise disclosure to investors—when evaluating whether to opt into the new layered disclosure regime.44 An optional approach also preserves flexibility for registrants that may not wish to undertake the costs of the transition to a summary prospectus regime. Given the almost universal adoption of the summary prospectus regime by mutual funds, and the anticipated cost￾savings and other efficiencies available to insurers that rely on the rule, we do not at this time believe a mandatory approach is necessary to achieve the goals of the variable contract summary prospectus regime. We intend to review the voluntary use of the summary prospectus and to assess whether benefits to investors warrant a future mandate.45

1. Initial Summary Prospectus
   a. Overview
   The new rule requires a person relying on the rule to send or give an initial summary prospectus in connection with sales of variable contracts to new investors.46 The initial summary prospectus uses a layered disclosure approach that provides investors with key information relating to the contract’s terms, benefits, and risks in a concise and more reader￾friendly presentation, with access to more detailed information available online and electronically or in paper format on request.47 We designed the initial summary prospectus to simplify and consolidate lengthy and complex disclosures, and to highlight aspects of the contract that may not be emphasized

48Another unique aspect of variable contract disclosure practices is the wide variety of information about the contract that we understand investors commonly receive throughout the lifecycle of the contract. See Proposing Release, supra note 6, at nn.66–69 and accompanying text. 49Rule 498A(b)(1). 50 Id. 51See rule 498A(a). 52See General Guidance to Variable Annuity, Variable Life, and Other Insurance Company Investment Contract Registrants, SEC Staff No￾Action Letter (Nov. 3, 1995), at Section I.4 (discussing industry practice). As discussed below, we are amending the registration forms to permit insurers to include multiple contracts (or versions thereof) in a single statutory prospectus and multiple prospectuses in a single registration statement subject to certain restrictions. See infra text following note 598 (discussing the amended form instructions that provide a prospectus may describe multiple contracts that are ‘‘essentially identical,’’ while a registration statement may include multiple prospectuses if the contracts described in those prospectuses are ‘‘substantially similar’’). 53See AARP Comment Letter. 54See Transamerica Comment Letter; ACLI Comment Letter; CAI Comment Letter. 55 Id. 56See, e.g., AARP Comment Letter (‘‘By permitting the disclosures to discuss more than one contract and, indeed, even more than one class per contract, the information becomes unorganized, unfocused, and difficult to understand.’’). 57For example, a mutual fund may offer a suite of equity funds that share the same statutory prospectus, but must provide a separate summary prospectus for each fund that has different investment objectives, strategies and risks (e.g., large-cap, mid-cap, small-cap, emerging markets, etc.). This reduces complexity and minimizes the likelihood of overwhelming investors with too much information in a single document. 58The amendments to Forms N–3, N–4, and N– 6 that facilitate the summary prospectus content requirements, as well as amend the content requirements for the statutory prospectus, are generally discussed in more detail in Section II.C below. However, in order to better explain the initial summary prospectus, we discuss new or amended items in the statutory prospectus, to the extent they will also appear in the initial summary prospectus, in this Section II.A.1. 59We understand that many investors purchase variable contracts through an intermediary and may not directly compare competing products. A standardized order may nonetheless be useful for investment professionals to compare the products they ultimately recommend to investors with other products, as well as investors considering whether to purchase a new annuity contract to replace an existing one. See infra note 194 and accompanying text. Having a more standardized document may ultimately promote greater comparability across products, registrants, and insurance institutions, which could lead to better investor understanding and increased competition. As
discussed below in Section II.D, we are also adopting, as proposed, the requirement to use Inline XBRL format for the submission of certain required Continued in marketing materials and other disclosures.48 b. Contracts That May Be Included in the Initial Summary Prospectus As proposed, we are requiring the initial summary prospectus to only describe a single contract that the registrant currently offers for sale.49 Also as proposed, an initial summary prospectus may describe more than one class of a currently offered contract.50 For purposes of the rule, we are adopting, as proposed, a definition of ‘‘class’’ to be a class of a contract that varies principally with respect to distribution-related fees and expenses.51 The Commission proposed these requirements for the initial summary prospectus because aggregating disclosures for multiple contracts, or currently offered and no-longer-offered features and options of a single contract, can hinder investors from distinguishing between contract features and options that apply to them and those that do not. Currently, and under our amendments to the registration forms, it is industry practice for registrants to describe multiple contracts in a single prospectus (or multiple versions of a particular contract in a prospectus), or include multiple prospectuses in a single registration statement.52 We also understand that certain contract prospectuses include disclosure about contract features and options that the registrant may no longer offer to new investors. We received mixed comments regarding this aspect of the proposal. One commenter supported limiting the initial summary prospectus to a single contract currently offered for sale, but to facilitate reader comprehension, urged us to further limit the initial summary prospectus to only one class of a currently offered contract.53 In contrast, three commenters urged us to allow an initial summary prospectus to describe multiple variable contracts that differed in ways other than distribution-related fees and expenses.54 Their suggested approach would permit an initial summary prospectus to describe all contracts currently offered for sale, regardless of how they differed, including with respect to fees and expenses beyond traditional distribution-related fees and expenses (e.g., administrative, insurance, and benefit charges), optional benefits, and other features. These commenters asserted that our proposal would require investors to review multiple initial summary prospectuses to choose between different variable contracts, and suggested that instead permitting multiple contracts to be described in a single document would make it easier for investors to choose between contracts. We are adopting this aspect of the rule as proposed. The initial summary prospectus is designed to provide investors key information to facilitate an initial investment decision. If we were to expand its scope as suggested by commenters, it could result in initial summary
prospectuses that disclose information about contracts and contract features and options not available to the prospective investor. We continue to believe that requiring an initial summary prospectus to describe only one contract will provide more effective disclosure by omitting information that is not relevant to an investor’s investment decision. Commenters raised the concern that our approach could result in investors reviewing multiple initial summary prospectuses.55 We believe, however, that an approach that results in multiple initial summary prospectuses—where each is tailored to present key information about a single contract— will more effectively facilitate an investment decision than a longer or more complex document that may overwhelm investors with information that is not relevant to the investment decision.56 The summary prospectus regime is designed to reduce the volume and content of variable contract disclosures that may make it difficult for some investors to find and understand key information they need to make an investment decision. Describing multiple contracts in a single initial summary prospectus, as some commenters suggest, conflicts with this goal. Our approach also is consistent with requirements for mutual fund and exchange-traded fund (‘‘ETF’’) summary prospectuses, where summary prospectuses may only present key information as to a single fund.57
c. Preparation of the Initial Summary
Prospectus
The chart at the end of this section outlines the information required to appear in an initial summary prospectus. Along with specifying required introductory disclosures on the outside front cover page or the beginning of the initial summary prospectus, the new rule references particular disclosure items from Forms N–3, N–4, and N–6 (as amended).58 We are adopting, largely as proposed, a standardized presentation to require certain disclosure items that we believe will be most relevant to investors (such as the table that includes key information about the contract and the contract overview section), to appear at the beginning of the initial summary prospectus, followed by supplemental information. The required presentation could also facilitate comparison of different variable contracts.59

disclosures in the variable contract statutory prospectus with respect to contracts currently offered to new investors. The structured data format will allow investors, Commission staff, data aggregators, financial analysts, and other data users to more efficiently analyze and compare these products. 60Rule 498A(b)(5). While the Commission did not propose (and we are not adopting) page limits for the initial summary prospectus, these provisions are designed to require registrants to produce a document that will present key information in a concise and clear way. 61See infra Section II.A.1.c.ii.(a) (relocating ‘‘Important Information You Should Consider About the Contract’’ before ‘‘Overview of the Variable Contract’’); see also rule 498A(b)(5)(i) through (ii). 62See infra Section II.A.1.c.ii.(c) through (d) (merging the ‘‘Standard Death Benefit’’ into ‘‘Benefits Under the Contract’’); see also rule 498A(b)(5)(iv). 63See Lincoln Comment Letter; Comment Letter of Cardozo School of Law Securities Arbitration Clinic (Mar. 14, 2019) (‘‘Cardozo Clinic Comment Letter’’); Comment Letter of Benjamin G. Baldwin, Jr. (Feb. 13, 2019) (‘‘Baldwin Comment Letter’’). 64 General Instruction C.3.(g) to Forms N–3, N–4, and N–6. 65As guidance, we generally do not believe that illustrations or examples regarding the operation of optional benefits should be included in the initial summary prospectus because the summary prospectus disclosure requirements regarding those benefits are generally limited to a tabular summary of those benefits. See rule 498A(b)(5)(iv) (providing initial summary prospectus disclosure requirements for ‘‘(Other) Benefits Available Under the Contract’’ by referencing the relevant item requirements from the particular registration statement forms). See also Item 11(a) of amended Form N–3; Item 10(a) of amended Form N–4; and Item 11(a) of amended Form N–6. 66See General Instruction C.3.(b) to amended Forms N–3, N–4, and N–6. 67See CAI Comment Letter; Pacific Life Comment Letter; ACLI Comment Letter; Brighthouse Comment Letter; Jackson Comment Letter; CCMC Comment Letter; ACLI Comment Letter; Transamerica Comment Letter. 68See CAI Comment Letter. 69Several commenters objected to the terms ‘‘death benefit,’’ ‘‘mortality and expense risk charges,’’ and ‘‘surrender charge.’’ See Comment Letter of Jackson National Life (Feb. 15, 2019) (‘‘Jackson Comment Letter’’); CCMC Comment Letter. Others did not want to use ‘‘contract’’ on the grounds that investors are used to ‘‘policy.’’ See Comment Letter of Ameritas Life Insurance Corp. (Mar. 12, 2019) (‘‘Ameritas Comment Letter’’); ACLI Comment Letter. One insurer objected to ‘‘living benefit rider’’ because ‘‘protected lifetime income benefit’’ resonates more with investors. See Lincoln Comment Letter. 70See ACLI Comment Letter. 71See CAI Comment Letter; Pacific Life Comment Letter; Brighthouse Comment Letter; Jackson Comment Letter. 72See Brighthouse Comment Letter; Transamerica Comment Letter; ACLI Comment
Letter; CAI Comment Letter. 73See ACLI Comment Letter. 74See CAI Comment Letter; Pacific Life Comment Letter; Jackson Comment Letter; Brighthouse Comment Letter. 75However, in certain instances our rules and forms do prescribe specific terminology. See, e.g., Form CRS (generally requiring that investment advisers and broker-dealers use specific headings when responding to each item). 76See General Instruction C.3.(d)(ii) of Forms N– 3, N–4, and N–6. See also infra note 598 and accompanying text. 77See General Instruction 1(a) to Item 2 of Forms N–3, N–4, and N–6. We discuss the Key Information
Table below in Section II.A.1.c.ii.(a).
Largely as proposed, we are requiring an initial summary prospectus to only contain the information specifically required, which must appear in the same order, and under the relevant corresponding headings, as the rule specifies.60 While we did not receive any comments regarding the proposed order of the substantive contents of the initial summary prospectus, in a change from the proposal, and as discussed below, we are reversing the order of the first two sections,61 and, for Forms N– 3 and N–4 only, merging two sections together.62 These changes are designed to facilitate investor readership and to streamline the document. Use of Illustrations and Examples While not proposed, three commenters suggested that we permit the use of illustrations or examples in summary prospectuses.63 Illustrations and examples are frequently presented in variable contract sales materials, and may be included in the statutory prospectus.64 We are persuaded that illustrations and examples could assist investors in more readily understanding potentially complex or lengthy narrative disclosures. Consequently, the final rule and forms permit the inclusion of illustrations or examples in a summary prospectus to the extent that they are responsive and limited to the particular statutory prospectus items required to be included in the summary prospectus.65 However, such illustrations and examples generally should not, by their nature, quantity, or manner of presentation, obscure or impede understanding of the information that is required to be included in the summary prospectus.66 Terminology Commenters broadly objected to the requirement to use only the headings and terms specified in the proposed rule (and forms).67 One commenter stated because the industry uses a wide variety of terminology in contract prospectuses, marketing materials, and the contracts themselves, investors may be confused by receiving an initial summary prospectus that uses different terminology than related contract documents.68 Several commenters identified specific terms they believed should not be required.69 Another commenter asked that we permit registrants reasonable flexibility to use alternative terms that reflect the substance of the defined terms in the proposed rule, noting that readability should be the top priority.70 Commenters also stated that providing flexibility in terminology would allow the industry to simplify the complex language commonly used in variable product disclosures,71 facilitate product evolution and innovation,72 and be consistent with current practice as permitted by the staff.73 Instead of prescribing specific terminology, four commenters asked that we prescribe only the content of the disclosures, giving industry the flexibility to modify headings and terms to better convey certain aspects of a variable contract and make them easier to understand, as long as such terms are substantially similar in meaning to the terms used in the rule and forms and are clearly
defined in the prospectuses in which they appear.74 We recognize that variable contract and other issuers may use terminology in their disclosure documents other than that used in our rules and forms, and that in many instances, our rules and forms do not prescribe terminology.75 After considering comments, we are modifying the proposed rule and form requirements to give insurers the flexibility to describe their variable contracts in a manner best suited to their products and business practices, while still requiring the use of certain standardized headings in initial summary prospectuses to allow investors to easily compare the features of different products. The proposed amendments to the forms would have defined and used certain terminology. However, contrary to certain commenters’ concerns, the forms, as proposed, would not have required that registrants use the specific terminology in the forms in preparing a registration statement, other than in certain legends. To respond to these commenters’ concerns, we are adding a clarifying instruction to the forms that explicitly and broadly permits registrants to use alternate terminology in preparing registration statements pursuant to the forms’ disclosure requirements, so long as the alternate terminology clearly conveys the meaning of, or provides comparable information as, the terms used in the forms.76 Notwithstanding this instruction, we are adding an additional instruction, which was not included in the proposed amendments to the forms, that a registrant must prepare the Key Information Table using the headings and sub-headings specified by the form.77 Because the initial summary prospectus (and as discussed below, the

78However, registrants are provided with limited flexibility as to certain bracketed terms. For example, information about buying a contract must be disclosed under the heading ‘‘Buying the [Contract].’’ Registrants could substitute ‘‘Policy’’ for the bracketed term ‘‘Contract.’’ See rule 498A(b)(5)(v). 79See Jackson Comment Letter; CCMC Comment Letter. 80See rule 498A(b)(5)(vii) (requiring the heading ‘‘Making Withdrawals: Accessing the Money in Your [Contract]’’ when disclosing the information required by Item 13(a) of Form N–3, Item 12(a) of Form N–4, or Item 12(a) of Form N–6). Similarly, we are modifying the sub-heading in the Key Information Table regarding surrenders and withdrawals to eliminate the proposed use of the term ‘‘surrenders.’’ See Item 2 of Forms N–3, N–4, and N–6. We discuss the Key Information Table below in Section II.A.1.c.ii.(a). 81Although information about standard death benefits offered by variable life insurance contracts must be disclosed under the heading ‘‘Standard Death Benefits,’’ the disclosures provided under that heading could, for example, explain that ‘‘death benefits’’ are referred to as ‘‘legacy benefits’’ under the contract and could use the term ‘‘legacy benefits’’ in providing the disclosures required under that heading. See rule 498A(b)(5)(iii). 82 Registrants on Form N–3 may omit the
Appendix specified by Item 18 of amended Form
N–3, and instead provide the more detailed disclosures about the investment options offered under the contract required by Item 19 of amended Form N–3. See infra note 788 and accompanying text. 83Rule 498A(b)(2)(i) through (iv). 84See, e.g., NAIFA Comment Letter; Comment Letter of VIP Working Group (Dec. 4, 2018) (‘‘VIP Working Group Comment Letter’’); Comment Letter of Jack Breacher (Jan. 27, 2019) (‘‘Breacher Comment Letter’’). 85See VIP Working Group Comment Letter (stating that the separate account name ‘‘is jargon and an accounting fiction’’). In addition, mutual funds are not required to include the registrant’s name on the summary prospectus cover page. We are making a conforming change to the cover
page requirements for the updating summary
prospectus. See infra Section II.A.2.c.i. updating summary prospectus) draw from disclosures in the statutory prospectus, insurers will similarly have flexibility in preparing those documents with one exception. With respect to the initial summary prospectus, we are generally requiring, as proposed, that the initial summary prospectus use the standardized headings required by the rule.78 We believe that the use of standardized headings will provide a consistent framework to allow investors to more easily navigate through variable product summary prospectuses and also facilitate the ability of investors to compare information across different variable contract products. Commenters generally objected to the proposed use of ‘‘surrender charges’’ and ‘‘death benefits’’ in the initial summary prospectus headings.79 Regarding ‘‘surrender charges,’’ we believe that the term ‘‘withdrawal’’ both sufficiently encompasses surrenders and other types of withdrawals and is a more intuitive term for investors, and have modified the heading regarding surrenders and withdrawals to no longer require the term ‘‘surrender.’’ 80 We decline, however, to permit the use of alternate terms for ‘‘death benefits’’ in the case of initial summary prospectuses for variable life insurance, because we believe that ‘‘death benefits’’ is a more intuitive term than ‘‘legacy benefits’’ or other terms.81 Additionally, the terms ‘‘mortality and expense risk charges’’ and ‘‘living benefit rider’’ do not appear in the standardized headings required by the rule, so insurers will have flexibility with respect to those terms.
TABLE 2—OUTLINE OF THE INITIAL SUMMARY PROSPECTUS
Heading in initial summary prospectus Item of amended Form N–3 Item of amended Form N–4 Item of amended Form N–6 Cover Page:
Identifying Information .......................................................................................................... ........................ ........................ ........................
Legends ................................................................................................................................ ........................ ........................ ........................
EDGAR Contract Identifier ................................................................................................... ........................ ........................ ........................
Table of Contents (optional) ................................................................................................. ........................ ........................ ........................
Content:
Important Information You Should Consider About the [Contract] ...................................... 2
Overview of the [Contract] .................................................................................................... 3
Standard Death Benefits ...................................................................................................... ........................ ........................ 10(a) [Other] Benefits Available Under the [Contract] ................................................................... 11(a) 10(a) 11(a) Buying the [Contract] ............................................................................................................ 12(a) 11(a) 9(a)–9(c) How Your [Contract] Can Lapse .......................................................................................... ........................ ........................ 14(a)–14(c) Making Withdrawals: Accessing the Money in Your [Contract] ........................................... 13(a) 12(a) 12(a)
Additional Information About Fees ....................................................................................... 4
Appendix: [Investment Options/Portfolio Companies] Available Under the [Contract] ........ 82 18 or 19 17 18
i. Cover Page and Table of Contents
Identifying Information. We are adopting, largely as proposed, the requirement that the following information appear on the front cover
page or the beginning of the initial
summary prospectus:

• The depositor’s name;
• The name of the contract, and the
  class or classes if any, to which the initial summary prospectus relates;
• A statement identifying the initial
  summary prospectus as a ‘‘Summary Prospectus for New Investors’’; and
• The approximate date of the first
  use of the initial summary prospectus.83 Several commenters suggested that instead of requiring the document to be identified as a ‘‘Summary Prospectus,’’ we should permit different titles, such as ‘‘Key Information Document’’ or ‘‘Summary Information.’’ 84 A prospectus, however, is a legal term with specific legal implications. It is also a term that is understood in the marketplace. We believe it is important that investors understand that an initial summary prospectus is, in fact, a prospectus, and that it therefore contains important required regulatory disclosures. However, in a change from the proposal, the cover page will not be required to include the registrant’s name. We agree with a commenter’s suggestion that the registrant’s name is of limited value to investors because it is largely a legal convention,85 and believe investors are more likely to be interested in the names of the depositor (or insurer) and the variable contract. Legends. We are requiring, largely as proposed, the cover page or beginning of the initial summary prospectus to include the following legends:
  This Summary Prospectus summarizes key features of the [Contract]. Before you invest, you should also review the prospectus for the [Contract], which contains more information about the [Contract’s] features, benefits, and risks. You can find this document and other information about the [Contract] online at

86The legend is required to provide an internet address, other than the address of the Commission’s electronic filing system, toll-free telephone number, and email address that investors can use to obtain the statutory prospectus and other materials, request other information about the variable contract, and make investor inquiries. Rule 498A(b)(2)(v)(B). The website address must be specific enough to lead investors to a direct link to the statutory prospectus and other required information, rather than to the home page or another part of the website. The website could host other relevant disclosure documents with prominent links to each required document. Id. The legend could indicate, if applicable, that the statutory prospectus and other information are available from a financial intermediary (such as a broker-dealer) through which the contract may be purchased or sold. Id. For purposes of this requirement, documents available on the website address must be publicly accessible and free of charge. Rule 498A(h)(1); see also infra Section II.A.5. 87The paragraph of the legend regarding cancellation of the contract may be omitted if not applicable. If this paragraph is included in the legend, the paragraph must be presented in a manner reasonably calculated to draw investor attention to that paragraph. See infra note 95. 88Rule 498A(b)(2)(v). The Commission’s Office of Investor Education and Advocacy maintains the website as an online resource to help investors make sound investment decisions and avoid fraud. The website includes investor bulletins, alerts, guidance and tools designed to assist investors, including those considering variable contracts, in obtaining additional information and resources on understanding and managing their investments. See, e.g., Updated Investor Bulletin: Variable Annuities (Oct. 30, 2018), available at https:// www.investor.gov/additional-resources/news-alerts/ alerts-bulletins/updated-investor-bulletin-variable￾annuities; Investor Bulletin: Variable Life Insurance (Oct. 30, 2018), available at https:// www.investor.gov/additional-resources/news-alerts/ alerts-bulletins/investor-bulletin-variable-life￾insurance. 89A registrant will be able to modify the legends so long as the modified statements contain comparable information. Rule 498A(b)(2)(v)(A). 90Rule 30e–3; see also Investment Company Shareholder Reports Release, supra note 19. This rule became effective January 1, 2019. 91Rule 498A(b)(2)(v)(E) through (F); see also rule 498A(b)(2)(v)(B) (requiring, if applicable, cover page legend to include the website address required by rule 30e–3, if different from the website address provided for variable contract and related documents). The legends required by rule 30e–3 will be removed from variable contract registration forms on January 1, 2022. 92See WFA Comment Letter. 93See AARP Comment Letter. 94Rule 498A(2)(v)(C). 95See rule 498A(b)(2)(v)(C); see also ACLI Comment Letter (stating that some types of group annuity
contracts, such as those used to fund
Section 403(b) retirement plans, are not required to
have a free look provision under state law). 96Proposed rule 498A(b)(2)(vi)(C). 97Rule 498A(b)(3)(i). 98See, e.g., 17 CFR 230.411(e) (rule 411(e) under the Securities Act); 17 CFR 270.0–4(e) (rule 0–4(e) under the Investment Company Act). 99See text following note 121. [ll]. You can also obtain this information at no cost by calling [ll] or by sending an email request to [ll].86 You may cancel your [Contract] within 10 days of receiving it without paying fees or penalties. In some states, this cancellation period may be longer. Upon cancellation, you will receive either a full refund of the amount you paid with your application or your total contract value. You should review the prospectus, or consult with your investment professional, for additional information about the specific cancellation terms that apply.87 Additional general information about certain investment products, including [variable annuities/variable life insurance contracts], has been prepared by the Securities and Exchange Commission’s staff and is available at Investor.gov.88 These legends are designed to provide identifying information about the variable contract to which the initial summary prospectus relates, as well as certain general information applicable to all variable contracts.89 Pursuant to the requirements of new rule 30e–3,90 the initial summary prospectus may include the legend designed to alert investors that beginning on a specified date, shareholder reports for Form N–3 variable annuities and for portfolio companies available under Form N–4 variable annuity and Form N–6 variable life insurance contracts will no longer be sent by mail (unless paper copies are specifically requested), and will instead be posted on a website, subject to notification by mail of their location and availability.91 One commenter stated that the initial summary prospectus would be more approachable if the cover page had more white space with fewer legal disclaimers and suggested that we eliminate the legend urging investors to review the statutory prospectus before investing and describing how to obtain further information about the contract.92 We are retaining the legend and have streamlined it in consideration of this comment, but are otherwise adopting the legend largely as proposed because we believe that it concisely informs investors that the statutory prospectus is available and how to obtain it. Providing investors information about the statutory prospectus and where to find it will facilitate the layered disclosure approach we are adopting in this document. Another commenter stated that because the free look period is one of the most crucial rights available to variable contract purchasers, investors should receive a separate, one-page disclosure describing this unique, time￾limited revocation right.93 The commenter also suggested that we require insurers to draw more attention to free look disclosure by requiring it to be in a larger font size, bolded, and boxed. We are not
requiring insurers to provide a stand-alone document describing the free look period, but rather are requiring, as proposed, that the legend on the cover page or beginning of the summary prospectus retain all disclosures of key information in one document. We also understand that state laws typically mandate free look disclosures in the variable contract application, investor education materials (e.g., the NAIC Buyer’s Guide), and the variable contract itself, and investors therefore already receive multiple notices regarding this unique revocation right. We agree, however, that this is important information that should be highlighted to investors because it is unique to variable contracts and time limited. We are therefore revising the rule to require that insurers present the ‘‘free-look’’ legend in a manner reasonably calculated to draw an investor’s attention.94 In response to comments, the new rule also clarifies that this legend is required only if applicable.95 Taking into account the comments urging that we streamline the legends where possible, we are relocating one legend and eliminating two others. Specifically, the Commission proposed that, if any information is incorporated by reference into the initial summary prospectus, the front cover page would include a legend with certain disclosures related to that information.96 Incorporation by reference is a technical legal doctrine that may not be understandable to many investors. To reduce the length of the legends on the cover page of the initial summary prospectus, we are relocating this legend to the back cover page or last
page of the initial summary
prospectus.97 However, we are not eliminating the legend because our rules on incorporation by reference require registrants to provide disclosure about what information is incorporated into a document.98 We are also eliminating the proposed legend stating ‘‘You should read this Summary Prospectus carefully, particularly the section titled Important Information You Should Consider About the Contract.’’ We believe that legend is no longer necessary because the section referenced by that legend is now the first item in the initial summary prospectus.99 One commenter suggested that we remove the proposed legend stating that the Securities and Exchange Commission has not approved or disapproved of the contract or passed upon the accuracy or adequacy of the disclosure in the summary prospectus and that any contrary representation is a criminal offense, on the basis that this

100See Breacher Comment Letter.
101Rule 498A(b)(3)(ii); see also Proposing Release, supra note 6, at n.87 (describing an EDGAR contract identifier). 102Rule 498A(b)(4). 103 17 CFR 230.481(c) (Rule 481(c)). 104Rule 498A(b)(5); see also Section II.A.1.c. 105 Id. 106Rule 498A(b); see also infra Section II.A.4.
Section 10(b) of the Securities Act authorizes the
Commission to adopt rules deemed necessary or appropriate in the public interest or for the protection of investors that permit the use of an ‘‘omitting prospectus’’ for the purposes of Section 5(b)(1) that omits or summarizes information contained in the statutory prospectus. Section 24(g) of the Investment Company Act authorizes the Commission to permit the use of a prospectus under
Section 10(b) of the Securities Act to include
information the substance of which is not included in the statutory prospectus. 15 U.S.C. 77j(b); 15 U.S.C. 77e(b)(1); 15 U.S.C. 80a–24(g); see also 2009 Summary Prospectus Adopting Release, supra note 17, at n.70. 107See rule 498A(b)(5)(i); Item 2 of Forms N–3, N–4, and N–6. 108As discussed in the Proposing Release, we considered investor complaints received by the Commission’s Office of Investor Education and Advocacy and the results of the 2012 Financial Literacy Study. See text accompanying note 1041 (regarding investor complaints). Office of Investor Education and Advocacy of the U.S. Securities and Exchange Commission, Study Regarding Financial Literacy Among Investors (Aug. 2012), available at https://www.sec.gov/news/studies/2012/917- financial-literacy-study-part1.pdf (‘‘2012 Financial Literacy Study’’). We also considered various regulatory and industry sources. See, e.g., FINRA Rule 2330(b)(1)(A)(i) (variable annuity investors must be informed, ‘‘in general terms, of various features of deferred variable annuities, such as the potential surrender period and surrender charge; potential tax penalty if consumers sell or redeem deferred variable annuities before reaching the age of 591⁄2; mortality and expense fees; investment advisory fees; potential charges for and features of riders; the insurance and investment components of deferred variable annuities; and market risk’’). 109See, e.g., ACLI Comment Letter; CAI Comment Letter. 110See Comment Letter of Christopher Viscomi (Dec. 4, 2018). 111See Comment Letter of Anthony Harrison (Dec. 7, 2018). 112As discussed in the Proposing Release, we considered mutual fund disclosure research that supported the view that a tabular presentation would be an effective disclosure delivery method. See, e.g., John Kozup, Elizabeth Howlett, & Michael Pagano, The Effects of Summary Information on Consumer Perceptions of Mutual Fund Characteristics, The Journal of Consumer Affairs 42, 37–59 (2008) (concluding that summary information, particularly using graphical presentation, is an effective way to facilitate the processing of information for investors evaluating mutual funds). Experts in disclosure effectiveness for consumer￾facing communications also have encouraged the use of a ‘‘strong design grid’’ (such as the tabular presentation we propose) to clarify concepts to consumers and to organize disclosure elements. See, e.g., Susan Kleimann, Making Disclosures Work for Consumers, Presentation to the SEC’s Investor Advisory Committee (June 14, 2018), Continued legend was ‘‘legalese.’’ 100 We agree that this legend may not communicate as effectively as the other legends and that removing it will streamline the cover
page, potentially increasing the
likelihood that investors will read the remaining legends. Removing the requirement to include that legend also treats variable contract summary prospectuses similarly to mutual fund summary prospectuses, which are permitted, but not required, to include that legend on their cover page. EDGAR Contract Identifier. We are adopting, as proposed, the requirement to include the contract’s EDGAR contract identifier on the bottom of the back cover page or last page of the initial summary prospectus in a type size smaller than that generally used in the prospectus (e.g., 8-point modern type).101 This requirement is intended to enable Commission staff and others to more easily link the initial summary prospectus with other filings associated with the contract. We received no comments regarding the EDGAR contract identifier.
Table of Contents. Likewise, we are
adopting, as proposed, the rule provision permitting an initial summary prospectus to include a table of contents.102 A table of contents must show the page number of the various sections or subdivisions of the summary prospectus, and immediately follow the cover page in any initial summary prospectus delivered electronically.103 We received no comments on this aspect of the proposal.
ii. Content of the Initial Summary
Prospectus
We are adopting, generally as proposed but with some modifications, specifications in the rule regarding the content and order required in an initial summary prospectus.104 An initial summary prospectus must contain the information required by the rule, and only that information, in the order specified by the rule.105 Adhering to these content requirements is one condition that an initial summary prospectus must satisfy in order to be deemed to be a prospectus that is permitted under Section 10(b) of the Securities Act and Section 24(g) of the Investment Company Act for the purposes of Section 5(b)(1) of the Securities Act.106 Key Information Table The initial summary prospectus will include a table (the ‘‘Key Information
Table’’) that will provide a brief
description of key facts about the variable contract in a specific sequence and in a standardized presentation that is designed to be easy to read and navigate.107 Specifically, it will include a summary of five topic areas: (1) Fees and expenses; (2) risks; (3) restrictions; (4) taxes; and (5) conflicts of interest. This is intended to highlight, in a consolidated location, important considerations related to these products, including certain unique aspects of the variable contract that might be unfamiliar to investors who have experience with mutual funds or other types of investment products.108 We are adopting the Key Information Table substantially as proposed, with some modifications made in response to comments. Commenters were broadly supportive of the proposed Key Information
Table,109 which was identified by
respondents to the Feedback Flier as the ‘‘most useful’’ section in the hypothetical initial summary prospectus that accompanied the Proposing Release. One commenter said the information in the Key Information
Table was most relevant to investors,
particularly if standardized to compare annuities,110 while another noted approvingly that it broke the information down in a simplified way.111 Given the positive response to the Key Information Table, in a change from the proposal, we are relocating it so it will be the first substantive section of the initial summary prospectus, followed by the Overview of the Contract instead of the second section following Overview of the Contract, as proposed. We believe that investors of different levels of financial sophistication may benefit from receiving this information early in the initial summary prospectus, as it was designed to provide a contextual baseline to help inform investors’ understanding of disclosure about more detailed aspects of the variable contract that are described later on. The Key Information Table includes a number of prescribed disclosures and is designed to complement the ‘‘Overview’’ section, discussed below. As proposed, we are placing these two disclosure sections at the beginning of the initial summary prospectus because we believe they contain certain basic information that is critical for variable contract investors to read. We are also requiring, as proposed, that this information be provided in a standardized tabular presentation because we believe that, as compared to the narrative-type presentation of corresponding disclosures in the statutory prospectus, a summary tabular presentation will be easier to read and better convey the importance of the information to investors.112 This

available at https://www.sec.gov/spotlight/investor￾advisory-committee-2012/iac061418-slides-by￾susan-kleimann.pdf (‘‘Kleimann Presentation’’). 113We proposed that the following legend would precede the Key Information Table: ‘‘An investment in the Contract is subject to fees, risks, and other important considerations, some of which are briefly summarized in the following table. You should review the prospectus for additional information about these topics.’’ See also text following supra note 85 (discussing the legend that appears on the cover page or beginning of the summary prospectus). 114See infra text following note 201. 115See ACLI Comment Letter (stating that ‘‘[t]he priority should emphasize readability and clarity of presentation, rather than stipulating the number of appropriate columns.’’). 116See Item 3 of current Forms N–3, N–4, and N– 6 (‘‘Fee Table’’). 117See VIP Working Group Comment Letter (observing that the Fee Tables in some statutory prospectuses ‘‘[a]re quite long (pushing 7 pages) . . . [one] has a fee table with its own table of contents.’’). 118Although the presentation of fees and expenses in the Key Information Table is shorter and more tailored relative to what is included in the Fee Table, many of the calculations and instructions in the Key Information Table directly reference parallel provisions in the Fee Table. This should increase efficiency and comparability between the disclosures, and also help ensure that updates and amendments to the calculations and instructions in the Fee Table are appropriately reflected in the Key Information Table. 119See infra Section II.A.1.c.ii.(h). presentation may also facilitate comparisons of certain disclosure topics among variable contract prospectuses. We are requiring, as proposed, that a registrant provide the Key Information
Table under the heading ‘‘Important
Information You Should Consider About the [Contract].’’ We are not requiring the proposed legend that would have followed this heading, because we believe that legend is largely redundant with similar language on the cover page or beginning of the summary prospectus.113 As proposed, specified headings are required for each of the five topic areas included in the table, and under each heading will be two columns. The left column lists the required disclosure line-items for each of the five topic areas, and the right column provides a brief description for each corresponding line-item, according to the respective instructions for each proposed line￾item. Registrants will also provide a cross-reference to the location in the statutory prospectus where further information can be found for each line￾item.114 One commenter expressed a preference for allowing registrants the discretion to use a one or two column format based on specific formatting and design preferences.115 While we recognize there are many ways to effectively provide the required information, requiring all registrants to adhere to the same presentation standards facilitates comparability. The overall format of the Key Information
Table is depicted below:
FEES AND EXPENSES
Charges for Early Withdrawals.
Transaction Charges.
Ongoing Fees and Expenses (annual charges). RISKS Risk of Loss. Not a Short-Term Investment. Risks Associated with Investment Options. Insurance Company Risks. RESTRICTIONS Investment Options. Optional Benefits. TAXES Tax Implications. CONFLICTS OF INTEREST Investment Professional Compensation. Exchanges. (i) Fees and Expenses Variable contracts typically have multiple layers of fees, expenses, and charges that can be confusing to investors. While the Fee Table currently required in variable contract prospectuses provides comprehensive fee and expense information,116 that information is frequently presented over a span of two or more pages when a prospectus is printed on paper.117 We believe that investors may benefit from a shorter, more tailored discussion in the Key Information Table that is intended to convey how an investor’s elections under the contract (e.g., as to classes, optional benefits, portfolio companies, etc.) will impact the fees and expenses he or she will experience under his or her contract.118 As discussed below, we are requiring, as proposed, that the initial summary prospectus also include the Fee Table from the statutory prospectus.119 This framework will allow an investor to determine the level of fee information that best suits his or her informational needs. We received mixed comments regarding the proposed Key Information

120See VIP Working Group Comment Letter. In addition, almost all of the respondents to our Feedback Flier agreed that the examples reflecting how much an investor would pay for a variable annuity, including upfront fees and future costs were clear. 121See CAI Comment Letter; Lincoln Comment Letter; see also CFA Comment Letter (expressing skepticism that most investors would be able to pull together disparate information about the contract features and fees that is scattered throughout the initial summary prospectus to make an informed choice). 122See CAI Comment Letter. 123The Commission’s Office of Investor Education and Advocacy frequently receives investor inquiries about variable contract surrender charges, suggesting that many investors may be confused about how surrender charges work. 124See VIP Working Group Comment Letter; NAIFA Comment Letter. 125See AARP Comment Letter. 126See supra note 79. 127See rule 498A(b)(5)(i); see also Instruction 2(a) to Item 2 of Forms N–3, N–4, and N–6. The maximum surrender charge must be expressed as a percentage of the purchase payment or premium or the amount surrendered, whichever is applicable. 128 Id. 129See also IRI Fact Book, supra note 7. 130Registrants will continue to disclose the surrender fee as a percentage in the ‘‘Transaction Expenses’’ section of the Fee Table. See Item 4 of amended Forms N–3, N–4, and N–6. 131See ACLI Comment Letter (‘‘The assumed $100,000 average for variable contracts overstates the impact of surrender charges for contracts that are below that average.’’). 132See CAI Comment Letter; Lincoln Comment Letter; Transamerica Comment Letter; ACLI Comment Letter. 133See Proposing Release, supra note 6, at n.9. 134See infra Section II.C.2.d.iv; see also Item 4 of amended Forms N–3, N–4, and N–6 (requiring registrants to reflect the consequence of any surrender fee in the ‘‘Example’’ to the Fee Table, which, based on a $100,000 assumed investment, shows in dollar figures how much an investor would pay if the contract were surrendered after 1 year, 3 years, 5 years, and 10 years). fee tables. One commenter approved of the summary fee tables, stating ‘‘they are well-conceived.’’ 120 Two commenters opposed presenting fee information in the Key Information Table (and certain other sections of the initial summary prospectus) as repetitive and potentially confusing to investors, and instead recommended that all fee and expense information be disclosed in a single location in the initial summary prospectus (i.e., the full Fee Table, described in the section titled ‘‘Additional Information About Fees.’’).121 One commenter stated that numerical fee information should not be in the Key Information Table because the investor would not have sufficient context to understand specific dollar figures or percentages at that point of the document, and that a narrative explanation of the types of fees and expenses associated with the investment, accompanied by a cross￾reference to the Fee Table,
would be most useful to investors.122 While we acknowledge that some fee information presented in the Key Information Table may be duplicative of information in the Fee Table, we believe that this is consistent with our general layered disclosure approach. Investors can receive preliminary fee-related information in the Key Information
Table, and more detailed information in
the Fee Table later in the document. Moreover, we are not persuaded, as one commenter suggests, that providing only a narrative description of the charges, without corresponding numerical costs, would as effectively communicate to new investors the costs associated with a variable product as a presentation that includes numeric information. Accordingly, we are adopting, as proposed, the requirement to include specific dollar figures and percentages in the Key Information Table. Charges for Early Withdrawals. It is important that investors understand that if they make a withdrawal in the first several years following an investment in their contract, they may pay a significant charge that will reduce the value of their investment. We believe, however, that investors frequently do not understand, or may be surprised by, surrender charges associated with early withdrawals.123 For that reason, the Commission proposed that the Key Information Table require information intended to alert investors about the potential impact of surrender charges imposed on early withdrawals. Comments were mixed on this issue. Two commenters urged us to de￾emphasize the surrender charges in the summary prospectus, suggesting that their prominence overemphasizes the risk they present.124 However, another commenter stressed the need for prominent disclosure of surrender charges, stating that older investors might not understand that long surrender periods may limit their ability to access money in their account.125 Other commenters requested more flexibility in the terminology used for this heading, and objected to the use of the term ‘‘surrender charges.’’ 126 Given the consequences of misunderstanding the impact of a surrender charge for early withdrawals, we are requiring, largely as proposed, the first line-item in the table, ‘‘Charges for Early Withdrawals,’’ to state that if the investor withdraws money from the contract within [x] years following his or her last premium payment, he or she will be assessed a surrender charge. This statement will include the maximum surrender charge, and the maximum number of years that a surrender charge may be assessed since the last payment was made under the contract.127 In response to commenters’ concerns regarding the term ‘‘surrender charges,’’ we believe that the term ‘‘withdrawal’’ both sufficiently encompasses surrenders and other types of withdrawals and is a more intuitive term for investors, and have modified the heading accordingly. In addition, we are requiring, as proposed, an example of the maximum surrender charge an investor could pay (in dollars) under the contract assuming a $100,000 investment (e.g., ‘‘[i]f you make an early withdrawal, you could pay a surrender charge of up to $9,000 on a $100,000 investment.’’).128 The Commission proposed to use $100,000 as the basis for the surrender charge example because the value of the average variable annuity contract exceeds $100,000.129 For purposes of the Key Information
Table, we believe that providing a dollar figure may better communicate to investors the impact of surrender charges than a surrender charge schedule that shows the applicable surrender charge per year as a percentage, as reflected elsewhere in the document.130 One commenter objected to a surrender charge example in the Key Information Table based on an assumed investment of $100,000,131 while several others generally opposed using $100,000 as the basis for any fee examples in the initial summary prospectus, preferring the current $10,000 assumed investment level.132 As we noted in the Proposing Release, $100,000 more closely approximates the current average value of a variable annuity, and therefore we continue to believe that figure is more likely to result in cost projections that align with actual investor expectations and experience.133 For this reason, and as discussed in more detail below, we are requiring $100,000 as the baseline investment assumption for all fee examples in a variable contract prospectus, including the Key Information Table’s surrender charge example.134 Transaction Charges. As proposed, the second line-item in the ‘‘Fees and Expenses’’ section of the table, ‘‘Transaction Charges,’’ requires a statement explaining that in addition to surrender charges, the investor may also be charged for other transactions, accompanied by a brief description of the types of such charges (e.g., front-end loads, charges for transferring cash value between investment options,

135See rule 498A(b)(5)(i); see also Instruction 2(b) to Item 2 of Forms N–3, N–4, and N–6. Although surrender charges are a type of transaction charge, we are requiring surrender charges be separately disclosed in the Key Information Table to highlight to investors the significant costs associated with early withdrawals. 136See rule 498A(b)(5)(i); see also Instruction 2(c) to Item 2 of amended Forms N–3, N–4, and N–6. 137See rule 498A(b)(5)(i); see also Instruction 2(c)(i)(A) to Item 2 of amended Forms N–3 and N–4. 138The Commission did not propose to require and we are not adopting minimum and maximum annual fees for base contract expenses for Form N– 6 registrants because life insurance charges are based on underwriting and can vary significantly from one insured person to another depending on various demographic characteristics. This could lead to significant variations between these amounts, which may be confusing to investors. 139See rule 498A(b)(5)(i); see also Instruction 2(c)(i)(D) to Item 2 of amended Form N–4. Registrants will use the gross expense ratio disclosed in the Fee Table of a portfolio company’s current prospectus, which is the same basis for calculating portfolio company expense ratios as Items 4 (Fee Table) and 17 (Portfolio Companies Available Under the Contract) of Form N–4. 140The disclosure will also require, in a parenthetical or footnote to the table or each caption, an explanation of the basis for each percentage (e.g., as a percentage of separate account value or benefit base, or percentage of net asset value). See rule 498A(b)(5)(i); see also Instruction 2(c)(i)(C) to Item 3 of amended Form N–4 (percentage of net asset value). In a change from the proposal, we are revising the line-item heading for optional benefits available for an additional charge to clarify that the minimum and maximum fees disclosed for that line-item relate to a single optional benefit, if elected. 141See rule 498A(b)(5)(i); see also Instruction 2(c)(i)(B) to Item 2 of amended Form N–3. In a conforming change, we are revising the instructions to this item to clarify that optional benefits charges should not be included in the calculation of annual contract expenses, because optional benefits charges are separately displayed in a line-item titled ‘‘optional benefits available for an additional charge (if elected).’’ See Instruction 2(c)(i)(D) to Item 2 of amended Form N–3. 142See rule 498A(b)(5)(i); see also Instruction 2(c)(i) to Item 2 of amended Form N–3; Instruction 2(c)(i) to Item 2 of amended Form N–4. In a conforming change, we are revising this instruction in amended Form N–3 to mirror the parallel instruction in amended Form N–4 in order to identify the specific categories for which lowest and highest fees should be shown, as opposed to simply stating that the lowest and highest contract fees should be shown. Because the table showing minimum and maximum annual fees is intended to inform investors about the types and ranges of fees
associated with a variable contract, we are excluding certain assumptions from the calculations. For example, although some registrants do not charge extra for certain optional benefits (e.g., portfolio rebalancing and dollar-cost averaging), we believe investors should be alerted to the costs associated with optional benefits that are available for an additional charge. See Instruction 2(c)(i)(B) to Item 2 of amended Form N–3 (stating that disclosures should be provided for optional benefits available for an additional charge); Instruction 2(c)(i)(B) to Item 2 of amended Form N–4 (same). Accordingly, the disclosure should reflect the minimum cost associated with an optional benefit that has a fee. If the registrant offers any optional benefits for an additional charge, the minimum fee should not be zero. For example, if the registrant offers three optional benefits, with additional charges of 0%, 0.50%, and 1.50%, then the minimum and maximum annual fees reflected in the table would be 0.50% and 1.50%. 143 Instruction 2(c)(i)(A) to Item 2 of amended Forms N–3 and N–4. Many states require a contract specifications page that contains information about the purchase payments, fees, annuitization date and other information specific to an investor’s variable annuity contract. See, e.g., the Insurance Compact’s Individual Deferred Variable Annuity Contract Standards, available at https://www.insurance compact.org/rulemaking_records/080911_stds_ annuity_individual_deferred_variable.pdf. 144This reflects the principle, which experts in disclosure effectiveness for consumer-facing communications have encouraged, of ‘‘eliminat[ing] most complex calculations’’ for consumers. See Kleimann Presentation, supra note 112. 145See Item 4 of amended Forms N–3 and N–4. 146See Instruction 7 to Item 4 of amended Forms N–3 and N–4. 147See rule 498A(b)(5)(i); see also Instruction 2(c)(ii) to Item 3 of Forms N–3 and N–4. 148See rule 498A(b)(5)(i); see also Instruction 2(c)(ii)(A) to Item 3 of Forms N–3 and N–4. 149See rule 498A(b)(5)(i); see also Instruction 2(c)(ii)(C)(a) to Item 3 of Forms N–3 and N–4. The prescribed assumptions largely mirror the Fee Table, with the exception of the sales load, which is not reflected because we are seeking to charges for wire transfers, etc.).135 This requirement is designed to provide a simple narrative description to alert investors that surrender charges are not the only transaction charges they could pay. We received no comments regarding this line-item. Ongoing Fees and Expenses. We are adopting, largely as proposed, the third line-item in the ‘‘Fees and Expenses’’
section of the Key Information Table,
‘‘Ongoing Fees and Expenses (annual expenses),’’ which is designed to alert investors that they also will bear recurring fees on an annual basis.136 In Forms N–3 and N–4, the disclosure in this line-item will begin with the legend: ‘‘The table below describes the fees and expenses that you may pay each year, depending on the options you choose.’’ 137 Largely as proposed, Form N–4 registrants will disclose, in a tabular presentation in the order specified, the minimum and maximum annual fees for: (1) Base contract expenses;138 (2) investment options (e.g., portfolio company fees and expenses); 139 and (3) optional benefits available for an additional charge (for a single optional benefit, if elected).140 Since Form N–3 registrants have a single-tier structure and consolidate fees and expenses for investment options into base contract expenses, they will disclose the same information as Form N–4 registrants, except fees for base contract expenses and investment options will be consolidated into a single entry labeled ‘‘annual contract expenses.’’ 141 The minimum annual fee column will show the lowest fee for each annual fee category (i.e., the least expensive contract class, the lowest annual portfolio company expense or management fee, and the single least expensive optional benefit that is available for an additional charge).142 The maximum annual fee column will show the highest fees for these categories (and will reflect the single most expensive optional benefit). Additionally, a legend preceding the minimum and maximum annual fee
table will refer investors to their
contract specifications page for information about the specific fees they would pay each year based on the options elected.143 This presentation will consolidate the more detailed information in the Fee
Table, in an effort to minimize the need
for investors to perform complex calculations to understand the fees they will pay.144 For example, like the ‘‘Ongoing Fees and Expenses’’ line-item in the Key Information Table, the Fee
Table will also include information
about the contract’s base contract fee, portfolio company fees and expenses, and optional benefits.145 However, the Fee Table will include a separate response for each contract class.146 In order to condense this information, the parallel disclosure in the Key Information Table will be presented as fee ranges. As described in the Proposing Release, we also designed an example in Forms N–3 and N–4 to provide a high￾level cost illustration that will give an investor a tool to understand the basic cost framework of the contract. To emphasize that an investor’s choices have a significant impact on the costs associated with his or her investment, we are requiring a two-column tabular presentation in the order specified reflecting the lowest and highest annual cost estimates for the variable contract.147 The following legend will precede this table: ‘‘Because your contract is customizable, the choices you make affect how much you will pay. To help you understand the cost of owning your contract, the following
table shows the lowest and highest cost
you could pay each year. This estimate assumes that you do not take withdrawals from the contract, which could add surrender charges that substantially increase costs.’’ 148 As proposed, the lowest and highest annual dollar costs in this table are based on certain prescribed assumptions (i.e., a $100,000 investment) with no additional contributions, transfers, or withdrawals, no sales charges, and a 5% annual return over a hypothetical 10- year period.149 The lowest annual cost

highlight the contract’s ongoing expenses. Because registrants may charge different fees in different years (which may have the effect of making fees appear small under certain circumstances), we are basing the cost estimate on the average cost of a contract over a 10-year period to level-set the calculation. See Instruction 2(c)(ii)(C)(a) to Item 3 of Forms N–3 and N–4. 150See rule 498A(b)(5)(i); see also Instruction 2(c)(ii)(C)(a) to Item 2 of amended Forms N–3 and N–4. In a conforming change, we are revising this instruction in amended Form N–3 to mirror the parallel instruction in amended Form N–4 in order to identify the specific categories for which lowest and highest fees should be shown, as opposed to simply stating that the lowest and highest contract fees should be shown. Instruction 2(c)(ii)(C)(e) to Item 3 of amended Forms N–3 and N–4 direct that, unless otherwise stated, the least and most expensive combination of annual contract expenses and optional benefits available for an additional charge should be based on the disclosures provided in the Example in Item 4 (Fee Table), and that if a different combination of these items would result in different maximum or minimum fees in different years, the registrant must use the least or most expensive combination of these items each year. 151While the example in the Fee Table would include a similar cost estimate, it would reflect the most expensive combination of annual portfolio company expenses and optional benefits available for each contract class available under the contract. The Fee Table example also includes estimated costs for 1-, 3-, 5- and 10-year periods (not just for one year), and reflects different scenarios based on whether the contract is surrendered or annuitized. See Item 4 of amended Forms N–3 and N–4. 152For example, since he or she would know the range of costs to be paid over one year, he or she could estimate the costs to be paid over five years. 153We also encourage registrants to use design features (e.g., multiple colors or shading patterns) that visually distinguish minimum and maximum fees, and lowest and highest annual cost estimates. 154See CAI Comment Letter. 155See CAI Comment Letter; ACLI Comment Letter. 156See supra note 133 and accompanying text. 157 In addition, maximum expenses for a variable life insurance contract could potentially exceed 100% of contract value based on the underwriting of the variable life insurance contract, which could potentially confuse investors. 158 Instruction 2(c) to proposed Item 3 of Form N–6. 159See ACLI Comment Letter. 160See VIP Working Group Comment Letter; Comment Letter of Lisa LeRoy (Nov. 9, 2018). We understand that some contracts registered on Forms N–4 and N–6 charge a fee, often referred to as ‘‘fund facilitation fees,’’ to make portfolio companies available as investment options under the contract. This fee varies solely on the basis of the portfolio company selected, and offsets the lack of distribution fees
provided by certain low or no-cost portfolio companies, or provides revenue sharing from portfolio companies that wish to be included in the investment options under the variable contract. Because registrants on Form N–3 have a single tier structure and do not offer third-party portfolio companies as investment options, registrants on Form N–3 do not charge fund facilitation fees. 161As reflected by recent registration statement filings, insurers reflect fund facilitation fees in a number of ways, including as a separate account expense, as optional expenses, or under their own expense heading. Insurers typically include fund facilitation fees when calculating the Example to the Fee Table (some provide explanation in the footnotes) and the accumulation unit value tables. Insurers may also describe fund facilitation fees in the general description of the contract. 162See General Instruction A of amended Forms N–4 and N–6. 163See rule new 498A(b)(5)(i); see also Instruction 2(c)(i)(E) to Item 2 of amended Form N–4; Instruction 2(c)(i)(E) to Item 2 of amended Form N–6. Because we understand that Form N–3 registrants do not charge fund facilitation fees, we are not including this instruction in Form N–3. 164See, e.g., infra notes 300 (discussing platform charges in the context of the portfolio company/ investment option Appendix) and 661 (discussing platform charges in the context of the Fee Table). estimate is based on the least expensive combination of contract classes and portfolio company charges or management fees, and excludes optional benefits. The highest annual cost estimate reflects the most expensive combination of contract classes, portfolio company charges or management fees, and optional benefits.150 Excluding optional benefits from the lowest annual cost estimate, and including them in the highest annual cost estimate, is intended to illustrate the cost impact of adding optional benefits to a contract.151 With this information, the investor will be able to roughly estimate further costs,152 and may be able to obtain additional information about costs in the statutory prospectus if needed.153 Despite advocating for the removal of numerical fee information in other sections of the Key Information Table, one commenter stated that ‘‘[a]n investor would benefit from the proposed annual cost estimates, which are easy for an investor to understand and would not be repeated elsewhere in the [Initial Summary Prospectus]’’ and supported including the cost estimates in this Key Information Table fee
table.154 We received two comments
reiterating concerns with the $100,000 assumed investment amount,155 but as previously discussed, we are requiring this amount for all examples in variable contract summary and statutory prospectuses because $100,000 more closely approximates the current average value of a variable annuity, and therefore we continue to believe that
figure is more likely to result in cost
projections that align with actual investor expectations and experience.156 We received no other comments on the cost estimate in the Key Information
Table, and are adopting it as proposed.
For Form N–6, the Commission proposed a variation of the ‘‘Ongoing Fees and Expenses’’ section of the Key Information Table that was proposed for Forms N–3 and N–4. Because the costs associated with variable life insurance contracts are largely based on the personal characteristics of the insured (e.g., age, sex, health history), the Commission did not propose to require specific numeric information about the fees covering the cost of insurance and optional benefits,157 but instead proposed to require this section of the Key Information Table to include: (1) A brief statement that investment in a variable life insurance contract is subject to certain ongoing fees and expenses that are set based on characteristics of the insured; and (2) the minimum and maximum annual fees for the investment options in a tabular presentation.158 One commenter who addressed this aspect of the proposal supported our approach,159 and we are adopting this requirement as proposed. Fund Facilitation Fees. Two commenters asked how fund facilitation fees would be presented for purposes of the ‘‘Ongoing Fees and Expenses’’
section of the Key Information Table.160
Currently, although our registration forms do not specifically reference fund facilitation fees, insurers that charge the fees disclose them in the prospectus. In our staff’s experience, however, such practices vary.161 To ensure that registrants disclose these fees in a consistent manner, in a change from the proposal, the final rules and forms include provisions in the registration forms covering such fees. First, consistent with our understanding of these fees, the forms define ‘‘platform charge’’ as any fee charged by the registrant to make a portfolio company available as an investment option under the contract, and that varies solely on the basis of the portfolio company selected.162 To allow investors to see the lowest and highest charges associated with the range of available portfolio company options, we are modifying the proposed instructions to the Key Information Table to require the minimum (or maximum, if applicable) portfolio company expense ratio reflected in the table to include any platform fee charges to invest in that option.163 The final rule and forms also require certain additional disclosures regarding platform charges in the Fee
Table and in the portfolio company/
investment option Appendix as described below.164 (ii) Risks As proposed, the Key Information
Table includes a condensed discussion
of contract risks. Current risk disclosures in variable contract statutory prospectuses typically span multiple pages. While this level of disclosure may be appropriate for a statutory prospectus, we believe that a more￾concise overview presentation of contract risks is better suited for the Key

165See rule 498A(b)(5)(ii); see also Instruction 3 to Item 3 of amended Forms N–3, N–4, and N–6. 166See rule 498A(b)(5)(ii); see also Instruction 3(a) to Item 3 of amended Forms N–3, N–4, and N–6 (‘‘State that an investor can lose money by investing in the Contract.’’). 167See ACLI Comment Letter. 168See AARP Comment Letter. 169See rule 498A(b)(5)(ii); see also Instruction 3(b) to Item 2 of amended Forms N–3, N–4, and N–6 (‘‘State that a Contract is not a short-term investment and is not appropriate for an investor who needs ready access to cash, accompanied by a brief explanation.’’). 170See rule 498A(b)(5)(ii); see also Instruction 3(c) to Item 2 of amended Forms N–3, N–4, and N–6 (e.g., from Form N–4, ‘‘State that an investment in the Contract is subject to the risk of poor investment performance and can vary depending on the performance of the investment options available under the Contract (e.g., Portfolio Companies), that each investment option (including any fixed account investment option) will have its own unique risks, and that the investor should review these investment options before making an investment decision.’’). Because most variable annuity contracts typically offer fifty or more portfolio companies to which investors can allocate their purchase payments, we are not requiring that the Key Information Table include risk information specific to each portfolio company, as to do so would undermine the goal of brevity for this disclosure item. 171See Comment Letter of Chris Tobe (Nov. 1, 2018). 172See rule 498A(b)(5)(ii); see also Instruction 3(d) to Item 2 of Forms N–3, N–4, and N–6 (e.g., from Form N–4, ‘‘State that an investment in the Contract is subject to the risks related to the Depositor, including the extent to which any obligations (including under any fixed account investment options), guarantees, or benefits are subject to the claims-paying ability of the Depositor.’’). 173See rule 498A(b)(5)(ii); see also Instruction 3(d) to Item 2 of amended Forms N–3, N–4, and N– 6 (e.g., from Form N–4, ‘‘Further state that more information about the Depositor, including if applicable its financial strength ratings, is available upon request, and indicate how such requests can be made (e.g., via toll-free telephone number)’’). See also Item 1(b)(1) of amended Form N–3, amended Form N–4, and amended Form N–6 (requiring the back cover page of the statutory prospectus to include a toll-free (or collect) telephone number for investor inquiries); rule 498A(b)(2)(v)(B) (requiring the front cover page of the initial summary prospectus to include a toll-free telephone number and email address for investor inquiries). 174See Instruction to Instruction 3(d) to Item 2 of amended Forms N–3, N–4, and N–6. 175See VIP Working Group Comment Letter. 176See, e.g., Item 6 of amended Form N–4 (‘‘General Description of Registrant, Depositor, and Portfolio Companies’’); Item 26(g) of amended Form N–4 (‘‘Reinsurance Contracts’’). 177See rule 498A(b)(5)(i);
see also Instruction 3(e) to Item 32 of amended Form N–6 (‘‘Briefly state (1) the circumstances under which the Contract may lapse (e.g., insufficient premium payments, poor investment performance, withdrawals, unpaid loans or loan interest), (2) whether there is a cost associated with reinstating a lapsed Contract, and (3) that death benefits will not be paid if the Contract has lapsed.’’). Information Table in light of the goals of the summary prospectus. Like the summary of fee and expense information that will appear in the Key Information Table, these risk summaries are intended to provide a concise overview, with additional information available for an investor who desires or requires additional details. Specifically, the table will include four line-items under the heading ‘‘Risks,’’ each of which includes disclosure about a risk that we believe investors should be alerted to: (1) Risk of loss; (2) risks that could occur if an investor believes a variable annuity is a short-term investment; (3) risks associated with the contract’s investment options; and (4) insurance company risks.165 Each of these line￾items will include succinct descriptions of the respective risk. The first line-item is intended to convey that although variable contracts have elements of insurance, unlike most traditional forms of insurance, these products are subject to the risk of loss.166 This could help prevent any misunderstanding if, for example, an investor confused a variable annuity contract and a fixed annuity contract and did not understand that the contract value in a variable annuity could decline. One commenter thought the ‘‘risk of loss’’ disclosure might be confusing because variable contracts should be held for the long term and that it would be more appropriate to state that the contract may be subject to market fluctuations or risks.167 Another commenter stated that the disclosure should include the fact that high fees increase the risk of loss.168 While risk of loss manifests in many different ways, we believe the proposed language serves its intended purpose of putting investors on notice that they can lose money by investing in the contract, and therefore we are adopting the requirement as proposed. The second line-item is intended to emphasize to investors that variable contracts are generally long-term investments and not appropriate for an investor who needs ready access to cash, particularly in view of the impact of surrender charges and/or tax penalties for early withdrawals.169 The third line-item is intended to focus on the general risk of poor investment performance (as opposed to the details of the specific risks associated with each of the particular investment options available under the contract).170 We received no comments on these line￾items and are adopting them largely as proposed, although we have added a reference related to general or ‘‘fixed account’’ investment options to clarify for investors who might not understand that
fixed account investment options have their own unique risks (such as credit risk). The fourth line-item is meant to alert investors that any obligations, guarantees, or benefits under the contract that may be subject to the claims-paying ability of the insurance company (as opposed to the separate account, which is insulated from the claims of the insurance company’s creditors) will depend on the financial solvency of the insurance company. One commenter noted that this line-item is especially important because variable annuity products bear liquidity and single entity credit risk of the insurance company.171 We agree and are adopting this line-item largely as proposed, but have added a reference to obligations related to general or ‘‘fixed account’’ investment options to clarify this point for investors who might not understand that any fixed account investment options may still be subject to the insurer’s solvency and claims-paying ability.172 As part of these disclosures, the registrant is required to state that additional information about the insurance company, including, if applicable, its financial strength ratings, may be obtained upon request, and indicate how such requests can be made (e.g., via toll-free telephone number).173 In lieu of providing the portion of this statement regarding the availability of the insurance company’s financial strength ratings, a registrant could include the insurance company’s financial strength rating(s).174 One commenter suggested requiring a brief description of the insurer that includes the identification of the entity that is responsible for the insurance obligations under the contract.175 Although that and other related information can be helpful to investors, and is required to be disclosed in variable contract statutory prospectuses, we do not believe that this line-item in the Key Information Table is the appropriate location for such disclosures.176 As discussed above, the risks section of the Key Information
Table is intended to provide succinct
descriptions of certain key risks, as opposed to providing general factual information that is redundant with disclosures provided elsewhere in the prospectus and the registration statement. A fifth line-item, which will only appear in the ‘‘Risks’’ section for variable life insurance contracts, is meant to focus on contract lapse, which is a key risk for variable life insurance investors (but not relevant to variable annuity contracts).177 For example, a variable life insurance contract may

178See Comment Letter of Jill Lydos (Jan. 2, 2019) (stating that other important risks are not included in the initial summary prospectus, such as the risk of divorce affecting insurance benefits in a joint contract and the risk that, for an investor in a qualified contract with a withdrawal benefit, the withdrawal amount may not be sufficient to cover the required minimum distributions); see also Breacher Comment Letter. 179See rule 498A(b)(5)(i); see also Instruction 1(c) to Item 2; Item 5 of amended Forms N–3, N–4, and N–6. While we understand that variable annuity statutory prospectuses today commonly discuss contract risks (although Form N–3 and Form N–4 do not currently require them to do so), this discussion can be dispersed throughout the prospectus. 180See rule 498A(b)(5)(i); see also Instruction 4 to Item 2 of amended Forms N–3, N–4, and N–6. We recognize that there may be overlap between the line-items for ‘‘Investments’’ and ‘‘Optional Benefits,’’ since many optional benefits limit the investments available to investors. 181See rule 498A(b)(5)(i); see also Instruction 4(a) to Item 2 of amended Forms N–3, N–4, and N–6 (‘‘State whether there are any restrictions that may limit the investments that an investor may choose, and/or whether there are any limitations on the transfer of Contract value among Portfolio Companies. If applicable, state that the insurer reserves the right to remove or substitute Portfolio Companies as investment options.’’). As a conforming change, we are changing the name of this line-item from ‘‘Investment Options’’ as proposed in Forms N–4 and N–6 to ‘‘Investments’’ to match the name of this line-item in amended Form N–3. See Item 2 of amended Forms N–3, N–4, and N–6. 182See rule 498A(b)(5)(ii); see also Instruction 4(b) to Item 2 of amended Forms N–3, N–4, and N– 6 (‘‘State whether there are any restrictions or limitations relating to optional benefits, and/or whether an optional benefit may be modified or terminated by the Registrant. If applicable, state that withdrawals that exceed limits specified by the terms of an optional benefit may affect the availability of the benefits by reducing the benefit by an amount greater than the value withdrawn, and/or could terminate the benefit.’’). In a change from the proposal, registrants must state that this restriction or limitation may be triggered when withdrawals exceed limits specified by the terms of an optional benefit, which we believe will help investors better understand the circumstances under which this may occur. 183See CAI Comment Letter. 184See, e.g., rule 498A(b)(5)(iv), Item 12(a) of amended Form N–3, and Item 11(a) of amended Forms N–4 and N–6 (all referencing the requirement that the table summarizing certain benefits available under the contract, which would appear in both the initial summary prospectus and the statutory prospectus, will be required to include a brief description of restrictions/limitations associated with each benefit); see also
rule 498A(b)(5)(ix), Item 19 of amended Form N–3, and Item 18 of amended Forms N–4 and N–6 (all referencing the requirement that, if the availability of one or more portfolio company varies by benefit offered under the contract, the Appendix that would appear in the initial summary prospectus, updating summary prospectus, and statutory prospectus will be required to include a separate
table indicating which portfolio companies are
available under each of the benefits offered under the contract). lapse when sufficient premium payments are not made by the investor. Since inadvertent contract lapse could negate the insurance benefit of the variable life insurance contract, we believe this risk should be included in the Key Information Table. We received no comments on this line-item and are adopting it as proposed. Some commenters identified other risks relevant to certain subsets of investors and contracts and suggested those risks be added to the Key Information Table.178 We decline to revise the Key Information Table to include those additional risks because the required disclosures in the Key Information Table are intended to identify key risks that are common to all variable insurance contracts, and we do not believe that any of the suggested additional risks are necessarily common across all variable insurance contracts. As discussed further below, we are also adopting, as proposed, a new requirement in Forms N–3 and N–4 that, like the current parallel requirement in Form N–6, requires the registrant to summarize the principal risks of purchasing a contract in a consolidated risk section within the statutory prospectus.179 Registrants have the flexibility to discuss any principal risks when responding to this requirement, including principal risks relevant to specific subsets of investors and contracts. (iii) Restrictions As proposed, the Key Information
Table requires registrants to briefly
disclose those features of a variable contract that commonly include restrictions or limitations, namely the investment options and optional benefits that the contract offers. We designed this section of the table to include separate line-items for each of these topics under the heading ‘‘Restrictions.’’ 180 For example, many variable annuity contracts have optional benefits that restrict the percentage of assets that investors can allocate to certain investment options, such as more volatile categories of equity funds, in order to facilitate the insurance company’s ability to reserve for the guarantees under the benefit. The ‘‘Investments’’ line-item requires registrants to disclose whether there are any restrictions that may limit the investments that an investor may choose and/or limitations on the transfer of contract value among portfolio companies, and if applicable, that the insurer reserves the right to remove or substitute portfolio companies as investment options.181 The ‘‘Optional Benefits’’ line-item requires registrants to disclose whether there are any restrictions or limitations relating to optional benefits, as well as whether the registrant may modify or terminate an optional benefit.182 We included these line-items in the Key Information Table to put investors on notice of restrictions and limitations associated with different options that are available under the contract. One commenter recommended placing greater emphasis on the investment restrictions associated with portfolio company options by renaming this section of the Key Investment Table ‘‘Investment Restrictions,’’ which would focus solely on benefit-related investment restrictions and the impact of not complying with such investment restrictions (including contract termination), and requiring all disclosure regarding restrictions or limitations related to optional benefits to be described in other sections of the initial summary prospectus.183 We are adopting the Restrictions line￾items in the Key Information Table as proposed. As explained in the Proposing Release, we chose not to require a description of the specific restrictions and limitations associated with each of the available investment options and optional benefits because doing so would likely add significant length to the table, and such information will be provided in other parts of the initial summary prospectus, as well as the statutory prospectus.184 Requiring a short description of these restrictions or limitations in the Key Information Table will alert investors of their existence. Investors looking for detailed descriptions of each such restriction or limitation may then review the ‘‘[Other]’’ Benefits Available Under the Contract’’ section. Finally, we decline to place greater emphasis on investment related restrictions in the Restrictions line-item, such as by renaming it ‘‘Investment Restrictions,’’ as this section is intended to cover all types of limitations or restrictions, including any
non-investment related limitations or restrictions. (iv) Taxes Because variable contracts are subject to different tax rules than other investment products, with both tax advantages and potential tax impacts in certain circumstances, we are requiring that the Key Information Table include tax-related disclosures. The ‘‘Tax Implications’’ line-item of the table, which will appear under the heading ‘‘Taxes,’’ requires a statement that investors should consult with a tax professional to determine the tax implications of an investment in, and payments received under, the variable

185See rule 498A(b)(5)(i); see also Instruction 5 to Item 2 of amended Forms N–3, N–4, and N–6. 186 Id. 187See AARP Comment Letter (recommending disclosure that, among other things, purchasing an annuity in an IRA in order to defer income is unnecessary since the IRA already is tax-deferred; funding an annuity with tax-deferred dollars gives the investor no additional tax benefits; and funding an annuity with after-tax money provides that all future gains are tax-deferred, but any gains are taxed at a higher ordinary income tax rate than capital gains rates). 188See Breacher Comment Letter. 189See, e.g., Item 15 of amended Form N–3, Item 14 of amended Form N–4, and Item 15 of amended Form and N–6. 190A registrant may omit these line-items if neither the registrant nor any of its related companies pay financial intermediaries for the sale of the contract or related services. See Instruction to Instruction 6 to Item 2 of amended Forms N–3, N–4, and N–6. 191See rule 498A(b)(5)(i); see also Instruction 6(a) to Item 2 of amended Forms N–3, N–4, and N–6. 192See Item 8 of Form N–1A (requiring disclosure alerting investors who purchase a fund through a broker-dealer or other financial intermediary (such as a bank) that the fund and its related companies may pay the intermediary for the sale of fund shares and related services, and such payments may create a conflict of interest by influencing the broker￾dealer or other intermediary and your salesperson to recommend the fund over another investment). 193See rule 498A(b)(5)(i); see also Instruction 6(b) to Item 2 of amended Forms N–3, N–4, and N–6. 194Replacement contracts usually occur in connection with a tax-free exchange of non￾qualified contracts under section 1035 of the Internal Revenue Code, or because of a rollover or direct transfer of a qualified plan contract (e.g., an individual retirement annuity) from one life insurance company to another. See 26 U.S.C. 1035; see also 26 CFR 1.1035–1. 195See CAI Comment Letter (asking that insurers be permitted to disclose other specific conflicts of interest that may be applicable to their products or services); Cardozo Clinic Comment Letter (recommending that conflicts of interest be removed from the Key Information Table and included in a separate section immediately following Key Information Table); AARP Comment Letter (recommending a requirement to disclose whether the person selling the variable contract is acting in the best interest of the investor.). 196See ACLI Comment Letter (stating that because investment professional fees are not traditionally
part of the contract, disclosure of those types of fees
should not be required).
197See rule 498A(b)(5)(i); see also Instruction 1(a) to Item 2 of amended Forms N–3, N–4, and N–6. 198See Instruction 1(a) to Item 2 of amended Forms N–3, N–4, and N–6. 199 Id. See also General Instruction C.3.(d)(ii) to amended Forms N–3, N–4, and N–6. contract.185 A registrant must also state that there is no additional tax benefit to the investor if the contract is purchased through a tax-qualified plan or individual retirement account (IRA), and that withdrawals will be subject to ordinary income tax and may be subject to tax penalties.186 One commenter stated that the tax consequences of purchasing a variable contract should be explained, and provided a list of six examples to include in the Key Information Table.187 Another recommended adding disclosure regarding required minimum distributions for group contracts.188 As discussed in the Proposing Release, the tax disclosure in the Key Information Table is meant to alert investors to tax implications of their investment in a location using a presentation we believe investors are most likely to see and understand. While we agree that additional tax information could provide context for investors, it would also add length to what is intended to be a brief and targeted description in a summary document. Moreover, similar to the other line-items in the Key Information
Table, additional detail about the tax
implications of an investment in a variable contract will also be available in the statutory prospectus.189 Finally, the tax disclosure is meant to include tax considerations that are generally applicable across all variable contracts, rather than a discussion of all tax considerations that may be relevant to a particular contract or investor. For these reasons we decline to add to the list of tax disclosures in the Key Information
Table, and are adopting this
requirement as proposed.
(v) Conflicts of Interest As proposed, the Key Information
Table must include, if applicable,190
line-items regarding conflicts of interest that may arise in the context of variable contracts, specifically with regards to investment professional compensation and exchanges. The ‘‘Investment Professional Compensation’’ line-item requires registrants to disclose, if applicable, that an investment professional may be paid for selling the contract to investors.191 A registrant must describe the basis upon which such compensation is typically paid (e.g., commissions, revenue sharing, compensation from affiliates and third parties). A registrant providing the required disclosure also must state that investment professionals may have a financial incentive to offer or recommend the contract over another investment for which the investment professional is not compensated (or compensated less). This requirement reflects analogous disclosure that appears in mutual fund summary prospectuses 192 and is designed to address similar concerns—namely to alert investors to the existence of compensation arrangements for investment professionals and the potential conflicts of interest arising from these arrangements. The ‘‘Exchanges’’ line-item requires the registrant to state, if applicable, that some investment professionals may have a financial incentive to offer a new contract in place of the one owned by the investor.193 A registrant must further state that investors should only exchange their contract if they determine, after comparing the features, fees, and risks of both contracts, that it is preferable for them to purchase the new contract rather than continue to own the existing contract. When a contract owner purchases a new annuity contract to replace an existing one, the new contract is referred to as a replacement contract.194 We understand that a significant proportion of variable contract sales stem from exchanges, and these disclosures are intended to alert investors to potential conflicts of interest that may arise in that context. Several commenters sought to expand the scope of the conflicts of interest disclosure,195 while others asked us to narrow it.196 We are adopting this line￾item as proposed. As noted above, the variable contract summary prospectus conflict of interest disclosures were modeled on the parallel requirement for mutual fund summary prospectuses. Based on our experience with the mutual fund summary prospectus regime we believe the required disclosure strikes the right balance of alerting investors to certain conflicts in a summary document, while accommodating additional detail that may be described in the statutory prospectus. (vi) General Instructions In addition to the proposed instructions specific to each line-item in the Key Information Table, we are adopting a set of general instructions to the table. As proposed, to streamline the disclosure and encourage registrants to use plain-English, investor-friendly principles when drafting the disclosures, the general instructions require registrants to disclose the required
information in the tabular presentation reflected in the form, in the order specified.197 However, registrants are permitted to exclude any disclosures that are not applicable or modify any of the statements required to appear in the
table so long as the modified statement
contains comparable information.198 In a change from the proposal, notwithstanding this instruction and a General Instruction permitting the use of alternate terminology under certain conditions, the title, headings, and sub￾headings for this tabular presentation may not be modified or substituted with alternate terminology unless otherwise provided.199 We believe having a

200See, e.g., Jackson Comment Letter; Pacific Life Comment Letter. 201See rule 498A(b)(5)(i); see also General Instruction 1(b) to Item 2 of amended Forms N–3, N–4, and N–6. The instruction specifies that the cross-reference should be adjacent to the relevant disclosure, either within the table row, or presented in an additional table column. We also separately proposed that any cross￾reference that is included in an electronic version of a summary prospectus must be an active hyperlink. See proposed rule 498A(i)(4). As discussed below, we are not adopting this requirement. See also infra Section II.A.6. 202See Proposing Release, supra note 6, at nn.162 and accompanying text. 203We recognize that there may be operational challenges in syncing page numbers, especially between lengthy documents. See CAI Comment Letter (stating that page numbers are often in flux until the last moments prior to finalization). 204See CAI Comment Letter (stating that proposed rule 498A(h)(1)(iii), which was modeled on parallel provisions in rule 498(e)(2)(iii) and applies to the summary prospectus as a whole, provides greater flexibility than the proposed form instruction, which would require direct links between the Key Information Table and the statutory prospectus with no alternative means); ACLI Comment Letter (recommending that the proposed requirement for additional embedded links be removed, and parallel the practices currently required in mutual fund summary disclosure). 205See rule 498A(i)(4) (‘‘[A]ny website address or cross-reference that is included in an electronic version of the Summary Prospectus must include an active hyperlink or provide another means of facilitating access through equivalent methods or technologies that lead directly to the relevant website address or cross-referenced information.’’); Instruction 1(b) to Item 2 of amended Forms N–3, N–4, and N–6 (‘‘Cross-references in electronic versions of the Summary Prospectus and/or Statutory Prospectus should link directly to the location in the Statutory Prospectus where the subject matter is discussed in greater detail, or should provide a means of facilitating access to that information through equivalent methods or technologies.’’). 206See rule 498A(b)(5)(i); see also Instruction 1(c) to Item 3 of amended Forms N–3, N–4, and N–6. 207See rule 498A(b)(5)(ii); see also Item 3 of amended Forms N–3, N–4, and N–6; infra Section II.C.2.c. 208See rule 498A(b)(5)(ii); see also Item 3(a) of amended Forms N–3, N–4, and N–6. 209One commenter recommended that to provide greater context for investors, this section should provide comparative information, stating ‘‘for example, if the purpose of the contract is ‘to provide or supplement the investor’s retirement income,’ the purpose should also state that other types of investments or products can achieve the same result.’’ See AARP Comment Letter. We decline to require this type of disclosure because it would not provide enough contextual information about
the other products to permit comparison, and we do not require this type of disclosure for any other investment product. 210See rule 498A(b)(5)(ii); see also Item 3(b) of amended Forms N–3 and N–4. 211See Cardozo Clinic Comment Letter (describing retail investors that failed to understand consequences of annuitizing, the adverse impact of withdrawals on optional benefits, and the fact that certain benefits can only be elected during the accumulation phase). 212However, a detailed explanation of the separate account, sub-accounts, portfolio companies, and any ‘‘fixed account’’ (general account) investment options is not required. See Instruction 2 to Item 2(b)(1) of amended Forms N– 3 and N–4. headings for the Key Information Table facilitates the ability of investors to easily compare key information and features for different variable contracts. Several commenters acknowledged the importance of an investor’s ability to compare variable contracts across different insurance companies,200 and we believe the use of standardized terms in this manner within the Key Information Table could facilitate comparability. The general instructions require registrants to provide cross-references or links in electronic versions of the summary prospectus to the location in the statutory prospectus where the subject matter required by the line-item is described in greater detail.201 As explained in the Proposing Release, we believe that providing cross-references and links (or similar technological access) will help investors who seek additional information quickly find more detailed information that may be important to them.202 The cross￾reference or link need not necessarily be a page number or page range; 203 instead, a registrant could cross￾reference or link to a particular section or sub-section, or heading or sub￾heading, in the statutory prospectus. In response to comments,204 we are modifying this general instruction in the context of the Key Information Table to allow registrants to provide another means of facilitating access through equivalent methods or technologies that lead directly to the relevant cross￾referenced information.205 In the context of the Key Information Table, this gives registrants the flexibility to provide a continuously visible sidebar in the summary prospectus that includes hyperlinks to sections in the statutory prospectus, as an alternative to providing a separate link for each line￾item in the Key Information Table that links directly to the section in the statutory prospectus where the subject matter of that line-item is discussed in additional detail. Registrants who choose this option generally should provide a cross-reference for each line￾item in the Key Information Table that directly corresponds to the appropriate heading in the sidebar (because otherwise an investor may find it difficult to determine which of the headings in the sidebar will provide more detailed information regarding that line-item). Finally, in
keeping with our goal of providing a brief tabular presentation of key facts that can be easily digested by investors, the instructions provide that all disclosures in the Key Information
Table should be short and succinct,
consistent with the limitations of a tabular presentation.206 Overview of the Contract We are adopting, largely as proposed, the requirement that an initial summary prospectus include a section describing certain basic and introductory information about the contract and its benefits, under the heading ‘‘Overview of the [Variable Annuity/Life Insurance] Contract.’’ 207 We are making only one substantive modification from the proposal related to this section. As proposed, this section would have appeared as the first substantive section of the initial summary prospectus, but as discussed above, this section will follow the Key Information Table under the final rule. Purpose of Contract. As proposed, the requirement to briefly describe the purpose(s) of the contract in general terms 208 is intended to provide the reader with information on what financial objectives that contract could help the investor achieve, as well as the profile of an investor for whom the contract may be appropriate (e.g., by discussing a representative investor’s time horizon, liquidity needs, and financial goals). This requirement could be satisfied, for example, by stating that the contract is meant to help the investor accumulate assets through an investment portfolio, to provide or supplement the investor’s retirement income, or to provide death benefits and/or other benefits, and that the contract may not be appropriate for an investor that intends to access his or her invested funds within a short-term timeframe.209 Phases of Contract (for Variable Annuity Contracts). As proposed, the requirement to include a brief description of the accumulation (savings) phase and annuity (income) phases of the contract 210 is meant to provide basic information about how the variable annuity contract functions, which in turn will help highlight how the contract differs from other types of investment products. It also is designed to address common areas of confusion among variable annuity investors. For example, it highlights the effect of annuitization on the ability to make withdrawals and the continuation of contract benefits.211 This discussion requires a brief overview of the investment options available under the contract (that is, portfolio companies and any general or fixed account option).212 The registrant

213See rule 498A(b)(5)(ii); see also Instruction 1 to Item 3(b)(1) of amended Forms N–3 and N–4. 214See rule 498A(b)(5)(ii); see also Item 3(b)(2) of amended Forms N–3 and N–4. 215See rule 498A(b)(5)(ii); see also Item 3(b) of amended Form N–6. The instructions will require the registrant to disclose that additional information on the portfolio companies is provided in an
Appendix to the summary prospectus, and provide
a cross-reference to the Appendix. In addition, the instructions note that a detailed explanation of the separate account, sub-accounts, portfolio companies, and any ‘‘fixed account’’ (general account) investment options is not required. See rule 498A(b)(5)(ii); see also Instructions to Item 3(b)(3) of amended Form N–6. 216See rule 498A(b)(5)(ii); see also Item 3(c) of amended Forms N–3, N–4, and N–6. 217See ACLI Comment Letter. 218See Breacher Comment Letter. 219See proposed rule 498A(b)(5)(iii); see also proposed Item 11(a) of Form N–3; proposed Item 10(a) of Form N–4; proposed Item 10(a) of Form N– 6. 220See CAI Comment Letter; Comment Letter of Yassi Abdullah (Dec. 31, 2019) (‘‘the standard death benefit isn’t such a big deal under my contract.’’); Comment Letter of Kristin Bowler (Feb. 11, 2019) (stating that the standard death benefit is ‘‘not that important.’’). The respondents to our Feedback Flier collectively identified the standard death benefit as the ‘‘least useful’’ section of the hypothetical initial summary prospectus. 221See CAI Comment Letter. 222See CAI Comment Letter (stating that ‘‘these death benefits generally are: (a) Face amount (the ‘‘level’’ death benefit); (b) face amount plus cash or contract value (the ‘‘increasing’’ death benefit); and in some cases, (c) return of (net) premium.’’) 223See rule 498A(b)(5)(iii); Item 10(a) of amended Form N–6; see also infra Section II.C.2.k. 224See rule 498A(b)(5)(iv); Item 11(a) of amended Form N–6; see also infra Section II.C.2.l. also must prominently disclose that additional information on the portfolio companies is provided in an Appendix to the summary prospectus (or elsewhere in the case of registrants on Form N–3 that chose to omit the
Appendix from the initial summary
prospectus in favor of more detailed information about investment options as required by Item 19 of amended Form N–3), and provide a cross-reference to the Appendix.213 Finally, the registrant must state, if applicable, that if an investor annuitizes, he or she will receive a stream of income payments, but he or she will be unable to make withdrawals, and death benefits and living benefits will terminate.214 Premiums (for Variable Life Insurance Contracts). For the same reasons discussed in the Proposing Release, instead of requiring a description of the phases of the contract as with variable annuities, Form N–6 requires the ‘‘Overview’’ section to briefly describe the payment of premiums under the variable life insurance contract. This description of premiums must include:
(1) Whether premiums may vary in timing and amount (e.g., flexible premiums); (2) whether restrictions may be imposed on premium payments (e.g., by age of insured, or by amount); (3) how premiums may be allocated (this discussion should include a brief overview of the investment options available under the contract, as well as any general (fixed) account options); and (4) a statement that payment of insufficient premiums may result in a lapse of the contract.215 Unlike variable annuities, variable life insurance generally requires the investor to make continuing premium payments in order to avoid a lapse of the contract. We therefore believe the ‘‘Overview’’ section should prominently explain the role of premium payments in the contract, and highlight for investors a key risk that non-payment (or insufficient payment) of premiums could result in contract lapse. Contract Features. Finally, this
section will include a summary of the
contract’s primary features, including annuity benefits, death benefits, withdrawal options, loan provisions, and any available optional benefits.216 If applicable, the registrant must state that the investor will incur an additional fee for selecting a particular benefit. Because registrants will discuss many of these subjects in other sections of the initial summary prospectus in greater detail (and will discuss each of these subjects in more detail in the contract statutory prospectus), this paragraph is intended to be summary in nature. One commenter suggested that the proposed list of overview topics was reasonable, but requested flexibility to allow registrants to prepare appropriate disclosures based on their products, markets, and customers.217 A second commenter suggested that the contract’s primary features and options should be listed in order of importance.218 Because we believe the item requirements for the ‘‘Overview’’
section focuses on the most important
features and options of a contract, while also giving registrants sufficient flexibility to tailor the disclosures in the manner best designed to briefly explain each product’s features, we are adopting the substantive requirements for this
section as proposed.
Standard Death Benefits
We are modifying our proposed approach to death benefit disclosures in the initial summary prospectus. To highlight standard death benefit limitations and the possibility of its termination, the Commission proposed to require a section briefly describing the contract’s standard death benefit,219 immediately followed by a separate
section describing any optional death
benefits, as well as standard and optional living benefits. We received several comments suggesting that we eliminate the standard death benefit as a standalone
section of the initial summary
prospectus for variable annuities because, as one commenter explained, ‘‘investors typically don’t purchase variable annuities for their death benefits, which don’t generally require an additional fee.’’ 220 Instead, commenters recommended that for variable annuities standard death benefits should be discussed in conjunction with the ‘‘Other Benefits Available Under the Contract.’’ 221 After considering these comments, in a change from the proposal, we are not requiring variable annuity registrants to include a separate section of the initial summary prospectus briefly describing the standard death benefit. Registrants will instead provide standard death benefit information with all other standard and optional benefits, as discussed below. One commenter stated that ‘‘the concept of a ‘standard’ death benefit generally does not apply to [variable life insurance] contracts.’’ The commenter noted that instead, variable life insurance contracts generally offer a choice of two or three death benefit options, none of which is standard.222 This commenter recommended retaining a standalone section of the initial summary prospectus to describe variable life insurance contract death benefits, but suggested eliminating ‘‘Standard’’ from the heading, to be simply re-titled ‘‘Death Benefits.’’ This commenter also stated that the initial summary prospectus should summarize death benefit information rather than requiring almost all the information about death benefits in the variable life insurance contract’s statutory prospectus. In response to these comments, we are revising the rule to clarify that ‘‘standard death benefits’’ exclude optional or supplemental death benefits available for a separate charge.223 To the extent that variable life insurance contracts present investors with a choice among several death benefit options whose costs are already reflected in the base contract, we believe that those options should be disclosed as part of the ‘‘standard death benefit’’ disclosures. To the extent that death benefits are available for a separate charge, those benefits should be presented as part of the section ‘‘Other Benefits Available Under the Contract.’’ 224 We are retaining the heading ‘‘Standard Death Benefits’’ in the initial summary prospectus to

225See rule 498A(b)(5)(iii); Item 10(a) of amended Form N–6; see also infra Section II.C.2.k. 226See Proposing Release, supra note 6, at n.17 and accompanying text (regarding the prevalence of optional benefits). 227See rule 498A(b)(5)(iv); see also Item 11(a) of amended Form N–3; Item 10(a) of amended Form N–4. 228See Item 11(a) of amended Form N–6. 229For example, the description of limitations or restrictions could include statements like ‘‘benefit limits investment options available’’ or ‘‘withdrawals could terminate benefit.’’ See Instruction 6 to Item 11(a) of amended Form N–3; Instruction 6 to Item 10(a) of amended Form N–4; Instruction 6 to Item 11(a) of amended Form N–6. 230See Instruction 5 to Item 11(a) of amended Form N–3; Instruction 5 to Item 10(a) of amended Form N–4; Instruction 5 to Item 11(a) of amended Form N–6. 231See [Feedback Flier] Comment Letters (seeking clarification regarding whether the ‘‘Fee’’ in the ‘‘Other Benefits Under the Contract’’ table was the current or maximum fee); see also VIP Working Group Comment Letter; Nedar Comment Letter; LeRoy Comment Letter. 232For example, the table could disclose ‘‘up to 1.5%’’ or provide similar disclosure. See Instruction 5 to Item 11 of Form N–3; Instruction 5 to Item 10 of Form N–4. Where an insurer reserves the right to charge a fee, the table must include the maximum amount that may be charged, even if the insurer does not currently charge the fee. 233See Instruction 6 to Item 11 of Form N–3; Instruction 6 to Item 10 of Form N–4. 234See Instruction 5 to Item 4 of amended Forms N–3 and N–4. 235As discussed above, the Fee Table includes the minimum fee, maximum fee, and fee for a representative investor for each benefit. See supra note 652 and accompanying text. This information should help provide better context for investors to understand the fees for the other benefits available under the contract. distinguish the standard variable life insurance contract death benefits from any optional death benefits. As proposed, the rule requires disclosure of the forms the benefit may take and the form of benefit that will be provided if a particular form has not been selected, which should address the issue raised by the commenter regarding the various death benefit options that are generally offered by variable life insurance contracts. We are adopting the rule, as proposed, to require an initial summary prospectus for variable life insurance contracts to include certain key information regarding those standard death benefits.225 Among other things, the initial summary prospectus requires, for each standard death benefit, when the insurance coverage is effective, when the death benefit is calculated and payable, how the death benefit is calculated, who has the right to choose the form of benefit and the procedure for choosing the form of benefit, the forms the benefit may take, and whether there is a minimum death benefit guarantee associated with the contract. Finally, as proposed,
under the registration form amendments, variable life insurance registrants will include in the statutory prospectus more detailed disclosures relating to standard death benefits, including how an investor may change the face amount of the death benefit, and how contract values and death benefits are affected by the investment performance of the portfolio companies, expenses, and deduction of charges. This additional information may help an investor who wants to understand the mechanics of how standard death benefits operate later in the contract lifecycle. However, we are not requiring that additional information to be included in the initial summary prospectus because we believe it would not be as critical to a basic initial understanding of the benefits, including any risks and limitations. [Other] Benefits Available Under the Contract We are requiring, largely as proposed, registrants to summarize standard and optional benefits available to the investor under the contract. We understand that insurers commonly consider these types of benefits to be primary features of variable contracts.226 Because these benefits are also often key differentiators between competing products, we are requiring, largely as proposed, specific disclosures in both the statutory prospectus and the initial summary prospectus. As discussed above, variable annuity contracts will not have a standalone
section for standard death benefits, so
we are retitling the heading for this
section ‘‘Benefits Available Under the
Contract’’ and requiring this summary
table to include information about any
standard and optional annuity or other living benefits, as well as any standard and optional death benefits that the variable annuity contract offers.227 Since variable life insurance contracts will disclose standard death benefits in a separate section of the prospectus, in this section they will disclose non￾standard death benefits (i.e., optional or supplemental death benefits available for a separate charge) as well as living contract benefits (such as income benefits, disability riders, long-term care insurance) under the heading ‘‘Other Benefits Available Under the Contract.’’ 228 For purposes of this discussion, we refer to this table in the variable annuity and variable life insurance contract registration forms as the Benefits Table. Because benefit terms can be complex, we are requiring the information to be provided in a uniform tabular presentation to make these important disclosures easier for investors to read, understand, and compare. Largely as proposed, the Benefits Table requires the name of each benefit, its purpose, whether the benefit is standard or optional, and a brief description of limitations or restrictions.229 In a change from the proposal, we are requiring the Benefits Table in Forms N–3 and N–4 to disclose the maximum fees (as a stated percentage of contract value, benefit base, etc.) associated with each benefit listed in the table(s), and revising the table heading to state ‘‘Maximum Fee.’’ 230 Our proposal would have required disclosure of ‘‘associated fees,’’ but several commenters asked for clarification regarding whether registrants should disclose the maximum or current fees associated with the benefits, and whether fees could change over time.231 Variable contracts typically include provisions that allow insurers to increase the fees associated with benefits up to a maximum charge, which can be significantly higher than the current fee. To help investors understand how much fees can be raised over time, we are revising the proposed instructions to the Benefits
Table to clarify that registrants must
disclose the maximum charge that investors could pay for each benefit.232 Also in a change from the proposal, the final instructions to this table in Forms N–3 and N–4 will permit registrants to disclose the current charge in a separate column, if the disclosure of the current charge is no more prominent than, and does not obscure or impede understanding of, the disclosure of the maximum charge.233 Collectively, this parallels the presentation of these charges in the Fee Table included in Forms N–3 and N–4.234 For variable life products registered on Form N–6, where fees are based in
part on the personal characteristics of
the insured, we recognize that a maximum fee applicable to an insured in the highest possible mortality risk category (e.g., an elderly smoker) may not be relevant to a typical investor. For these reasons, this item in Form N–6 does not require disclosure of maximum fees, but instead requires a statement explaining that the Fee Table contains information about the fees for each benefit.235 We are adopting this requirement as proposed. Under the form amendments, a registrant must include in the statutory prospectus the Benefits Table, as well as additional disclosures in narrative form relating to benefits, such as further descriptions of each benefit, whether it is standard or optional, descriptions of

236See Items 11(b) and (c) of amended Form N– 3 and instruction to same; Items 10(b) and (c) of amended Form N–4 and instruction to same; Items 11(b) and (c) of amended Form N–6 and instruction to same. 237Registrants may, but are not required to, provide in the initial summary prospectus cross￾references or links to these additional narrative disclosures in the contract statutory prospectus. 238See CAI Comment Letter (requesting that the Commission clarify that benefits (including versions and iterations of a single benefit) that are owned by existing contract owners but no longer for sale should not appear in an initial summary prospectus.’’). 239See Instruction 1(b) to new Item 11(a) of amended Form N–3; Instruction 1(b) to amended Item 10(a) of amended Form N–4; Instruction 1(b) to Item 11(a) of amended Form N–6. Registrants that choose to use a single table should consider whether grouping together multiple benefits of the same type, with appropriate headings, might similarly permit better comparisons of those benefits. 240See Instruction 1(c) to new Item 11(a) of amended Form N–3; Instruction 1(c) to new Item 10(a) of amended Form N–4; Instruction 1(c) to Item 11(a) of amended Form N–6. 241See VIP Working Group Comment Letter. 242See Comment Letter of Jake Sleder (Nov. 5,
2018) (‘‘Sleder Comment Letter’’); Breacher
Comment Letter; M. Bowler Comment Letter; Nedar Comment Letter; Anonymous Comment Letter (Dec. 28, 2018) (‘‘Anonymous Comment Letter III’’). 243See infra Section II.C.2.l. 244See rule 498A(b)(5)(v); see also Item 12(a) of amended Form N–3; Item 11(a) of amended Form N–4; Item 9(a) through (c) of amended Form N–6. With the exception of renumbering certain provisions, we made no other changes to this item as presented in current Forms N–3 and N–4. 245See rule 498A(b)(5)(v); see also Item 12(a) of amended Form N–3; Item 11(a) of amended Form N–4. 246See rule 498A(b)(5)(v); see also Item 9(a) through (c) of amended Form N–6. 247See CAI Comment Letter; see also Proposing Release, supra note 6, at n.181. 248See rule 498A(b)(5)(v); see also Item 9(a) through (c) of amended Form N–6; see infra Section II.C.2.m. 249See Item 12 of amended Form N–3; Item 11 of amended Form N–4; Item 9 of amended Form N– 6. the benefits’ limitations, restrictions and risks, and one or more examples illustrating the operation of each benefit.236 We believe that requiring the initial summary prospectus to include only the Benefits Table and not the additional narrative disclosures is appropriate for the scope of the initial summary prospectus.237 Consistent with the layered disclosure approach, investors who want more information about benefits may refer to the more extensive narrative disclosures in the contract statutory prospectus. Because the initial summary prospectus is intended for new investors and limited to features that are currently offered, benefits that are no longer available should not be included in the Benefits
Table in the summary prospectus, but
should be described in the statutory prospectus.238 We are also adopting, as proposed, instructions that allow registrants offering multiple benefits of the same type (e.g., death benefit, accumulation benefit, withdrawal benefit, long-term care benefit, etc.) to use multiple tables to provide the required information, if doing so might better permit comparisons of those benefits.239 Registrants may also include appropriate titles, headings, or other information that might promote clarity and facilitate understanding of the
table(s).240 For example, if certain
benefits are only available to certain investors, or are mutually exclusive, the
table could include headings to identify
which benefits are affected and to whom they are available. These instructions are designed to accommodate the variety of benefits currently offered or that might be offered in the future, and provide registrants flexibility in presenting this information. One commenter suggested that a one￾page description of each rider may be more appropriate than the proposed Benefits Table.241 In reacting to the Benefits Table contained in the hypothetical initial summary prospectus, some commenters also asked for more information, including how much a benefit pays, the likelihood that a benefit will pay out, and how much can be withdrawn annually.242 While we recognize that the information in the Benefits Table only provides a brief description of the benefits, we believe that because variable contract features are typically complex, even a short description of each benefit available under the contract could significantly expand the length of what is designed to be a short and concise document. Because we believe retail investors are more likely to read a shorter document that briefly tells them about benefits available under the contract, and since more information will be available in the full contract prospectus,243 we are not requiring the Benefits Table in the initial summary prospectus to include more information about those benefits. Buying the Contract (for Variable Annuity Contracts) and Premiums (for Variable Life Insurance Contracts) We are adopting, largely as proposed, the requirement that the initial summary prospectus include a brief description of the procedures for purchasing the variable contract (and premiums, in the case of variable life insurance contracts), under the heading ‘‘Buying the Contract’’ for variable annuity contracts, and ‘‘Premiums’’ for variable life insurance contracts.244 We believe this information should be included in the initial summary prospectus so investors have a clear understanding of how they can purchase the variable contract. For variable annuity contracts, this will include a concise explanation of the minimum initial and subsequent purchase payments required, any limitations on the amount of purchase payments (such as when the selection of certain optional benefits may limit additional purchase payments), as well as a statement of when such payments are credited.245 For variable life insurance contracts, this will include a description of the purchase procedures, premium amount, and premium due dates.246 One commenter noted that as proposed, the initial summary prospectus for variable life insurance contracts would include virtually all of the information required to be in the Premiums section of the variable life insurance statutory prospectus, and asked that we instead permit a brief summary of the specified premium information.247 In response to the commenter’s suggestion, we are revising the rule to require an initial summary prospectus for variable life insurance contracts to include only certain key
information regarding premiums.248 Among other things, the initial summary prospectus requires registrants on Form N–6 to describe the provisions of the contract that relate to premiums and the procedures for purchasing a contract, the factors that determine the amount of any required premiums, and the provisions of the contract that relate to premium due dates and the operation of any grace period. We believe this information should be included in the initial summary prospectus so investors have a clear understanding of how they can purchase the variable contract, but we are persuaded by the commenter that a more concise summary that is limited to key information regarding premiums is more likely to be useful to investors and is appropriate for the initial summary prospectus. We also note that, as proposed, additional information on purchases and premiums will appear in the statutory prospectus. For example, the statutory prospectus will also include information on the manner in which purchase or premium payments are credited, and the identity of each principal underwriter.249 Contract Lapse (for Variable Life Insurance Contracts) We are adopting, largely as proposed, the requirement that the initial

250See rule 498A(b)(5)(vi); see also Item 14(a) of amended Form N–6 (requiring a brief summary of the disclosures required by paragraphs (b) through (e) of amended Item 14); see infra Section II.C.2.p. 251For example, costs could occur in the form of premium payments that the investor previously paid into the policy, and which the investor cannot retrieve following contract lapse. 252See CAI Comment Letter. 253See rule 498A(b)(5)(vi); see also Item 14(a) through (c) of amended Form N–6; see infra Section II.C.2.p. 254See rule 498A(b)(5)(vii); see also Item 13(a) of amended Form N–3; Item 12(a) of amended Form N–4; Item 12(a) of amended Form N–6. 255See CAI Comment Letter; Transamerica Comment Letter; AARP Comment Letter. 256See rule 498A(b)(5)(vii); see also Item 13(a) of amended Form N–3; Item 12(a) of amended Form N–4; Item 12(a) of amended Form N–6; see also infra Section II.C.2.n. 257For example, as proposed, references to ‘‘surrender’’ appeared in paragraph (a) while references to ‘‘partial surrender’’ appeared in paragraphs (a) through (d). As amended, references to ‘‘surrender’’ appear in paragraphs (a) through (d) while all references to ‘‘partial surrender’’ are removed from this item. Among other things, this change clarifies that only the most important information about surrenders is required to be included in the summary prospectus pursuant to paragraph (a), while other information about surrenders should be disclosed in the statutory prospectus. This is consistent with the layered disclosure approach embodied in the summary prospectus and helps to ensure that the information in the summary prospectus regarding surrenders is not simply a full recitation of the same information contained in the statutory prospectus. 258See Item 13(b) through (d) of amended Form N–3; Item 12(b) through (d) of amended Form N– 4; Item 12(b) through (d) of amended Form N–6. 259See rule 498A(b)(5)(viii); see also Item 4 of amended Forms N–3, N–4, and N–6. The initial summary prospectus fee information will be the same as the Fee Table included in the contract statutory prospectus, modified as necessary to describe only a single contract that the registrant currently offers for sale. See infra Section II.A.1.b. 260 In addition, the Fee Table details the minimum and maximum total operating expenses the portfolio companies charge annually, as well as an example intended to help the investor compare the cost of investing in different variable contracts. 261See supra Section II.A.1.c.ii.(a). summary prospectus for a variable life insurance contract include certain information about the possibility of contract lapse, under the heading ‘‘How Your Contract Can Lapse.’’ 250 Specifically, the initial summary prospectus must briefly describe when and under what circumstances a variable life insurance contract will lapse, any lapse options, the effect of the lapse and under what circumstances such a contract may be reinstated. Because inadvertent contract lapse could
negate the insurance benefit of a policy to an investor, possibly at significant cost,251 understanding the risk of contract lapse is important when deciding whether to invest in a variable life insurance contract. The Commission proposed that the initial summary prospectus would include the same information on contract lapse that would appear in the contract statutory prospectus. One commenter suggested that, consistent with a layered disclosure approach, the initial summary prospectus should only include a brief summary of the lapse and reinstatement information required in the full statutory prospectus.252 In response to comments and consistent with our layered disclosure approach, we are revising the rule to require an initial summary prospectus for variable life insurance contracts to include only certain key information regarding contract lapse.253 We were persuaded by the commenter that a more concise summary that is limited to key information regarding premiums is more likely to be useful to investors and is appropriate for the initial summary prospectus. Among other things, the initial summary prospectus requires registrants on Form N–6 to state when and under what circumstances a contract can lapse, the effect of lapse, and under what circumstances a contract may be reinstated. Surrenders or Withdrawals Largely as proposed, the initial summary prospectus must include certain information about contract surrenders or withdrawals, under the heading ‘‘Making Withdrawals:
Accessing the Money in Your Contract.’’ 254 This will include a brief summary on how to surrender (or partially surrender or make withdrawals from) a variable contract, including any limits on the ability to surrender, how withdrawal and surrender proceeds are calculated, and when they are payable. Several commenters observed that investors would also benefit from a description of the negative consequences of partial withdrawals on death and living benefits.255 We agree that such information would be useful for investors, and have revised the relevant form requirements to additionally require the initial summary prospectus to briefly describe the potential impact of such surrenders or withdrawals.256 Given that variable contracts are long-term investments that may entail high surrender fees, it is important to clearly explain the withdrawal and surrender terms to new variable contract investors, including the consequences of withdrawals on death and living benefits. To clarify the scope of paragraph (a), and to simplify this item in general, we are also removing references to ‘‘partial surrender’’ and ‘‘partial withdrawal’’ (which both have the same meaning as ‘‘withdrawal’’) so that this item will only refer to ‘‘surrender’’ and ‘‘withdrawal,’’ which we believe are more plain English.257 Additional information on surrenders and withdrawals will appear in the statutory prospectus. For example, the statutory prospectus must include more detailed information on surrenders and withdrawals, sub-account allocation, involuntary redemptions, and revocation rights (free look period).258 Additional Information About Fees As proposed, the initial summary prospectus must include the Fee Table (including, for variable annuity contracts, the expense example), that will appear in the statutory prospectus, under the heading ‘‘Additional Information About Fees.’’ 259 The Fee
Table provides detailed information on
the fees and expenses investors will pay when buying, owning, and surrendering the contract, as well as those paid each year during the time the investor owns the contract.260 We are also adopting, largely as proposed, certain amendments to the Fee Table for each type of variable contract, as discussed below in Section II.C.2.d. We are requiring the Fee Table in both the statutory prospectus and the initial summary prospectus because investor understanding of variable contract fees is particularly important given these products’ layered fee structure and typically higher costs relative to other investment products. The Fee Table is intended to complement and build upon the high-level summary of contract fees and expenses in the Key Information
Table by providing additional detail for
those investors who may wish to review more comprehensive fee and expense information.261 We understand that some registrants currently prepare supplements to the contract prospectus that detail and modify certain fees and rates under the variable contract applicable to new investors (‘‘rate sheets’’). Current fees, withdrawal rates, and crediting rates associated with various contract benefits (for new sales) can change so frequently as to make filing of post-effective amendments to the registration statement with each change impractical. Instead, updated disclosure of current levels of these fees and rates is accomplished by filing a rate sheet as a supplement under rule 497 under the Securities Act. Because a rate sheet is no different than a change to any other term in the prospectus, the rate sheet approach permits the filing of a 497 filing instead of a rule 485(a) filing to implement that material change. Several commenters sought clarification regarding when a change to

262See CAI Comment Letter; VIP Working Group Comment Letter; Transamerica Comment Letter. 263For example, if the rate sheet is updating information in a summary prospectus or the statutory prospectus, the document should describe how the rate sheet process works, and the rate sheet supplement should be affixed to the front of the document. In addition, the rate sheet supplement should be available on the website where current prospectuses and certain other documents must be posted online under rule 498A(h). As a best practice, all current rates should be separately posted on the website. 264See CAI Comment Letter; Transamerica Comment Letter. 265See rule 498A(b)(5)(ix); see also Item 18 of amended Form N–3; Item 17 of amended Form N– 4; Item 18 of amended Form N–6. 266See, e.g., ICI Comment Letter; AARP Comment Letter (commending the ‘‘proposal for a summary disclosure for the underlying portfolio companies. We submit that a concise disclosure is needed.’’); Capital Group Comment Letter; ACLI Comment Letter; Comment Letter of American International Group (Mar. 15, 2019) (‘‘AIG Comment Letter’’). In addition, the respondents to our Feedback Flier collectively identified the Appendix as the second ‘‘most useful’’ section of the hypothetical initial summary prospectus (after the Key Information
Table).
267See Item 17 of amended Form N–4; Item 18 of amended Form N–6. In the context of participant￾directed individual account plans under the Employee Retirement Income Security Act of 1974 (which, similar to variable contracts, are long-term, tax-advantaged investment vehicles whereby the investor may direct his or her investment among investment alternatives), a similar disclosure requirement applies. See 29 CFR 2550.404a–5(d). 268See Instruction 1(b) to proposed Item 19 of Form N–3; Instruction 1(a) to proposed Item 18 of Form N–4; Instruction 1(a) to proposed Item 18 of Form N–6. 269See CAI Comment Letter (explaining that ‘‘the Portfolio Company associated with a soft closed fund option may or may not be issuing new shares. Instead, when a Portfolio Company option is soft closed, the insurer limits the ability of some or all contract owners to invest in the subaccount corresponding to that Portfolio Company.’’). 270See Instruction 1(a) to Item 18 of amended Form N–3, Item 17 of amended Form N–4, and Item 18 of amended Form N–6; see infra Section II.C.2.t. 271See rule 498A(b)(1). 272See Instructions 2–4, 7 to Item 18 of amended Form N–3; Instructions 2–4, 7 to Item 17 of amended Form N–4; Instructions 2–4, 7 to Item 18 of amended Form N–6. For purposes of this discussion, we use the term ‘‘portfolio company’’ throughout, even though the
Appendix for Form N–3 registrants will use the
term ‘‘investment option.’’ 273See AARP Comment Letter. 274See Comment Letter of Broadridge Financial Solutions, Inc. (Mar. 15, 2019) (‘‘Broadridge Comment Letter’’) (reporting that based on a 4-day online survey of 120 individuals that self-identified as current variable annuity investors and were the contract would require the filing of a rate sheet supplement for an initial summary prospectus, and about the corresponding delivery obligations for rate sheet supplements.262 As we noted in the proposal, we do not believe that the summary prospectus framework will affect the current practice of using rate sheets. When a rate (relating to fees, withdrawal rates, crediting rates, etc.) disclosed in any prospectus (initial, updating, or statutory) changes, the prospectus must be updated with the new rate and the update filed with the Commission, and the revised disclosures must be provided to investors affected by the rate change.263 Two commenters suggested that instead of filing rate sheets, insurers should provide current rates to investors as marketing materials at the point of sale.264 Because a variable contract’s fees and rates are material information, we do not believe relegating this information to marketing materials is sufficient, and are not making the suggested change.
Appendix: Portfolio Companies/
Investment Options Available Under the Contract We are requiring, largely as proposed, an initial summary prospectus to include an appendix, under the heading ‘‘Appendix: Portfolio Companies/ Investment Options Available Under the Contract,’’ that provides summary information in a tabular form about the portfolio companies or investment options offered under the contract.265 Commenters generally supported our proposal to include this Appendix in the initial summary prospectus.266 While no commenters opposed the
Appendix, we did receive a number of
recommendations to modify certain aspects of the Appendix, some of which we are incorporating into the final version. In addition, we are making certain other changes discussed below. Format/Scope. Because the investment experience of a variable contract investor will largely depend on his or her selection of portfolio companies (or investment options in the case of a variable annuity registered on Form N–3), we believe it is important for investors to receive an overview of the portfolio companies and investment options available under the contract in a uniform tabular presentation that promotes comparison, and are requiring, as proposed, the format specified in the introductory sentence of the relevant form item.267 The Commission also proposed an instruction that registrants only include portfolio companies that are currently offered under the contract, and we are adopting this instruction with a modification, as described below.268 One commenter asked us to clarify whether the ‘‘currently offered’’ standard includes portfolio company options in which current, but not new, investors are permitted to invest (‘‘soft closed’’ fund options).269 This commenter suggested that an instruction be added to the Appendix specifying that soft closed fund options should not be included in the Appendix appearing in an initial summary prospectus, but should be included in the Appendix appearing in an updating summary prospectus and in a Statutory Prospectus, with an explanation (in a footnote or otherwise) of the limited availability of the options. We are modifying the form instruction to state that the Appendix must only include portfolio companies that are investment options under the contract (not just those that are ‘‘currently offered,’’ as proposed), and clarifying that registrants must indicate if investments in any of the portfolio companies offered under the contract are subject to a restriction (because of a ‘‘soft’’ or ‘‘hard’’ close).270 This change is designed to require summary and statutory prospectuses to include all of the portfolio companies available under the contract in the Appendix, not just those that are currently offered. However, because the initial summary prospectus may describe only a single contract currently offered for sale,271 the
Appendix will only list the portfolio
companies that are investment options under that particular contract. Contents. The Commission proposed that the Appendix include separate columns for each portfolio company’s type (e.g., money market fund, bond fund, balanced fund, etc.) or investment objective; the name of the portfolio company and its adviser or subadviser (as applicable); the portfolio company’s expense ratio (expenses/average assets and, in the case of Form N–3, explicitly excluding optional benefit expenses); and its average annual total returns over the past 1-year, 5-year, and 10-year periods (in the case of Form N–3, explicitly excluding optional benefit expenses).272 Type or Investment Objective Regarding the proposed requirement that the Appendix include the portfolio company’s type or investment objective, one commenter recommended that we require only the investment type (or primary asset class), which is similar to 401(k) fee disclosures, and not the investment objective.273 Another commenter, which conducted its own online survey of variable annuity investors regarding certain aspects of the proposed Appendix, stated that its testing indicates that ‘‘if either ‘Investment Objective’ information or ‘Investment Type’ (i.e., one of these data fields, but not both) were to be included in the Appendix, ‘‘Investment Objective’’ would be more useful to investors.’’ 274 In light of these varying

asked to review a modified version of the proposed
Appendix that replaced information on ‘‘investment
type’’ with ‘‘investment objective, ‘‘nearly 90% said ‘‘Investment Objective’’ was more helpful than ‘‘Investment Type.’’). 275See Instruction 2 to Item 18 of amended Form N–3, Instruction 2 to Item 17 of Form N–4, and Instruction 2 to Item 18 of Form N–6. 276See ICI Comment Letter (citing Instruction 2 to Item 5(b) of Form N–1A). 277See Instruction 3 to Item 18 of amended Form N–3, Instruction 3 to Item 17 of Form N–4, and Instruction 3 to Item 18 of Form N–6; see also Instruction 2 to Item 5(a) of Form N–1A. 278See CAI Comment Letter (opposing fee and performance information); Brighthouse Comment Letter (opposing fee and performance information); Transamerica Comment Letter (opposing fee and performance information); Lincoln Comment Letter (opposing performance information); Ameritas Comment Letter (opposing performance information). 279See CAI Comment Letter. 280See CAI Comment Letter; Lincoln Comment Letter; Brighthouse Comment Letter; Transamerica Comment Letter. 281See AIG Comment Letter; CFA Comment Letter. 282See CAI Comment Letter; Lincoln Comment Letter; Ameritas Comment Letter; Brighthouse Comment Letter; ACLI Comment Letter. 283See Lincoln Comment Letter; Ameritas Comment Letter; Brighthouse Comment Letter; CAI Comment Letter; ACLI Comment Letter; AIG Comment Letter; Transamerica Comment Letter. 284See ACLI Comment Letter; Brighthouse Comment Letter. 285See CAI Comment Letter; ACLI Comment Letter (asking us to encourage portfolio companies to share the required information with them in a timely manner); Lincoln Comment Letter; Ameritas Comment Letter; Brighthouse Comment Letter; AIG Comment Letter; Transamerica Comment Letter. 286See CAI Comment Letter (citing Disclosure of Costs and Expenses by Insurance Company Separate Accounts Registered as Unit Investments Trusts, Investment Company Act Release No. 25802 (Nov. 13, 2002) [67 FR 69973 (Nov. 19, 2002)] (‘‘2002 Adopting Release’’)). 287See Brighthouse Comment Letter; CAI Comment Letter. 288See Brighthouse Comment Letter (stating that ‘‘[it] has continued to include fund-by-fund expense ratios (but not performance data) in our prospectuses even after such requirement was eliminated from Form N–4 (which requires only the highest and lowest fund expense ratios to be disclosed).’’). 289As discussed below, we recently required mutual funds to use Inline XBRL to tag their risk/ return summaries, which may make it easier for insurers to ‘‘scrape’’ the data they need to populate their variable contract Appendixes. See infra
Section II.D. See also infra note 892.
290See 2002 Adopting Release, supra note 286. comments, we continue to believe that it is appropriate to permit registrants the flexibility to choose the approach they believe most clearly and effectively communicates a portfolio company’s investment category to retail investors, and are adopting this aspect of the
Appendix as proposed.275
Name of Portfolio Company and Its Adviser or Subadviser In response to our proposal to include a column with the name of each portfolio company and its adviser or subadviser, one commenter stated that that the Appendix should only identify sub-advisers ‘‘whose actions are likely to impact the fund significantly,’’ and an instruction should limit the requirement to sub-advisers that are responsible for a significant portion of a portfolio company’s net assets, consistent with the approach for mutual funds.276 We agree, and have modified the relevant instruction to mirror the approach in Form N–1A for consistency between the forms.277 Portfolio Company Expenses and Performance A number of commenters opposed our proposal to require the Appendix to include each portfolio company’s expense ratio and/or performance information.278 One commenter stated that insurers should not be responsible for disclosing specific data that is in each portfolio company’s prospectus, and would be available at the website specified in the legend for the summary prospectus.279 Several recommended eliminating this requirement, and replacing it with a legend or cross￾reference stating where and how up-to￾date portfolio company data can be obtained (e.g., on portfolio company and insurance company websites).280 Two commenters suggested that electronic versions of the summary prospectus should be required to include direct links to the portfolio company summaries in the Appendix.281 Commenters also opposed this requirement asserting that gathering the information for each portfolio company offered under a contract would be administratively burdensome (and in some cases, potentially infeasible given filing-related timing constraints).282 They explained that insurers must rely on the portfolio companies to transmit their current expense ratios to them in time to meet the variable contracts’ registration statement filing (and printing and mailing) deadlines. They noted that because portfolio companies often do not finalize their expense information until shortly before they file their annual registration statement updates, there is a very narrow window of time for insurers to collect, verify, and incorporate current portfolio company expense ratios into the variable contract prospectuses, which, like portfolio company prospectuses, must be filed by May 1.283 Several commenters suggested there would also be operational and timing challenges associated with obtaining portfolio company performance data.284 Commenters also expressed concern about being dependent on the cooperation of third-parties (particularly unaffiliated portfolio companies) to obtain the required portfolio company data in time to include the information in their variable contract initial summary (and other) prospectuses.285 One commenter recalled that Form N– 4 previously required expense ratios for each portfolio company in the Fee
Table, stating ‘‘that requirement was
later eliminated, and in this respect, the proposed requirement represents a step backwards.’’ 286 Two commenters also opposed including portfolio company performance in the Appendix on the grounds that performance would be quickly become outdated, whereas more current and frequently updated performance data is generally available online.287 They expressed concern that having to disclose portfolio company performance, in addition to the expense ratios, would further exacerbate the timing and operational challenges associated with disclosing this information in the Appendix. We recognize these timing and coordination concerns, and that these challenges increase for variable contracts that offer contracts with a large number of portfolio companies. Regarding portfolio expense information, however, insurers currently must obtain current expense ratios for each portfolio company to ensure the accuracy of the range of lowest and highest portfolio company expenses in the Fee Table—a requirement that we leave undisturbed in this document. In addition, the fact that some insurers provide expense information for each portfolio company shows that it is currently feasible to obtain and disclose this information,288 and may soon be easier with the aid of new technology solutions.289 We acknowledge, as one commenter noted, that Form N–4 previously required expense ratios for each portfolio company in the Fee Table. However, as explained in the 2002 Adopting Release, the Commission removed the requirement in an effort to streamline the Fee Table, which had grown lengthy and complex, and instead required Form N–4 registrants to disclose a range showing the lowest and highest expenses for portfolio companies available under the contract.290 We are now once again requiring disclosure of portfolio company expense information—but in the Appendix, as opposed to the Fee
Table. As discussed below we believe
that it is appropriate to require this disclosure, particularly in light of the

291See 17 CFR 270.30e–1 (rule 30e–1 under the Investment Company Act). All insurance product portfolio companies have a December 31 fiscal year￾end, and must transmit their annual reports to shareholders within 60 days after that date. Form N–CSR, which must be filed no later than 10 days after the transmission of the annual report, must contain a copy of the annual report to shareholders, which is made publicly available on EDGAR. 292See Appendix A of the Memorandum from the Division of Investment Management regarding a May 29, 2019 Meeting with Representatives of the Committee of Annuity Insurers (materials provided by Committee of Annuity Insurers participants state that ‘‘the ongoing information most relevant to existing contract owners relates to their investment options’’). 293See infra Section II.B. 294See CAI Comment Letter; ICI Comment Letter; Brighthouse Comment Letter. 295See Breacher Comment Letter. 296See Instruction 4 to Item 18 of amended Form N–3; Instruction 4 to Item 17 of amended Form N– 4; Instruction 4 to Item 18 of Form N–6. The expense ratio we proposed would not have reflected any waivers and reimbursements that reduce the portfolio company’s rate or return. ‘‘Current Expenses,’’ as adopted, reflects these waivers and reimbursements. 297For portfolio companies that are not operating under expense reimbursement or fee waiver arrangements, current expenses will be the same as gross expenses. 298 Id. 299See generally supra note 160 and accompanying and following text (discussing fund facilitation fees and comments received regarding those fees). Fund facilitation fees, or platform charges, were not explicitly addressed in the proposal, but one commenter questioned how insurers should treat them. See VIP Working Group Comment Letter. We believe it is appropriate to incorporate them into the forms and provide instructions on their treatment as part of the Appendix requirements. portfolio company prospectus delivery option we are adopting. Regarding the concern that obtaining portfolio company performance data may also present operational and timing challenges for insurers, we note that a portfolio company’s performance information must be included in its annual report that is typically filed and publicly available by early March,291 which should provide sufficient time for a registrant to obtain such information before the variable contracts’ registration statement annual update must be filed. As is the case with the portfolio company expense information, the portfolio company performance information is also part of the risk/ return summary that will be tagged using the Inline XBRL format. We are also concerned that eliminating portfolio company fee and performance data from the Appendix, as commenters suggest, will not benefit investors. We believe it is important for investors to receive an overview of the portfolio companies and investment options available under the contract in a uniform tabular presentation that promotes
comparison, and designed the
Appendix with that in mind. A portfolio
company’s expense ratio and performance provide key information that, if eliminated from the Appendix, would significantly reduce its usefulness to investors. We do not believe an Appendix that provides a legend or cross-reference stating where a portfolio company’s prospectus may be found allows investors to as efficiently and effectively compare investment options as one that includes expense and performance information. Moreover, once an investor has purchased a variable contract, information about portfolio companies is the most important information he or she needs when considering how to invest new premiums and whether to reallocate current contract values to different investment options.292 In a layered disclosure regime, including portfolio company expense and performance information in the updating summary prospectus is the type of key information that we believe should be provided to investors. In addition, the Appendix is designed to help facilitate the new optional portfolio company delivery option. Investors in contracts registered on Forms N–4 and N–6 currently receive portfolio company prospectuses at or shortly after the point of sale, as well as each portfolio company’s updated prospectus each year. As discussed below, under rule 498A, portfolio company prospectus delivery obligations may be satisfied if the portfolio company summary and statutory prospectuses are posted at the website address specified on the variable contract summary prospectus.293 The Appendix is designed to complement the portfolio company prospectuses in a layered disclosure approach to provide the investor with an ability to choose the amount and type of information he or she prefers to review. For investors that do not choose to review portfolio company prospectuses posted at the specified website, the Appendix may contain all the information they receive about their investment options. If we were to eliminate fee and performance information from the Appendix, as some commenters suggest, a new investor (who would have previously received the prospectuses) would have the burden of locating, obtaining, and reviewing the prospectus for each portfolio company available under the contract to discern the very information we are proposing to require insurers to include in the Appendix. We believe that instead of shifting more responsibility to the investor, registrants should supply the portfolio company fee and performance information in the
Appendix. Accordingly, we are
requiring, largely as proposed, the
Appendix to include portfolio company
expense and performance information, with certain modifications as discussed below. Several commenters asked that, consistent with parallel requirements for open-end funds set forth in Form N– 1A, we permit insurers to disclose, in addition to the gross expense ratio, a portfolio company’s net expense ratio, and require those that choose to do so to include a footnote explaining the effect of waivers on portfolio company expenses.294 One commenter, in viewing the Appendix in the hypothetical initial summary prospectus, asked whether the expense ratio was gross or net, and if the expense ratio was derived from the portfolio company prospectus, which would reflect the current fee, or its annual report, which would reflect the previous year’s expense ratio.295 After considering these comments, in a change from the proposal, we are requiring registrants to disclose under the column heading ‘‘Current Expenses,’’ the expense ratio currently charged by each portfolio company offered under the contract.296 We believe that current expenses provide more pertinent information to investors than gross expenses in the case of portfolio companies operating pursuant to an expense reimbursement or fee waiver arrangement.297 To alert investors that the costs for some portfolio companies could increase, we are requiring registrants, in a change from the proposal, to identify each portfolio company subject to an expense reimbursement or fee waiver arrangement, and provide a footnote stating that annual expenses reflect temporary fee reductions.298 We are also modifying the Appendix requirements to account for fund facilitation fees, or ‘‘platform charges’’ as they may more commonly be understood by investors.299 We believe that all the charges associated with choosing a particular portfolio company should be presented in the Appendix, not just those charged at the portfolio company level. If a registrant charges a platform charge for any portfolio company, the Appendix must include a separate column that discloses the current platform charge associated with any portfolio company offered under the contract, along with a separate column that sums the portfolio company’s current expenses plus any platform

300See Instructions 5 and 6 to Item 17 of amended Form N–4; Instructions 5 and 6 to Item 18 of amended N–6. Form N–3 registrants do not have platform charges because they have a one tier structure, as discussed above. See supra note 160. 301See General Instruction 5 to Item 17 of amended Form N–4; General Instruction 5 Item 18 of amended Form N–6. 302Platform charges were not explicitly addressed in the proposal. See supra note 299. 303See supra notes 300–301 (discussing the requirement to include a column displaying platform charges separately from current expenses, as well as a column displaying platform charges plus current expenses); infra note 327. 304See CAI Comment Letter. 305See Instructions 4–5 to Item 18 of amended Form N–3. Additionally, Instructions 4–5 cross￾reference instructions in Form N–3 regarding calculation of expenses and performance as opposed to instructions in Form N–1A, as proposed. However, because those instructions in Form N–3 mirror the parallel instructions in Form N–1A, this change in cross-references does not affect the substantive disclosure requirements for the Appendix in Form N–3. 306See Instruction 7 to Item 4 of amended Form N–3 (providing that for a contract with more than one class, the registrant must provide a separate response for each class); see generally supra Section II.A.1.c.ii.(h) (discussing the Fee Table). 307See ICI Comment Letter; see also supra note 287 and accompanying text. 308See Instruction 1(e) to Item 17 of amended Form N–4; Instruction 1(e) to Item 18 of amended Form N–6; see also Item 4(b)(2) of Form N–1A (parallel instruction); see infra note 324. 309See Lincoln Comment Letter; Brighthouse Comment Letter; Ameritas Comment Letter. 310See Item 18 of amended Form N–3, Item 17 of amended Form N–4, and Item 18 of amended Form N–6. See infra note 327 and following text. 311See ICI Comment Letter; Capital Group Comment Letter. 312See Comment Letter of Barry Iris (Jan. 17, 2019); Anonymous Comment Letter II (suggesting that the Appendix include a measure of relative risks for each fund, i.e., low, medium, high). 313See Instruction 1(c) to proposed Item 19 of Form N–3; Instruction 1(c) to proposed Item 18 of Form N–4; Instruction 1(c) to proposed Item 18 of Form N–6. 314See CAI Comment Letter. charge.300 In addition, the column that discloses each portfolio company that has a platform charge must include a footnote indicating the highest level to which any relevant platform charge may be increased.301 To help investors identify the most relevant disclosures among the various combinations of portfolio company expenses and platform charges, the column displaying the sum of the portfolio company’s current expenses plus platform charges must be presented in a manner reasonably calculated to draw investor attention to that column.302 In addition, the legend preceding the table in the Appendix must also state that the current expenses and performance columns displayed in the table do not reflect the
other fees and expenses that the contract may charge, such as platform charges.303 One commenter recommended that we remove the proposed Annual Contract Expenses column from the Investment Option Appendix for Form N–3 registrants because it duplicates information in the Fee Table.304 We believe some duplication is warranted to ensure that investors have key data, including expense information, about the available investment options located in one place. In addition, because the updating summary prospectus does not include a Fee Table, providing expense information in the Appendix ensures that current investors also receive the information. For these reasons, we are not making the requested change. In a change from the proposal, we are revising the disclosure requirements for registrants on Form N–3 to clarify that if the registrant is a multiple class fund, the registrant only needs to disclose expenses and performance for one class.305 Investors who wish to obtain more information about portfolio company expenses for other classes can consult the information presented in the Fee Table.306 The Appendix is intended to facilitate the ability of investors to compare the portfolio companies available under the contract, and therefore changes that would equally affect the expenses and performance of all portfolio companies, such as changes due to class, would not be helpful in facilitating the ability of investors to select a particular portfolio company. This issue is not relevant for registrants on Forms N–4 and N–6 because those are two-tiered products with separate expenses at the contract level and the portfolio company level (e.g., changes in expenses due to class will not be reflected in the expenses of portfolio company). Some commenters had specific suggestions or concerns regarding the performance information. One commenter recommended permitting variable contracts to include a statement telling investors where and how they could obtain more current portfolio company performance information.307 We agree that this information is useful for investors and consistent with our layered disclosure approach, and are modifying the form instructions to permit such information to be included in the legend immediately preceding the
table in the Appendix.308
Three commenters stated that portfolio company performance data could be misleading or confusing because it would not reflect recurring separate account or contract charges, and it could conflict with the variable contract performance information contained in other materials that do include these charges.309 To address these concerns, we are modifying the item requirements to clarify what is (and is not) included in the performance and expense information in the
Appendix.310
Two commenters asked that the performance information be permitted to include returns for the life of the fund if in existence for more than 10 years, to align with mutual fund disclosure requirements.311 Because we believe that presenting performance over 1, 5, and 10 year periods makes it easier for investors to compare fund performance, and because as part of the layered disclosure framework returns for the life of the fund are in a portfolio company’s summary prospectus, which will be available online or upon request, we are not making this suggested change. Several commenters asked for the
Appendix to convey information about
the risks associated with investment options.312 To make the Appendix more approachable for investors, we designed it to be concise, including only certain information about the available portfolio companies. Because variable contracts commonly offer hundreds of portfolio companies, and each portfolio company may have many risks, requiring risk information could quickly expand the length of the Appendix, which would make it less useful for investors and therefore we are not adopting this suggestion. The Commission proposed that if the availability of one or more portfolio companies varies by benefit offered under the contract, registrants would be required to include another table that showed which portfolio companies were available under each of those benefits.313 One commenter strongly opposed this second tabular presentation, stating it would be difficult, and in some cases infeasible, for insurers to distill the numerous possible variations in investment restrictions, clearly and concisely, into the simple table suggested by the proposed forms and the hypothetical initial summary prospectus.314 This commenter also stated that the proposed disclosure about benefit-related investment restrictions in ‘‘Other Benefits Available under the Contract’’ provides investors with a clear understanding that not all portfolio companies or investment options may be available for investment, with additional information about such restrictions in the statutory prospectus. Another commenter stated that the investment option table could be lengthy, especially since the restrictions change over time (even for the same

315See VIP Working Group Comment Letter. 316 Instruction 1(f)(2) to Item 17 of amended Form N–4; Instruction 1(f)(2) to Item 18 of amended Form N–6. 317We understand that many insurers currently use sales materials to illustrate the benefits-related investment restrictions to potential purchasers in a manner that is similar to our proposed approach. 318See infra Section II.A.2.b. 319See CAI Comment Letter (seeking clarification that the language in the proposed instruction permitting ‘‘any other presentation that might promote clarity and facilitate understanding’’ would allow multiple tables, narrative explanations, annotations, and other approaches or combinations). 320 Instruction 1(f)(2) to Item 17 of amended Form N–4; Instruction 1(f)(2) to Item 18 of amended Form N–6. The proposed instructions would have required a separate table indicating these investment-related restrictions without this added flexibility. 321See Instruction 1(f)(1) to Item 17 of amended Form N–4; Instruction 1(f)(1) to Item 18 of amended Form N–6. See infra note 324. 322See AARP Comment Letter; CAI Comment Letter; ICI Comment Letter. 323See rule 498A(b)(5)(ix); Item 18 of amended Form N–3; Item 17 of Form N–4; Item 18 of amended Form N–6. 324For registrants on Forms N–4 and N–6, the legend will read as follows:
‘‘The following is a list of Portfolio Companies available under the Contract. More information about the Portfolio Companies is available in the prospectuses for the Portfolio Companies, which may be amended from time to time and can be found online at [ll]. You can request this information at no cost by calling [ll] or by sending an email request to [ll].’’ Registrants that offer portfolio companies that are subject to benefits-related investment restrictions must add the statement, ‘‘Depending on the optional benefits you choose, you may not be able to invest in certain Portfolio Companies.’’ See Instruction 1(f)(1) to Item 17 of amended Form N– 4 and Instruction 1(f)(1) to Item 18 of amended Form N–6. Registrants that are not relying upon rule 498A(j) with respect to the portfolio companies that are offered under the contract may, but are not required to, provide the next-to-last sentence of the first paragraph of the introductory legend to the table regarding online availability of the prospectuses. See Instruction 1(d) to Item 17 of amended Form N–4 and Instruction 1(d) to Item 18 of amended Form N–6. 325For registrants on Form N–3, the legend will read as follows:
‘‘The following is a list of Investment Options available under the Contract. More information about the Investment Options is available in the Statutory Prospectus for the Contract, which can be requested at no cost by following the instructions on [the front cover page or beginning of the Summary Prospectus].’’ See rule 498A(b)(5)(ix); Item 18 of amended Form N–3. 326See rule 498A(b)(5)(ix); Instruction 1(c) to Item 17 of amended Form N–4; Instruction 1(c) to Item 18 of amended Form N–6. 327See General Instruction 5 to Item 17 of amended Form N–4; General Instruction 5 to Item 18 of Form N–6. This additional phrase is only required for registrants that charge platform fees. 328See Item 17 of amended Form N–4; Item 18 of amended Form N–6. contract benefit), and recommended removing this disclosure requirement if the insurer imposes guardrails that prevent an investor from violating these investment restrictions.315 We are requiring the Appendix in the initial summary prospectus (as well as the updating summary and statutory prospectuses) to indicate which portfolio companies are subject to benefit-related investment restrictions.316 We recognize that providing a reader-friendly tabular depiction of the investment limitations associated with certain variable contracts may be challenging for certain insurers, particularly those that offer multiple optional benefits, or benefits that have complicated investment restrictions. However, we believe the initial summary prospectus should alert investors which portfolio companies are (or are not) available for investment depending on the optional benefit they choose, as that information could affect their investment decisions. The initial summary prospectus will be limited to a single contract currently available for sale, which by its nature will limit the number of variations, and thus complexity, of the benefit-related investment restrictions insurers will be required to disclose to new purchasers.317 In contrast, we believe it may be more difficult to succinctly condense all the investment-related restrictions associated with multiple optional benefits for multiple contracts over a period of years in an updating summary prospectus, which, as discussed below, may describe multiple contracts.318 However, because a current investor’s optional benefits may be voided if he or she inadvertently fails to comply with certain investment limitations, we believe the updating summary prospectus should, at a minimum, alert investors that restrictions apply. Accordingly, and in response to comments,319 we are revising the instruction to provide greater flexibility to registrants in depicting such information to investors.320 In addition, we are requiring additional disclosure in the legend preceding the Appendix alerting investors that, depending on the optional benefits they choose, they may not be able to invest in certain portfolio companies.321 This approach is designed to minimize the Appendix’s length and
complexity, while addressing investor protection concerns. Accordingly, this flexibility may encourage issuers to develop more concise and effective ways to present the information to investors. Legends. We are requiring, largely as proposed, certain legends to precede the
table in the Appendix. We are
modifying certain aspects of the proposed legends to provide a more straightforward presentation, as suggested by several commenters, as well as to highlight investor attention to potential investment limitations, as discussed above.322 The first paragraph of the legend must state, as proposed: ‘‘The following is a list of [Investment Options/Portfolio Companies] available under the Contract.’’ 323 In a change from the proposal, for registrants on Forms N–4 and N–6 for which the availability of portfolio company options varies by benefit offered under the contract, the legend will also state, ‘‘[d]epending on the optional benefits you choose under the Contract, you may not be able to invest in certain Portfolio Companies.’’ As proposed, the legend will provide an internet address to a landing page, toll-free telephone number, and email address that investors could use to obtain portfolio company statutory and summary prospectuses.324 For registrants on Form N–3, the legend will direct investors to the cover page of the initial summary prospectus to request the statutory prospectus for the registrant containing more information about the investment options.325 The legend also could indicate, if applicable, that prospectuses and other information are available from a financial intermediary (such as an insurance agent or broker-dealer) distributing the contract.326 We had proposed the second paragraph of the legend to state:
The performance information below reflects fees and expenses of the [Portfolio Companies], but does not reflect the other fees and expenses that your contract may charge. Performance would be lower if these charges were included. Each [Portfolio Company’s] past performance is not necessarily an indication of future performance. We are requiring, with some modifications from the proposal, the second paragraph of the legend for variable contracts registered on Forms N–4 and N–6 to state as follows:
The expense and performance information below reflects fees and expenses of the Portfolio Companies, but does not reflect the other fees and expenses that your Contract may charge [, such as platform charges].327 Expenses would be higher and performance would be lower if these charges were included. Each Portfolio Company’s past performance is not necessarily an indication of future performance.328 These revisions are intended to streamline the legends in response to commenters’ concerns, to clarify which charges are, and are not, included in the

329The proposed legend did not include ‘‘current expenses.’’ 330See Item 18 of amended Form N–3. 331See rule 498A(b)(5)(ix); Item 19 of amended Form N–3. 332See text following note 797 (discussing Item 19 of amended Form N–3); see also Item 4(b)(2) of Form N–1A. 333 Investors generally must be provided with a prospectus when they make additional purchase payments or reallocate variable contract value. See Proposing Release, supra note 6, at nn.27–29 and accompanying text. As proposed, an updating summary prospectus that complies with rule 498A will be deemed to be a prospectus that is permitted under Section 10(b) of the Securities Act and
Section 24(g) of the Investment Company Act for
the purposes of Section 5(b)(1) of the Securities Act. 334See rule 498A(c). 335See, e.g., CAI Comment Letter; Lincoln Comment Letter; ACLI Comment Letter. Many commenters elected to provide detailed comments on the initial summary prospectus, stating that their comments also applied to the updating summary prospectus. See, e.g., CAI Comment Letter; AARP Comment Letter. 336Rule 498A(c)(1). 337See ACLI Comment Letter; CAI Comment Letter; Transamerica Comment Letter. 338Thus, if each contract in a registration statement is no longer offered to new investors (and therefore the insurer would no longer have a need to use an initial summary prospectus), an insurer may continue to use an updating summary prospectus. 339See rule 498A(c)(2). If there are multiple statutory prospectuses in a registration statement, a separate updating summary prospectus would be required for each such statutory prospectus. 340See supra Section II.A.1.b. 341Rule 498A(c)(2); see also supra Section II.A.1.b (an initial summary prospectus also can describe more than one class of a currently offered contract). 342See infra text following note 598 (discussing new General Instruction C.3.(e)(i) to Forms N–3, N– 4, and N–6 regarding the permitted inclusion of multiple contracts in a single prospectus). performance calculation, and to tell investors where they can find current performance information. In contrast, because insurance charges are already reflected in the expenses and performance of the investment options for contracts registered on Form N–3, the second paragraph of the legend for variable annuities registered on Form N–3 will state, largely as proposed: 329 The current expenses and performance information below reflects contract fees and expenses that are paid by each investor. Each Investment Option’s past performance is not necessarily an indication of future performance.330 Form N–3. For variable contracts registered on Form N–3, registrants may omit the required Appendix and instead provide more detailed disclosures for the investment options offered under the contract required by Item 19 of amended Form N–3.331 Item 19 requires narrative disclosure for each investment option regarding its investment objectives and principal investment strategies, and principal risks of investing in the investment option, and a bar chart and table showing the performance of the investment option modeled after the risk/return bar chart and table that Form N–1A currently requires.332
2. Updating Summary Prospectus
a. Overview
Today, variable contract investors are typically sent a copy of the updated current contract statutory prospectus each year.333 New rule 498A permits a person to satisfy contract prospectus delivery obligations with respect to existing investors by sending or giving an updating summary prospectus in lieu of the statutory prospectus.334 The comments we received relating to the updating summary prospectus were generally supportive.335 Although commenters did not raise broad objections to this aspect of our proposal, they raised concerns with and/or requested clarification on specific issues, as discussed in more detail below. We are adopting the proposed updating summary prospectus framework substantially as proposed, with some modifications in response to issues raised by commenters. As discussed in the Proposing Release, we are not requiring that registrants send a current initial summary prospectus to investors each year, due in part to the cost to maintain and update separate initial summary prospectuses for currently offered variable contracts and those no longer offered to new investors. Additionally, we believe that existing investors would benefit more from a brief summary of the changes to the contract reflected in the statutory prospectus than from the disclosures in the initial summary prospectus, which is designed for someone making an initial investment decision. We have therefore designed the updating summary prospectus to provide a brief description of any important changes with respect to the contract that occurred within the prior year, which will allow investors to better focus their attention on new or updated information relating to the contract. Additionally, as proposed, the updating summary prospectus will include certain of the information required in the initial summary prospectus that we consider most relevant to investors when considering additional investment decisions. Finally, as proposed, a registrant may only use an updating summary prospectus if it uses an initial summary prospectus for each currently offered contract described under the contract statutory prospectus to which the updating summary prospectus relates.336 We believe that making the use of the updating summary prospectus contingent on use of the initial summary prospectus for each currently offered contract will encourage registrants to utilize the summary prospectus framework and provide a more consistent disclosure experience to investors. Several commenters sought clarification regarding whether insurers could use an updating summary prospectus even if the insurer did not provide an initial summary prospectus to existing investors that previously received a full statutory prospectus.337 Under new rule 498A, an insurer could use an updating summary prospectus even if the insurer did not provide an initial summary prospectus to an existing investor that previously received a full statutory prospectus. The rule only requires an insurer to use an initial
summary prospectus for each currently offered contract described in the statutory prospectus if the insurer wishes to use an updating summary prospectus.338 b. Contracts That May Be Included in the Updating Summary Prospectus As proposed, the new rule permits the updating summary prospectus to describe one or more contracts covered in the statutory prospectus to which the updating summary prospectus relates.339 This scope is different than that of the initial summary prospectus, which may only cover a single contract that the registrant currently offers for sale.340 Similar to the initial summary prospectus, however, the new rule also permits an updating summary prospectus to describe more than one class of a contract.341 Given the limited subset of information provided in the updating summary prospectus, we believe permitting registrants to combine multiple contracts will not cause investor confusion in the same way that combining disclosure about multiple contracts in the initial summary prospectus might.342 Furthermore, we understand that there are generally not a significant number of changes that occur to an individual contract year￾over-year, and many of those changes (such as changes to the available portfolio companies or the addition of new optional benefits) typically apply across multiple contracts described in the same prospectus. We therefore believe the section describing contract

343A registrant must indicate in this section, to the extent appropriate, whether certain described contract changes are only applicable to certain contracts in the statutory prospectus. See rule 498A(c)(6)(i)(B). 344See, e.g., ACLI Comment Letter. 345See rule 498A(c)(6). 346Registrants on Form N–3 may omit the
Appendix specified by Item 18 of amended Form
N–3, and instead provide the more detailed disclosures about the investment options offered under the contract required by Item 19 of amended Form N–3. See infra note 788 and accompanying text. 347See rule 498A(c)(3)(i) through (iv). We are not requiring the cover page of the updating summary prospectus to include the registrant’s name. See supra Section II.A.1.c.i. 348See supra note 86 (discussing requirements of the registrant’s internet address and contact information). 349See rule 498A(c)(3)(v). 350See rule 498A(b)(2)(v); see also supra note 86. The legend in the updating summary prospectus will note that ‘‘an updated prospectus’’ is available online, whereas the initial summary prospectus will note that it summarizes key features of the contract. 351See rule 498A(c)(3)(v); see also rule 498A(b)(2)(v)(A). 352See infra note 623. 353See infra Section II.A.7. changes, even if changes to multiple contracts are included, will not be overly lengthy, and will not prevent investors from reading or understanding the applicable disclosures.343 Finally, combining multiple contracts could make the updating summary prospectus significantly more efficient for registrants to produce and distribute. Commenters widely agreed with the proposed approach, and supported the optionality to allow the updating summary prospectus to include multiple contracts under the statutory prospectus to which the summary prospectus relates.344 Accordingly, we are adopting this approach as proposed.
c. Preparation of the Updating Summary
Prospectus
The following chart outlines the information required in an updating summary prospectus under new rule 498A. As proposed, along with specifying required cover page disclosures, the rule references particular disclosure items from Forms N–3, N–4, and N–6. The required information must appear in the same order, and under the relevant corresponding headings, as specified by the rule.345
TABLE 3—OUTLINE OF THE UPDATING SUMMARY PROSPECTUS
Heading in updating summary prospectus Item of amended Form N–3 Item of amended Form N–4 Item of amended Form N–6 Cover Page:
Identifying Information .......................................................................................................... ........................ ........................
Legends ................................................................................................................................ ........................ ........................
EDGAR Contract Identifier ................................................................................................... ........................ ........................
Table of Contents (optional) ................................................................................................. ........................ ........................
Content:
Updated Information About Your [Contract] ......................................................................... ........................ ........................
Important Information You Should Consider About the [Contract] ...................................... 2 2
Appendix: [Investment Options/Portfolio Companies] Available Under the [Contract]346 18
or 19 .................................................................................................................................. 17 18
i. Cover Page and Table of Contents
Identifying Information. As proposed, the following information will be required to appear on the front cover
page or at the beginning of the updating
summary prospectus:

• The depositor’s name;
• The name of the contract(s), and the
  class or classes, if any, to which the updating summary prospectus relates;
• A statement identifying the
  document as an ‘‘Updating Summary Prospectus’’; and
• The approximate date of the first
  use of the updating summary prospectus.347 Legend. The cover page or beginning of the updating summary prospectus is required to include the following legend:
  The prospectus for the [Contract] contains more information about the [Contract], including its features, benefits, and risks. You can find the current prospectus and other information about the [Contract] online at [ll]. You can also obtain this information at no cost by calling [ll] or by sending an email request to [ll].348 Additional general information about certain investment products, including [variable annuities/variable life insurance contracts], has been prepared by the Securities and Exchange Commission’s staff and is available at Investor.gov.349 Like the cover page or beginning of the initial summary prospectus, the cover page or beginning of the updating summary prospectus will be required to include identifying information about the variable contract, as well as a legend including certain general information that will be applicable to all variable contracts. The portions of the legend that describe how to obtain further information about the contract, as well as the Investor.gov website, are identical to the parallel portions of the legend that will appear on the cover page or beginning of the initial summary prospectus.350 As with the initial summary prospectus, a registrant could modify this required legend so long as the modified legend includes comparable information.351 Likewise, the updating summary prospectus will also include a legend informing investors about the optional internet availability of shareholder reports, if applicable, pursuant to the requirements of rule 30e–3.352 Similar to the initial summary prospectus, if a registrant incorporates any information by reference into the updating summary prospectus, the rule requires the registrant to include in the legend certain information about the document(s) from which the information was incorporated.353 The free look period legend that will appear on the cover page or beginning of the initial summary prospectus is not appropriate in the context of the updating summary prospectus, because the free look period is not applicable to additional investments after the initial purchase.

354See text following note 95.
355See rule 498A(c)(4)(ii). As in the case of the initial summary prospectus, this requirement is designed to allow Commission staff and others to more easily link the updating summary prospectus with other filings associated with the contract. 356See rule 498A(c)(5). 357Rule 481(c). 358See rule 498A(c)(6). 359See supra note 106. 360See 17 CFR 230.423 (rule 423 under the Securities Act) (regarding the date of the prospectus). 361See rule 498A(c)(6)(i). A change that has affected availability of portfolio companies (or investment options) includes changes in the portfolio companies (or investment options) offered under the contract or available in connection with any optional benefit. See also Item 18 of amended Form N–3; Item 17 of amended Form N–4; Item 18 of amended Form N–6. 362See rule 498A(c)(6)(i); see also Item 4 of amended Forms N–3, N–4, and N–6. 363See rule 498A(c)(6)(i); see also Item 10 of amended Form N–6. See supra Section II.A.1.c.ii.(c). 364See rule 498A(c)(6)(i); see also Item 11 of amended Forms N–3 and N–6; Item 10 of amended Form N–4. 365See rule 498A(c)(6)(i); see also Item 2 of amended Forms N–3, N–4, and N–6. 366See rule 498A(c)(6)(i); see also Item 3 of amended Forms N–3, N–4, and N–6. 367See rule 498A(c)(6)(i); see also Item 12 of amended Form N–3; Item 11 of amended Form N– 4; Item 9 of amended Form N–6. 368See rule 498A(c)(6)(i); see also Item 13 of amended Form N–3; Item 12 of amended Forms N– 4 and N–6. 369See rule 498A(c)(6)(i); see also Item 14 of amended Form N–6. 370See rule 498A(c)(6)(ii). Any additional information included should not, by its nature, quantity, or manner of presentation, obscure or impede understanding of the information that the rule requires. 371See rule 498A(c)(6)(i). 372See rule 498A(c)(6)(i)(A). 373See ACLI Comment Letter. In response to requests from commenters urging that we streamline the legends where possible, the legend on the cover page or beginning of the updating summary prospectus also reflects certain streamlining changes that mirror revisions made to the parallel legend in the initial summary prospectus.354 EDGAR Contract Identifier. As proposed, we are also requiring that the EDGAR contract identifier for each contract covered by the updating summary prospectus be included on the bottom of the back cover page or last
page of the updating summary
prospectus in a type size smaller than that generally used in the prospectus (e.g., 8-point modern type).355
Table of Contents. As proposed, the
new rule permits an updating summary prospectus, like the initial summary prospectus, to include a table of contents.356 A table of contents must show the page number of the various sections or subdivisions of the prospectus and must immediately follow the cover page in any prospectus delivered electronically.357
ii. Content of the Updating Summary
Prospectus
New rule 498A specifies the content and order required in an updating summary prospectus.358 Similar to the initial summary prospectus and the summary prospectus for mutual funds, adhering to these content requirements is one condition that an updating summary prospectus must satisfy in order to be deemed to be a prospectus that is permitted under Section 10(b) of the Securities Act and Section 24(g) of the Investment Company Act for the purposes of Section 5(b)(1) of the Securities Act.359 (a) Description of Changes to the Contract The updating summary prospectus is required to include a concise description of certain changes to the contract made after the date of the most recent updating summary prospectus or statutory prospectus that was sent or given to investors.360 As proposed, these changes include those that relate to (1) the availability of portfolio companies (or investment options under a variable annuity registered on Form N–3) under the contract,361 (2) the Fee Table,362 (3) the standard death benefit (for variable life insurance contracts),363 and (4) the benefits available under the contract.364 In a change from the proposal, we are also requiring the updating summary prospectus to include a concise description of changes to other items that are included in an initial summary prospectus. Specifically, we are requiring a discussion of changes that relate to the Key Information Table,365 the overview of the contract,366 purchases and contract value (premiums for variable life insurance contracts),367 surrenders and withdrawals,368 and lapse (for variable life insurance contracts).369 Although we would not expect these additional items to change very frequently (for example, many relate to terms that are set by the contract or reflect Commission or state insurance regulatory requirements), given their importance, we believe that investors should be notified of any changes with respect to these items. The updating summary prospectus also could include a concise description of any other changes to the contract that the registrant wishes to disclose, provided they occurred within the same time period.370 We believe that permitting—but not requiring—a concise description of any additional changes will provide flexibility to registrants to highlight for investors any additional changes. These contract changes will be described under the heading ‘‘Updated Information About Your [Contract].’’ 371 This legend will be required to follow the heading:
The information in this Updating Summary Prospectus is a summary of certain [Contract] features that have changed since the [Updating Summary Prospectus] dated [date]. This may not reflect all of the changes that have occurred since you entered into your [Contract].372 We designed this disclosure requirement in light of the fact that disclosures in a contract statutory prospectus do not change frequently, and we believe providing investors with notice and a brief description of any changes that do occur may be more informative than repeating all the disclosures each year. We believe that notice of these changes is particularly helpful, given that currently investors must determine which, if any, disclosures relevant to their particular contract have changed each year they receive the contract statutory prospectus. After receiving notice and a brief description of certain changes, an investor who then wishes to obtain more information on specific changes can consult the contract statutory prospectus to review related disclosures in more detail. We believe that highlighting certain key changes with respect to the contract in the updating summary prospectus will provide important information to investors that they can use in considering whether to continue making additional purchase payments or reallocate contract value. The requirement to disclose contract￾related changes to investors is particularly relevant for variable contracts, since the length of statutory prospectus disclosure may hinder investors in identifying important year￾over-year changes to contract features. One commenter noted that ‘‘because investors currently obtain disclosure about contract changes in a piecemeal fashion through different sequential updating disclosure, it may be helpful and constructive for investors to have a list in one place about contract changes in the updating prospectus.’’ 373 In providing a concise description of a contract-related change in the updating summary prospectus, registrants must provide enough detail to allow investors to understand the

374See rule 498A(c)(6)(i)(B).
375See Proposing Release, supra note 6, at n.236 and accompanying text. 376See CAI Comment Letter (seeking clarification because the proposal indicates that a change in expense ratio should be disclosed, ‘‘which would lead to voluminous, technical, and lengthy disclosure that would obscure information and reduce the effectiveness of the updating summary prospectus.’’); ACLI Comment Letter (stating that providing details about changes to underlying fund expenses would be burdensome, and recommending that the disclosure state that underlying fund expenses can be expected to change and investors should consult the Appendix discussing them in greater detail). We agree that the proposing release contained an example that may have led to this misimpression, and have replaced this with another example. 377See CAI Comment Letter. 378 Id. 379See supra note 373. 380See Transamerica Comment Letter. 381See infra Section II.A.3 for further discussion on the delivery of amendments to contract prospectuses. 382See rule 498A(c)(6)(iii). This disclosure will be the same information required by Item 2 of Forms N–3, N–4, and N–6. 383See supra Section II.A.1.c.ii.(a). 384See ACLI Comment Letter (supporting this flexibility as ‘‘allowing an approach that makes the most sense for each company.’’). change and how it will affect them.374 For example, this could include stating that an optional benefit fee has changed from 1.5% to 1.7%, rather than stating that the fee has changed or increased, or specifically identifying each optional benefit that has changed (with a brief explanation of how), rather than generically stating that certain optional benefits are new or no longer available. As another example, if a portfolio company is no longer available under the contract to new investors although current investors may continue to make investments, this change should be disclosed in the discussion of changes to the contract, even though in the
Appendix the portfolio company will
have a footnote (or similar indication) alerting investors that investments in the portfolio company are restricted to current investors. In the proposal, we had stated that ‘‘if a portfolio company’s expense ratio has changed, a registrant generally should describe this in the body of the updating summary prospectus even though expense ratio information would also appear in the required appendix to the updating summary prospectus, in order to highlight this change to investors.’’ 375 Commenters asked whether the updating summary prospectus should, in the discussion of changes to the contract, disclose changes to the expense ratio of the portfolio companies.376 Because the
Appendix will present updated
portfolio company information as to portfolio company expenses (as well as performance), we do not expect changes to portfolio company expenses to be disclosed in the discussion of changes to the contract section, even in cases where the ‘‘Annual Portfolio Company Expenses’’ table in the Fee Table is changed to reflect a new range. One commenter stated that the updating summary prospectus should be able to include changes that have occurred outside of the limited time period specified in proposed rule 498A.377 Because we are seeking to limit the amount of information in the updating summary prospectus to key information in order make it more approachable for investors, we decline to expand its scope to include information beyond the specified period. This commenter also stated that since the delivery of the last updating summary or statutory prospectus, insurers may have delivered supplements to those documents. As a result, highlighting and repeating those disclosures in the updating summary prospectus could be confusing. This commenter recommended we permit insurers to omit information that has been disclosed in a prior updating summary prospectus or statutory prospectus supplements delivered to investors (and if insurers include it, they should be able to clarify that the information was previously communicated).378 We do not share the commenter’s concern that investors will become confused and in fact believe that permitting such omission could result in piecemeal disclosures that are less useful to investors, and are therefore not making the suggested change.379 Another commenter suggested that we not require the delivery of an updating summary prospectus in the case of additional investments in a variable contract, as they will receive an updating summary prospectus annually, as well as prospectus supplements throughout the year, as necessary, for certain changes to the contract and/or portfolio company information.380 We agree with the commenter’s interpretation and note that the Commission did not propose, and we are not adopting, a requirement to deliver an updating summary prospectus each time an investor makes an additional investment.381 Key Information As proposed, the updating summary prospectus must include the same Key Information Table that appears in the initial summary prospectus.382 As discussed above, this table streamlines certain important concepts about the variable contract in a presentation that is designed to be easy to read and navigate.383 Because investors may make additional investments in the variable contract, we are requiring this disclosure in the updating summary prospectus to remind them of the contract’s fees and expenses, risks, restrictions, tax implications, and investment professional compensation. Furthermore, we believe that an investor who continues to make investments in the variable contract (or to reallocate contract value)—not just an initial investor in the contract—should receive the benefit of
this disclosure in a presentation that is intended to improve readability and readership. Besides the brief description of contract-related changes and portfolio company/investment option Appendix discussed below, an updating summary prospectus will include only this Key Information Table as summary disclosure about the contract’s key information, and will not also include the additional disclosure that the initial summary prospectus will include (for example, additional information about standard and optional contract benefits, or the contract Fee Table). We believe this is appropriate in the context of an updating summary prospectus for several reasons. First, unless the investor invested prior to the registrant relying on rule 498A, the investor already will have received the initial summary prospectus (and have had access to the statutory prospectus), which includes this extra detail. Additionally, the updating summary prospectus draws on layered disclosure concepts, where the investor can access the more detailed statutory prospectus electronically (or in paper format on request) to complement the disclosure included in the updating summary prospectus. An updating summary prospectus that describes multiple contracts could contain a separate Key Information
Table for each contract, or use a
different presentation approach that consistently discloses the required information for each contract in the required order.384 For example, if the only Key Information Table disclosure that will vary by contract is the fee information, a prospectus that describes multiple contracts could include a single Key Information Table that discloses separate fee information in the

385 Id. (stating that Regulation Best Interest and Form CRS may resolve questions about appropriate disclosure concerning investment professional compensation). 386Rule 498A(c)(6)(iv). This information on portfolio companies or investment options is the same information required by Item 17 of amended Form N–4 and Item 18 of amended Forms N–3 and N–6. We received and considered several comments on the Appendix, which are discussed in Section II.A.1.ii.(i). See, e.g., supra note 266. 387Paralleling a similar requirement for the initial summary prospectus, if the Appendix includes the information required by Item 18 of amended Form N–3, the Appendix must also include the following introductory legend: ‘‘The following is a list of [Investment Options] currently available under the [Contract], which is subject to change as discussed in the [Statutory Prospectus for the Contract]. More information about the [Investment Options] is available in [the Contract Statutory Prospectus], which can be requested at no cost by following the instructions on [the front cover page or beginning of the Summary Prospectus].’’ See Item 18 of amended Form N–3; rule 498A(c)(6)(iv). 388See rule 498A(c)(6)(iv); see also text following note 796 (discussing Item 19 of amended Form N– 3). 389As discussed above, we are requiring the
Appendix in the initial and updating summary
prospectuses to indicate which portfolio companies are subject to benefit-related investment restrictions. See supra note 316 and accompanying text. 390See VIP Working Group Comment Letter. 391Section 5(b)(2) of the Securities Act. 392 15 U.S.C. 77e(b)(2) (stating that it shall be unlawful for any person to carry or cause to be carried through the mails or in interstate commerce any such security for the purpose of sale or for delivery after sale, unless accompanied or preceded by a prospectus that meets the requirements of Securities Act Section 10(a)); see also Proposing Release supra note 6 at nn.27 (noting that the term ‘‘statutory prospectus’’ means a prospectus that meets the requirements of Section 10(a) of the Securities Act). Because the requirements of Section 5(b)(2) of the Securities Act are applicable to ‘‘any person,’’ its obligations are applicable to financial intermediaries through whom variable contracts are sold, as well as variable contract issuers. 393See supra note 392 (discussing the prohibition against carrying or delivering a security without otherwise accompanying it or preceding it with a statutory prospectus). 394See rule 498A(f)(1); see also supra note 333 and accompanying text. 395See rule 498A(f)(2). 396See rule 498A(f)(2)(i) and (ii). These materials may be bound together so long as: (1) All of the underlying portfolio companies whose prospectuses are bundled together are available to the investor to whom they are sent or given; and (2) a table of contents identifying each portfolio company summary and/or statutory prospectus that is bound together (and the page number on which each document is found), is included at the beginning or immediately following a cover page of the bound materials. 397See rule 498A(f)(3). ‘‘Fees and Expenses’’ line-items for each contract. One commenter opposed including the line-item for investment professional compensation in the Key Information Table, stating that once a contract has been purchased, information about investment professional compensation is not sufficiently relevant to be required in the table.385 Because investment professionals may present investors with other opportunities to invest in variable contracts, or encourage them to terminate an existing contract and then purchase or exchange into a new one, we believe it is important to remind investors about potential conflicts of interest, and are retaining the requirement, as proposed.
Appendix: Portfolio Companies/
Investment Options Available Under the Contract Finally, as proposed, the updating summary prospectus must include the
Appendix, which provides summary
information about the portfolio companies offered under the contract.386 This Appendix requirement is identical to the requirement for the
Appendix in the initial summary
prospectus.387 Like the requirement for the initial summary prospectus
Appendix, Form N–3 registrants could
omit the Appendix and instead provide the more detailed disclosures about the investment options offered under the contract that will be required by Item 19 of Form N–3.388 Because the selection of portfolio companies or investment options will directly affect the performance, and often the available optional benefits, of the contract, we believe that it is necessary to provide basic information about the portfolio companies to ongoing investors in variable contracts. This disclosure is intended to remind investors of one of the most important decisions they face during the life cycle of a contract—that is, whether and where to allocate additional purchase payments and reallocate contract value among the portfolio companies or investment options available to them.389
3. Interim Amendments to Contract
Statutory Prospectuses
One commenter asked for clarity regarding when contract prospectuses and summary prospectuses must be updated, and when information related to those updates must be delivered to investors.390 We believe that the use of initial and updating summary prospectuses to satisfy prospectus delivery requirements generally should mirror today’s summary prospectus delivery practices for mutual funds. To the extent there are amendments to the statutory prospectus that occur between annual updates (i.e., on an off-cycle basis) and an investor who received a summary prospectus makes a subsequent contribution to, or reallocates contract value within, their contract:

• If the amendment affects
  information contained in the current summary prospectus (including any of the four categories of changes that will be disclosed as part of the ‘‘Updated Information About Your [Contract]’’
  section of an updating summary
  prospectus), we believe that the summary prospectus would be amended (e.g., by sticker or supplement) and the amendment provided to investors as necessary to meet any requirements to deliver a current statutory prospectus for the contract; 391 and
• If the amendment does not affect
  information contained in the current summary prospectus, we do not believe that the summary prospectus would be amended and therefore, no amendment would need to be provided to investors.

4. Legal Effect of Use of Summary
   Prospectus for Variable Contracts
   Section 5(b)(2) of the Securities Act
   makes it unlawful to carry or cause to be carried a security for purposes of sale or for delivery after sale ‘‘unless accompanied or preceded’’ by a statutory prospectus.392 As proposed, new rule 498A provides that, for variable contract securities in an offering registered on Forms N–3, N–4, or N–6, the use of a summary prospectus could satisfy this Section 5(b)(2) obligation under certain conditions, described below. First, a person relying on new rule 498A will be required to send or give a summary prospectus to an investor no later than the time of the ‘‘carrying or delivery’’ of the contract security.393 This summary prospectus will be an initial summary prospectus in the case of an initial purchase of a variable contract, or an updating summary prospectus in the case of additional investments in a variable contract previously purchased.394 Second, the summary prospectus generally may not be bound together with any other materials, except portfolio company summary and statutory prospectuses may be bound together with the contract summary prospectus,395 subject to certain conditions.396 Third, the summary prospectus must meet the rule’s content requirements for an initial summary prospectus or updating summary prospectus (as appropriate).397 Finally, the initial summary prospectus, updating summary prospectus, contract statutory prospectus, and contract SAI must be publicly accessible, free of

398See rule 498A(f)(4) (in addition, a Form N–3 registrant will also be required to post its most recent annual and semi-annual reports to shareholders to the website); see also infra Section II.A.5. 399As discussed below, the rule also includes additional requirements (such as the requirement to send a copy of the contract statutory prospectus upon request) whose violation would result in a violation of the rule, but not result in a violation of Section 5(b)(2). See infra note 490 and accompanying text. 400Section 2(a)(10) of the Securities Act provides that certain communications accompanied or preceded by a statutory prospectus are not deemed to be ‘‘prospectuses’’ for purposes of the Securities Act. See Section 2(a)(10) of the Securities Act [15 U.S.C. 77b(a)(10)(a)] (providing that a communication sent or given after the effective date of the registration statement (other than a prospectus permitted under subsection (b) of
Section 10) shall not be deemed a prospectus if it
is proved that prior to or at the same time with the communication a written prospectus meeting the requirements for a statutory prospectus at the time of the communication was sent or given to the person to whom the communication was made). 401See rule 498A(g). 402See rule 498(d). 403See, e.g., Section 17(a) of the Securities Act [15 U.S.C. 77q(a)]; Section 10(b) of the Exchange Act [15 U.S.C. 78j(b)]; Section 34(b) of the Investment Company Act [15 U.S.C. 80a–33(b)]. 404See CFA Comment Letter (‘‘For investors to make good use of disclosures, they need to receive the information early enough (e.g., point of recommendation) to incorporate it in their decision￾making process. Disclosure that arrives after a decision has already been made (e.g., point of sale) or worse, after a purchase has already been made, defeat the purpose of disclosure as a decision￾making tool.’’). 405See AARP Comment Letter. 406Several commenters asked that we take steps to modernize the electronic delivery framework. See VIP Working Group Comment Letter; CAI Comment Letter (requesting action with respect to the federal Electronic Signatures in Global and National Commerce Act of 2000 (‘‘E-SIGN’’), which, as described, includes provisions that impose significant burdens on how informed consent may be obtained); Broadridge Comment Letter (stating that if technologies like QR codes and offers to enroll in e-delivery were permitted (but not required) to be included in the new disclosure, the path to digital delivery could be smoother for the 85% of variable annuity investors who currently receive these documents in the mail). Because these issues go beyond the scope of this rulemaking, we do not address them here. However, recognizing the growth of different forms of electronic media and other technological developments, among other things, the Commission has stated that it plans to revisit its existing guidance regarding electronic delivery. See Form CRS Relationship Summary; Amendments to Form ADV, Investment Advisers Act Release No. 5247 (June 5, 2019) [84 FR 33492 (July 12, 2019)], at n.678. 407See AIG Comment Letter. This approach is permitted under existing rules, subject to certain conditions. See Proposing Release, supra note 6, at n.32. 408See Lincoln Comment Letter. 409See infra Section II.A.6. 410See Cardozo Clinic Comment Letter. 411See AARP Comment Letter; CFA Comment Letter (investors should continue to have the choice of how they prefer to receive disclosures—whether in paper or electronically). 412See ACLI Comment Letter. charge, on a website in the manner that the rule specifies.398 Failure to comply with any of these requirements will prevent a person from relying upon the rule 498A to meet its
Section 5(b)(2) prospectus delivery
obligations. Absent satisfaction of the
Section 5(b)(2) obligation by other
available means, a Section 5(b)(2) violation will result.399 New rule 498A also provides that a communication relating to an offering registered on Forms N–3, N–4, or N–6 that a person sends or gives after the effective date of a variable contract’s registration statement (other than a prospectus that Section 10 of the Securities Act permits or requires) will not be deemed a prospectus under
Section 2(a)(10) of the Securities Act 400
if:
(1) It is proved that prior to or at the same time with such communication a summary prospectus was sent or given to the person to whom the communication was made; (2) The summary prospectus meets the same binding requirements that we discuss in the immediately preceding paragraph; (3) The summary prospectus that was sent or given satisfies the requirements for the initial summary prospectus or the updating summary prospectus, as applicable; and (4) The initial summary prospectus, updating summary prospectus, contract statutory prospectus, and contract SAI are publicly accessible, free of charge, on a website in the manner that the rule specifies.401 This provision of the final rule, which is modeled on a corresponding provision of rule 498,402 extends similar treatment to communications accompanied or preceded by a summary prospectus if all the provision’s conditions are met. These communications remain subject to the general antifraud provisions of the federal securities laws.403 Because we believe that all investors should receive the benefit of the succinct, investor-friendly disclosure that is included in the variable contract summary prospectus, all of the disclosure items that appear in the summary prospectus also will be required to appear in the statutory prospectus. In that respect, all variable contract investors, regardless of whether the product they choose has a summary prospectus, will have the benefit of improved disclosures in the statutory prospectus. We received comments relating to the rule’s conditions as to delivery of the summary prospectus. One commenter recommended that the summary prospectus should be delivered at the point of the investment recommendation,404 while another believed that retail investors should receive the initial summary prospectus ‘‘the earlier of ‘the time of the ‘carrying or delivery’ of the contract’ or 10 days in advance of the effective date of the contract’’ to allow time to make an educated investment decision and rescind the contract before the end of the free-look period.405 Because the proposed delivery requirement effectuates the requirements of a statutory provision, we are not modifying the timing of the prospectus delivery requirements, and are accordingly adopting this aspect of the rule as proposed. Although the Commission did not propose a change to the delivery format (paper versus electronic) of summary prospectuses, we received a number of comments on this topic.406 One commenter asked that we allow insurers to deliver an electronic initial summary prospectus with links to the statutory prospectus at the point of sale.407 A second commenter suggested that we allow insurers to satisfy prospectus delivery obligations by posting the prospectuses on the company’s website, provided that paper copies are available upon request,408 similar to the delivery requirements for the required online contract documents, discussed below.409 A third commenter stated that any summary prospectus should
be provided to investors digitally and in hard copy.410 A fourth commenter urged us to require paper delivery as the default delivery of their prospectuses or summary prospectuses unless the retail investor has affirmatively chosen to receive these documents electronically.411 Another commenter stated that it did not see a ‘‘need to modify the requirements to make clear that paper-based delivery is not the only permissible or desired delivery format.’’ 412 To maintain a consistent regime across all investment products, the summary prospectus framework we are adopting in this document will not change the Commission’s current guidance regarding electronic delivery. As discussed in the Proposing Release, although paper is the default format for delivery of prospectuses and certain other required disclosures, the Commission has provided guidance noting that electronic delivery may be used to satisfy prospectus delivery requirements if: (1) The investor has notice of the availability of the information; (2) the use of the medium is not so burdensome that intended recipients cannot effectively access the

413See 1995 Release, supra note 19; 1996 Release, supra note 19; 2000 Release, supra note 19. 414See Proposing Release supra note 6, at n.32 and accompanying text. 415One commenter requested clarification regarding an issue related to electronic delivery obligations generally. See CFA Comment Letter. Because these comments go beyond the scope of this rulemaking, we do not address them here. See also supra note 406. 416See rule 498(c)(4), (d)(4), (e), and (f). 417See 2012 Financial Literacy Study, supra note 108, at iv, xix. 418See rule 498A(h)(1)(i) through (ii). 419See rule 498(e)(1). 420See rule 498A(h)(1); see also rule 498(e)(1). 421See rule 498A(h)(1). 422See AARP Comment Letter. 423For example, an investor who has received the summary prospectus and would like to review more detail about a certain topic in the statutory prospectus would have at least 90 days to access the statutory prospectus that is available online. 424See VIP Working Group Comment Letter; Anonymous Comment Letter III. One of these commenters suggested that we not be so prescriptive about the format of content, which appear to be paper-based, and instead permit the flexibility that would allow for a website with tabs for each section instead of a serial document. The final rule does not prohibit a website with tabs for each section. 425See rule 498A(b)(2)(v)(B). information being provided; and (3) the issuer has evidence of delivery.413 Issuers relying on this guidance have typically satisfied the ‘‘evidence of delivery’’ requirement by obtaining informed consent to electronic delivery.414 We understand that investors that have elected electronic delivery of materials associated with their variable contract commonly receive an email that contains a link to the website where the materials are available.415
5. Online Accessibility of Contract
Statutory Prospectus and Certain Other Documents Relating to the Contract Under the final rule, as proposed, investors who receive an initial or updating summary prospectus will have access to more detailed information about the variable contract, either by reviewing the information online, or by requesting the information to be sent in paper or electronically. These provisions parallel provisions in the rule governing the use of mutual fund summary prospectuses.416 In our experience, layered disclosure for mutual funds has benefitted both investors and registrants, and we are adopting a similar framework for variable contracts. We believe that permitting variable contract investors to access the contract statutory prospectus in several ways (online and by physical or electronic delivery) maximizes the accessibility and usability of the information, as indicated by investors’ preference for access to both online and paper resources.417 a. Required Online Contract Documents As proposed, and under the final rule, a variable contract’s current initial summary prospectus, updating summary prospectus, statutory prospectus, and SAI, and, in the case of a registrant on Form N–3, the registrant’s most recent annual and semi-annual reports to shareholders under rule 30e–1 under the Investment Company Act (together, the ‘‘required online contract documents’’), will be required to be available online.418 This approach operationalizes the summary prospectus layered disclosure framework, with the summary prospectus provided in paper (or electronically) to investors, and additional information about the contract securities available online. The required online contract documents generally comprise the same set of documents that the mutual fund summary prospectus rules require to be posted online,419 and provide additional important detail about the contract that investors can access, if they wish. The required online contract documents only reference the registrant’s annual and semi-annual shareholder reports for Form N–3 registrants because Form N– 4 and Form N–6 registrants do not have shareholder reports, but instead transmit the portfolio companies’ annual and semi-annual shareholder reports to the investors in the contracts. As with similar provisions in the mutual fund summary prospectus rule, these required online contract documents are required to be publicly accessible, free of charge, at the website address that the cover page of the summary prospectus specifies, on or before the time that the person relying on the rule provides the summary prospectus to investors.420 Moreover, a current version of each of the required online contract documents must remain on that website for at least 90 days following either:

• The time of the ‘‘carrying or
  delivery’’ of the contract security if a person is relying on the rule to satisfy its Section 5(b)(2) prospectus delivery obligations; or
• If a person is relying on the rule to
  send communications that will not be deemed to be prospectuses, the time that the person sends or gives the communication to investors.421 This requirement is designed to provide continuous access to the information from the time the summary prospectus is sent or given until at least 90 days after the date of delivery of a security or communication in reliance on the rule. One commenter stated the proposed 90-day timeframe for the availability of online information was too short (unless there were an archive requirement, in which case it suggested the 90-day timeframe could make sense), and that a year would be more helpful to investors.422 As a practical matter, because variable contracts (and their underlying portfolio companies) are generally continuously offered, a current contract prospectus and related documents would likely remain online for longer than 90 days. The 90 day period is also the timeframe required for the availability of online information under the mutual fund summary prospectus rule, and the Commission proposed that it be the same for variable contracts because of market participants’ familiarity with this timeframe, and because there may be operational efficiencies for certain registrants in having the timeframe be the same under both summary prospectus frameworks. Moreover, we believe this timeframe appropriately balances the costs of maintaining information online with investors’ interests in having the flexibility to access this online information after receiving the summary prospectus.423 Two commenters recommended that we make the web-posting requirements more principles-based and less regimented.424 The proposed requirements for the availability of online information were designed to mirror the requirements in the mutual fund summary prospectus rule because we believed that investors and the industry would benefit from the consistency between the two summary prospectus regimes. Moreover, we believe it would be more appropriate to undertake a holistic review of the website posting (and possibly other technology-based) requirements for all investment products, including funds and variable contracts as part of a future initiative. Therefore, we are adopting the website posting requirements as proposed. Website Address at Which Required Online Contract Documents Are Available. Also as proposed, the website address must be specific enough to lead investors directly to the required online contract documents, although the website can be a central site with prominent links to each document.425 Thus, while contract documents may be hosted at multiple locations, for purposes of compliance with the rule, a summary prospectus may only include a single website address where each of the required online contract documents

426See infra Section II.B.
427See rule 498A(h)(2)(i).
428Rule 498(e)(2)(i).
429As in the parallel provisions of the rule governing mutual fund summary prospectuses, the ‘‘human-readable’’ condition is intended to make clear that posted information must be presented in human-readable text, rather than machine-readable software code, when accessed through an internet browser and that it must be printable in human￾readable text. This condition does not impose any further requirements relating to user-friendliness of the presentation. See 2009 Summary Prospectus Adopting Release, supra note 17, at 85; see also infra note 444 and accompanying and following text (discussing provisions that are meant to enhance investors’ understanding of special terms when they view the summary prospectus online, as well as other technological tools associated with online disclosure (e.g., fee calculators or pop-up explanations) that present further opportunities to promote investor understanding). 430See rule 498A(i)(3); see also rule 498(f)(3) (parallel provision in the rule governing the use of mutual fund summary prospectuses). This condition could be satisfied by, for example, providing one format that is convenient for reading online, and another format that is convenient for printing on paper. 431See 2009 Summary Prospectus Adopting Release, supra note 17, at nn.272 and 273 and accompanying text (relevant factors include the manner in which the online version renders charts, tables, and other graphics; the extent to which the online materials include search and other capabilities of the internet to enhance investors’ access to information and include access to any software necessary to view the online version; and the time required to download the online materials). 432See rule 498A(i)(5); see also rule 498(f)(5) (parallel provision in the rule governing the use of mutual fund summary prospectuses). 433See rule 498A(h)(2)(ii) and (iii); see also rule 498A(i)(4); General Instruction 1(b) to Item 2 of Forms N–3, N–4, and N–6; see supra note 201 and accompanying text. 434See rule 498(e)(2)(ii) and (iii). As discussed below, the parallel provisions of rule 498A also include similar linking requirements for the portfolio company documents that the rule requires to appear online if a person were to rely on the rule’s new delivery option for portfolio company prospectuses. 435See rule 498A(h)(2)(ii). The linked table of contents may be outside the document (e.g., in a separate section or panel of the screen), and need not be the table of contents that is contained within the document itself, as long as the linked table of contents for the statutory prospectus conforms to our rules’ requirements for the table of contents that appears within the document). See rule 481(c) under the Securities Act. Mutual funds commonly implement this feature using a left navigation or ‘‘bookmark’’ design style. While such design styles continue to be popular (and we anticipate that some insurers relying on rule 498A might also employ this design style), the
increased use of mobile devices and applications has led to the development of new and evolving design styles. Any navigation style must provide the functionality that is required by the rule. 436See rule 498A(h)(2)(iii). 437 Id. Under the latter option, links either have to be available at both the beginning and end of the summary prospectus, or have to remain continuously visible to persons accessing the summary prospectus. This requirement is designed to promote the links’ prominence and accessibility to investors. 438See supra note 201 and accompanying text. 439See rule 498A(b)(5), (6); General Instruction B.4(c) to amended Forms N–3, N–4 and N–6 (referencing 17 CFR 230.421 (rule 421(d) under the Securities Act)). may be accessed. This requirement is designed to ensure that the required online contract documents are collectively located at the same website address (or can be readily accessed from the same website address), as opposed to being scattered across various disconnected websites which could discourage investors from seeking those materials. As discussed below, if an insurer avails itself of the optional method of delivering portfolio company prospectuses, the portfolio company documents required to be made available online under that option must be accessible from the same website address used to access the required contract documents.426 b. Formatting Requirements for Required Online Contract Documents The final rule, as proposed, requires that the online contract documents be presented in a manner that is human￾readable and capable of being printed on paper in human-readable format.427 We received no comments on this aspect of the proposal. This formatting requirement is a condition of reliance on the rule to satisfy a person’s delivery obligations under Section 5(b)(2) of the Securities Act and the provision that a communication shall not be deemed a prospectus under Section 2(a)(1) of the Securities Act. The rule governing mutual fund summary prospectuses also requires this formatting approach.428 The ‘‘human-readable’’ presentation requirement is designed to impose a minimum standard of usability comparable to that of a paper document, although the electronic version could include additional features (e.g., fee calculators or pop-up explanations) that might enhance its usability relative to the paper version.429 Regarding usability, all portions of the document should be human-readable such that when an investor views the document electronically, the text is not cut off based on the screen size. In addition, the final rule requires that the online materials be presented in a format, or formats, that are convenient for both reading online and printing on paper.430 The failure to comply with these ‘‘convenient for reading and printing’’ formatting requirements will not, however, be a condition of reliance on the rule, because whether a particular format is convenient for reading online and printing depends on a number of factors
and must be decided on a case-by-case basis.431 In order to provide certainty to market participants, we are therefore not mandating that this requirement be a condition of reliance on the rule, and thus the failure to comply with this requirement will not negate a person’s ability to rely on the rule in order to satisfy a person’s delivery obligations under Section 5(b)(2) of the Securities Act.432 Such a failure will, however, constitute a violation of Commission rules.
c. Linking Within and Between
Documents
As proposed, the final rule also includes requirements for linking within the electronic versions of the contract statutory prospectus and SAI that are available online, and also for linking between electronic versions of contract summary and statutory prospectuses that are available online.433 These requirements, which are substantively identical to parallel provisions in the rule governing mutual fund summary prospectuses,434 are designed to promote the usability of the information that appears in these documents. The first linking requirement will allow the reader to move directly between a table of contents of the contract statutory prospectus or SAI and the related sections of that document.435 The second linking requirement will allow the reader to move back and forth between each section of the summary prospectus and any related section of the contract statutory prospectus and contract SAI that provides additional detail.436 This back-and-forth movement could occur either directly from the summary prospectus to the relevant
section of the statutory prospectus or
SAI, or indirectly by linking from the summary prospectus to a table of contents for the statutory prospectus or SAI, and vice versa.437 As discussed above, in response to commenters, we are modifying a separate aspect of the proposal that would have inadvertently negated the ability of registrants to use the indirect linking option.438 d. Definitions of Special Terms, and Online Viewing of Special Terms The summary prospectus content requirements reference information that is required to appear in the contract statutory prospectus, which in turn must be written using plain English principles.439 Variable contract disclosure documents tend to include industry-specific language in order to describe the sometimes complex features of these products. We recognize, therefore, that it may be particularly challenging to accurately describe a variable contract without

440See rule 498A(e). For example, the summary prospectus could include a glossary or a list of definitions of special terms that appear throughout the document. Or, as another example, if a special term appears in only one section of the summary prospectus, the summary prospectus could include a definition for this term on the page, or in the
section, where this term appears (for example, in a
box to the side of the main text, or at the bottom of the page). Additionally, there are or may become available technological solutions for electronic versions of the summary prospectus. See infra note 444 and accompanying and following text. 441See General Instruction C.3(d) to Forms N–3, N–4, and N–6; see also Item 2 of current Forms N– 3 and N–4. 442See WFA Comment Letter. 443See Cardozo Clinic Comment Letter. 444For example, investors could view the definitions of special terms by moving or ‘‘hovering’’ the computer’s pointer or mouse over the term, or selecting the term on a mobile device. 445Rule 498A(h)(2)(iv). 446See AARP Comment Letter. 447See Cardozo Clinic Comment Letter (‘‘if the reader ‘‘clicks’’ on a defined term, the definition of the term should automatically be shown to the reader’’). 448See CAI Comment Letter. 449See AARP Comment Letter; CAI Comment Letter; ACLI Comment Letter. 450See CAI Comment Letter (stating that interactive fee calculators would be very difficult to design for even a single contract, given the potential complications associated with multiple classes/ versions, fee structures, features, investment restrictions, and optional benefits, and administering interactive fee calculators for entire books of business could be virtually impossible for many insurers); ACLI Comment Letter. 451See ACLI Comment Letter (stating that investors would receive the same fee information from the investment professional selling the variable contract, who could also explain the information, whereas use of an interactive calculator without the benefit of an explanation might serve to create investor confusion); Ameritas Comment Letter. 452See Baldwin Comment Letter. 453See Donnelley Financial Comment Letter I. 454See IRI Comment Letter I (‘‘Rather than relying on investors or third parties to harness modern technology to give investors the ability to efficiently analyze and compare available information, the Commission, as the repository of all Summary Continued using certain terms that, while technically accurate, may be confusing or unfamiliar to retail investors. Accordingly, the final rule, as proposed, requires a summary prospectus to define any ‘‘special terms’’ elected by the registrant, using any presentation that clearly conveys their meaning to investors.440 This requirement reflects the instructions in Forms N–3, N–4, and N–6 (as well as similar instructions in the current version of these forms to define ‘‘special terms’’ in a glossary or index).441 The registrant will determine which terms constitute special terms. We generally believe that a special term is a term that is typically unfamiliar to a new contract investor and is important for the investor to understand key features of the contract. Two commenters responded favorably to the inclusion of a Special Terms
section of the hypothetical initial
summary prospectus, with one commenter stating its belief that ‘‘the ‘Special Terms’ section . . . will be helpful to the reader as it defines terms with which they may not be familiar,’’ 442 and another observing that ‘‘because the Special Terms are the first thing people see, they are likely to read them more diligently.’’ 443 In order to leverage technology to help investors understand the variable contract, the final rule includes provisions that are meant to enhance investors’ understanding of special terms when they view the summary prospectus online. Specifically, the rule requires that investors either be able to view the definition of each special term used in an online summary prospectus upon command,444 or to move directly back and forth between each special term and the corresponding entry in any glossary or list of definitions that the summary prospectus includes.445 This approach, which today is a common convention for many electronically available documents, is an example of how technology can enhance our layered approach to disclosure and help investors who access the document online grasp the complexities of variable contract features. Registrants may wish to consider whether other technological tools associated with their online disclosure (e.g., pop-up explanations) present further opportunities to promote investor understanding. Two commenters supported the proposed approach. One commenter ‘‘commend[ed] the Commission for its requirement that investors accessing the summary prospectus should be able to view the definition of special terms upon command,’’ and suggested that the requirement be expanded to all definitions to improve the readability of the document.446 Another commenter stated that electronic versions of the prospectus should have definitions for defined terms that pop up when clicked.447 Conversely, one commenter stated that requiring the definition of each special term used in an online summary prospectus to be viewed upon command, or to permit investors to move directly back and forth between each special term and the corresponding entry in any glossary in the summary prospectus, may be burdensome and excessive since an initial and updating summary prospectus has so many terms.448 This commenter recommended instead that insurers be permitted to make a link to a summary prospectus’s glossary continuously visible, thereby allowing an investor to move back-and-forth between the various sections of a summary prospectus and its glossary. We are adopting the requirement as proposed. We believe that registrants should provide investors with an easy and convenient means to understand the terms used to describe the investment product offered. Given the prevalence of different technological solutions that allow online documents to be viewed upon command, we are not persuaded that the burdens are as great as this commenter suggests. Moreover, we are concerned that for a registrant that chooses to make the table of
contents for the statutory prospectus continuously available, the inclusion of a continuously available glossary would clutter an investor’s visual field, potentially reduce the investor’s focus, and detract attention away from the information in the summary documents. Commenters offered a variety of suggestions regarding technological tools that could enhance online disclosure to promote investor understanding. While several commenters agreed with the concept of an interactive fee calculator,449 they recommended that the final rule not require this functionality because of concerns about the feasibility of developing this feature for such a highly customized investment product,450 and raised questions about the relative benefits to investors.451 One commenter suggested an interactive tool that could allow investors to vary the assumptions in a visual illustration to see the effect on policy value as the inputs are changed.452 Another commenter stated that a modern app-based disclosure solution is the best technology option to provide investors with streamlined, user-friendly technology, and recommended that we add language to the final rule that specifically supports apps for delivery of content related to prospectus data for variable contracts.453 The final rule does not preclude the use of apps as a disclosure delivery channel provided all conditions of the rule are met, and, as we note below, we decline to add any additional language supporting their use. A different commenter suggested that the Commission should develop an application or other web-based tool to enable investors to compare the key information contained in summary prospectuses of different issuers in a manner similar to the way websites today enable consumers looking to purchase a new car to compare key features of vehicles of different manufacturers.454

Prospectus data, should itself harness such technology.’’). 455See supra note 424 and subsequent text. 456See rule 498A(h). 457See rule 498A(h)(2)(i) through (ii). 458One commenter said we should require that downloaded documents retain links that enable a user to move readily between related passages of multiple documents because without the links, the documents do not provide complete information to investors. See AARP Comment Letter. We do not agree that the lack of an active link diminishes the completeness of the information in the documents, and decline to make the suggested change. 459See rule 498(e)(3). 460See rule 498A(i)(3). 461See supra note 430 and accompanying text. 462See rule 498A(i)(5). 463See supra notes 431 and 432 and accompanying text. 464See rule 498A(f)(4) (Section 5(b)(2) transfer of the contract security is satisfied if, among other things, the conditions in rule 498A(h) are satisfied). 465Such events might, for example, include system outages or other technological issues, natural disasters, acts of terrorism, or pandemic illnesses. 466See ACLI Comment Letter. See also Comment Letter of Martha Chemas (Mar. 8, 2019) (‘‘Chemas Comment Letter’’) (suggesting a safe harbor in the case of a denial of service attack or similar outage while the website was under attack). 467See rule 498A(h)(4); see also rule 498(e)(4). 468 Id. This safe harbor generally would not be available to a registrant that repeatedly fails to comply with the rule’s website posting requirements or that is not in compliance with the requirements over a prolonged period. See Proposing Release, supra note 6, at nn.285. 469See rule 498A(i)(1). We appreciate all of these technological suggestions and are continuing to consider their usefulness in investor disclosures. As previously noted, however, because we believe it would be more efficient to undertake a holistic review of technology-based approaches for all investment products as part of a future initiative,455 we are adopting the requirements to define, and provide online viewing of, Special Terms as proposed. We nonetheless encourage registrants and other industry participants to consider how technology can be used to improve the communication of information to investors, particularly as investors trend toward using applications and other technologies to access information. e. Ability To Retain Documents The final rule, as proposed, also requires that persons accessing the website that appears on the summary prospectus cover page be able to permanently retain, free of charge, an electronic version of each of the required online contract documents.456 Like the online version of these documents, the retainable version of the documents must be in a format that: (1) Is human-readable and capable of being printed on paper in human-readable format; and (2) permits persons accessing the downloaded documents to move directly back and forth between each section heading in a table of contents of that document and
the
section of the document referenced in
that section heading.457 The permanently retained document does not have to be in a format that allows an investor to move back and forth between the summary prospectus and the statutory prospectus and SAI, because of possible technical difficulties associated with maintaining links between multiple downloaded documents.458 These conditions are substantively identical to parallel provisions in the rule governing mutual fund summary prospectuses.459 In addition, the rule mandates that the electronic versions of the documents that may be permanently retained must be in a format that is convenient for both reading online and printing on paper.460 Like the ‘‘convenient for reading and printing’’ online formatting requirements,461 the failure to comply with these formatting requirements for retained electronic documents is not a condition for reliance on the rule.462 Since the convenience of these formatting requirements must be decided on a case-by-case basis, we believe this approach will help provide certainty to market participants who seek to rely on the rule to satisfy prospectus delivery obligations.463 f. Safe Harbor for Temporary Noncompliance Compliance with the conditions in new rule 498A regarding the online availability of the required online contract documents (including the formatting and linking requirements for these documents, the requirements associated with the use of special terms in these documents, and the ability to retain these documents permanently) is generally required in order to rely on the rule to meet prospectus delivery obligations under Section 5(b)(2) of the Securities Act.464 Failure to comply with any of these conditions could result in a violation of Section 5(b)(2) unless the contract statutory prospectus is delivered by means other than reliance on the rule. We recognize, however, that there may be times when, due to events beyond a person’s control, the person may temporarily not be in compliance with the rule’s conditions regarding the availability of the required online contract documents.465 Commenters expressed support for the proposed safe harbor provision,466 and the final rule, as proposed, contains a provision for temporary noncompliance, which is substantively identical to a parallel provision in the rule governing mutual fund summary prospectuses.467 This provision provides that the conditions regarding the availability of the required online contract documents will be deemed to be met, even if the required online contract documents are temporarily unavailable, provided that the person has reasonable procedures in place to ensure that those materials are available in the required manner. A person relying on the rule to satisfy prospectus delivery obligations is required to take prompt action to ensure that those materials become available in the manner required as soon as practicable following the earlier of the time when the person knows, or reasonably should have known, that the documents were not
available in the manner required.468
6. Other Requirements for Summary
Prospectus and Other Contract Documents a. Delivery Upon Request Proposed rule 498A included certain requirements relating to the delivery of paper or electronic copies of required online contract documents upon request.469 We are adopting these requirements as proposed. Under the final rule, an investor who receives a contract summary prospectus and who would also like to review the contract’s statutory prospectus, SAI, and, in the case of a variable contract registered on Form N–3, its most recent annual and semi-annual report to shareholders is able to choose whether to review these documents online or to receive that information directly, in paper or electronic format as requested by the investor. Accordingly, a registrant (or financial intermediary distributing the contract) is required to send a paper or electronic copy of the required online contract documents to any person requesting such a copy. The person must send requested paper documents at no cost to the requestor, by U.S. first class mail or other reasonably prompt means, within three business days after receiving the request. A registrant or intermediary is also required to send electronic copies of these documents upon request within three business days. The requirement to send an electronic copy of a document may be satisfied by sending a direct link to the online document; provided that a current version of the document is directly accessible through the link from the time that the email is sent through the date that is six months after the date that the email is sent and the email

470See, e.g., NAIFA Comment Letter (‘‘Any investor who wants to receive more detailed information should have access to more detailed, second-tier disclosures upon request and without cost. Firms should be required to provide hard-copy versions of these second-tier disclosures free of charge to any investor who requests a hard-copy disclosure document.’’); ACLI Comment Letter. 471See ACLI Comment Letter (predicting that, based on insurers’ experiences under the current paper delivery regime, few variable contract purchasers are likely to request a paper copy after the initial purchase). 472See VIP Working Group Comment Letter. 473See generally infra Section IV.C.1.a.i.(a). 474See generally infra Section IV.C.1.a.i.(b). 475See id. (noting that investors may need to manually enter a hyperlink from a paper updating summary prospectus or open a link to a website containing the statutory prospectus in such circumstances). 476See rule 498A(i)(2); see also rule 498(f)(2). 477See Prospectus Release, supra note 6, at nn.293–294 and accompanying text. 478 Id. A summary prospectus on top of a group of papers that are provided together, or listed first if presented on a website together with other materials related to the contract, satisfies this requirement. 479See ACLI Comment Letter (stating ‘‘We support the proposal’s narrative that the summary prospectus should be the first among several documents listed electronically or delivered in a bundle. This approach has worked well in the mutual fund industry and can be expected to work equally well for variable contract disclosure,’’ while also stating ‘‘Imposing prominence requirements is unnecessary.’’). 480See rule 498A(i)(4). In addition, a parallel requirement applies to statutory prospectuses. See General Instruction C.3.(i) to Forms N–3, N–4, and N–6. 481A summary prospectus filed on EDGAR must not include a functioning link to an external location, as our rules prohibit hyperlinking to websites, locations, or other documents that are outside of the EDGAR system. See 17 CFR 232.105 [rule 105 of Regulation S–T]. Because this is an existing EDGAR restriction, we do not believe it is necessary to add this provision to rule 498A. Thus, in a change from the proposal, rule 498A does not include this provision. 482See Ameritas Comment Letter. 483See rule 498A(b)(2)(v)(B) (‘‘The legend must provide a website address, other than the address of the Commission’s electronic filing system . . . that investors can use to obtain the Statutory Prospectus and other materials . . . [t]he website address must be specific enough to lead investors directly to the Statutory Prospectus and other materials that are required to be accessible under paragraph (h)(1) of this section . . . [t]he website could be a central site with prominent links to each document.’’); see also rule 498A(c)(3)(v) (parallel requirements); rule 498A(h)(1) (required online documents). 484See General Instruction 1(d) to Item 18 of amended Form N–3;
General Instructions 1(b) and (e) to Item 17 of Form N–4; General Instructions 1(b) and (e)(e) to Item 18 of amended Form N–6. explains both how long the link will remain useable and that, if the recipient desires to retain a copy of the document, he or she should access and save the document. Collectively, these requirements are intended to ensure that an investor has prompt access to the required information in a format that he or she prefers. As proposed and under the final rule, investors who prefer paper copies of the statutory prospectus but do not have ready access to the internet (or the ability to print out the statutory prospectus that is made available online) will not be able to elect in advance to receive paper copies of all future statutory prospectuses unless a registrant chose to give investors that option. Assuming no such accommodation, investors will need to follow the summary prospectus legend’s instruction on how to request paper copies of the statutory prospectus each time a new statutory prospectus is available. Those that do not take the additional step of requesting a paper copy of the statutory prospectus will not receive the statutory prospectus in their preferred format. Two commenters supported this framework.470 One of those commenters stated that the ability to obtain a paper copy of the prospectus without charge through a toll-free number provides a functional and practical mechanism for investors to obtain a paper copy, and advised against mandating opt-in or opt￾out practices concerning future delivery of paper prospectuses, which would impose unnecessary tracking responsibilities and costs that would greatly overshadow the marginal benefit to consumers.471 In contrast, a separate commenter asserted that investors who want paper should be able to permanently elect to receive the full statutory prospectus and underlying fund documents.472 While registrants may choose to give investors the option to permanently elect to receive the full statutory prospectus and underlying fund documents, we are not requiring registrants to provide that option. As discussed throughout this release, we believe the layered disclosure framework contemplated by the rule (i.e., sending or receiving the summary prospectus and making the statutory prospectus and underlying fund materials available online and upon request) will benefit the majority of investors and generally represents an improvement over the current disclosure regime.473 Moreover, we believe that this approach appropriately balances the interests of the number of variable contract investors whom we believe would benefit from the convenience of online documents against the number of those whom we believe prefer paper. Although certain investors may prefer statutory prospectuses rather than summary prospectuses, we believe that such investors are likely willing to seek out detailed information to inform their investment decisions.474 We believe that for these investors, the
additional effort required to access the statutory prospectus online or request paper or electronic statutory prospectuses will be incrementally minimal.475 b. Prominence Requirement The final rule also requires that, generally like mutual funds, a contract summary prospectus must be given greater prominence than any materials that accompany the summary prospectus.476 As discussed in the Proposing Release, this requirement is designed to prevent any accompanying sales or other materials from obscuring the contract summary prospectus, and to highlight for investors the concise presentation of the summary prospectus, and the salience of the information it includes.477 We believe that the greater prominence requirement would be satisfied if the placement of the contract summary prospectus makes it more conspicuous than any accompanying materials.478 The only commenter who addressed this aspect of the proposal offered mixed support.479 We continue to believe the prominence requirement benefits investors and are adopting it as proposed.
c. Hyperlinking of website Addresses in
Electronic Versions of Summary Prospectus Largely as proposed, we are also requiring any website address that is included in an electronic version of the summary prospectus (i.e., electronic versions sent to investors or available online) to be an active hyperlink.480 This provision is intended to ensure that investors viewing electronic versions are able to easily access website addresses that are included in the summary prospectus.481 One commenter stated that requiring active hyperlinks for website addresses referenced in electronic versions of the initial summary prospectus could be administratively burdensome because insurers would need to monitor to ensure the disclosed website locations were accurate and functioning.482 The cover page of the initial summary prospectus must provide a website where investors can obtain the summary and statutory prospectuses (and certain other contract documents),483 and the legend in the Appendix in the initial summary prospectus must include a website where investors can access the portfolio company prospectuses (and, if applicable, access updated performance information).484 However, the rule and form requirements give registrants the

485See rule 498A(i)(4).
486See rule 498A(i)(4) (‘‘[A]ny website address that is included in an electronic version of the Summary Prospectus must include an active hyperlink or provide another means of facilitating access through equivalent methods or technologies that lead directly to the relevant website address.’’). See also supra note 205 and accompanying text. 487Compare rule 498A(i)(4) as proposed (requiring hyperlinks for both website addresses and cross-references) with final rule 498A(i)(4) (requiring hyperlinks only for website addresses). See also Proposing Release, supra note 6, in the text accompanying notes 295 and 296 and General Instruction C.3.(i) to Forms N–3, N–4, and N–6 as proposed. 488See, e.g., Item 4 of amended Forms N–3, N–4, and N–6 (cross-referencing the contract specifications page from each investor’s contract). 489See rule 498A(h)(2)(ii) and (iii). 490Rule 498A(i)(5). The final rule’s requirements under paragraph (i)(3) that (1) the required online documents be presented in a format that is convenient for reading and printing, and (2) a person be able to retain electronic versions of these documents in a format that is convenient for reading and printing, also are not conditions to relying on the rule to satisfy prospectus delivery obligations. See supra notes 430 and 460 and accompanying text. 491See ACLI Comment Letter; Chemas Comment Letter. 492See Chemas Comment Letter (‘‘How long could what is supposed to be an active hyperlink be a dead link before a registrant is deemed non￾compliant with this proposed updated requirement?’’); see also Proposing Release supra note 6, at n. 297 (similar comments regarding the ‘‘greater prominence’’ requirement in the proposed mutual fund summary prospectus rule). Consistent with the requirements of the safe harbor for electronic delivery in rule 498A(h), a registrant should update a dead hyperlink when it knows or reasonably should have known that the hyperlink is dead. See also supra notes 406 and 415. 493See rule 498A(d)(2). We received no comments on this aspect of the proposal. 494See Proposing Release, supra note 6, at n.300 and accompanying text. 495Rule 498A(d)(2) references rule 30e–1 under the Investment Company Act, which applies only to management companies (Form N–3 registrants). While rule 30e–2 under the Investment Company Act requires Form N–4 and Form N–6 registrants to transmit portfolio company annual and semi-annual shareholder reports to the investors in their trust accounts, these registrants do not incorporate by reference information from a portfolio company shareholder report into the contract prospectus. See CAI Comment Letter (stating that the underlying fund summary or statutory prospectus should not be incorporated by reference into the variable contract summary prospectus). Accordingly, the final rule does not reference rule 30e–2. 496See rule 498A(d)(2)(ii); see also supra Sections II.A.1 (describing content requirements for the initial summary prospectus) and II.A.2
(describing content requirements for the updating summary prospectus). 497See rule 498A(d)(2)(iii). flexibility to determine whether to provide the required information on the registrant’s website, or a third party website. Because the availability of more detailed information is a key component to a layered disclosure approach, enabling access to that information is fundamental to the framework. We therefore believe it is reasonable, and not unduly burdensome, for a registrant to ensure that the website address it chooses to include in the electronic version of its summary prospectuses has an active link, and are adopting this aspect of the rule largely as proposed.485 However, as discussed above, in response to comments we are modifying this requirement to allow registrants to provide another means of facilitating access through equivalent methods or technologies that lead directly to the relevant website address.486 This change is intended to give registrants the flexibility to provide hyperlinks in a continually visible sidebar, or some equivalent means of facilitating access from the summary prospectus. d. Hyperlinking of Cross-References in Electronic Versions of Summary Prospectus Although we proposed that registrants provide hyperlinks for cross-references included in an electronic version of the summary prospectus,487 we recognize that the summary prospectus could contain multiple cross-references to both internal disclosures as well as external documents, and implementing and maintaining active hyperlinks for those cross-references could be burdensome or in some cases infeasible (e.g., cross-references to individual external documents that are specific to each investor).488 We also believe that hyperlinked cross-references may be largely unnecessary because rule 498A provides that the summary prospectus, statutory prospectus, and SAI must include links or otherwise permit persons accessing those documents to move directly back and forth between each section heading in a table of contents and the section of the document referenced in that topic heading, as well as between each
section of the summary prospectus and
any section of the statutory prospectus and SAI (or, alternately, have continuously visible links that allow persons accessing those documents to move directly back and forth between each section heading in a table of contents and the section of the document referenced in that topic heading).489 Therefore, we are eliminating the proposed requirement, but we nonetheless encourage registrants to use hyperlinks and other tools to provide investors with means to more easily read and access information in electronic versions of documents relating to their contract. e. Failure To Comply With Other Requirements in Rule Under the final rule, as proposed, the failure to comply with the ‘‘other requirements’’ in the new rule will not negate a person’s ability to rely on the rule to satisfy a person’s delivery obligations under Section 5(b)(2) of the Securities Act.490 Commenters supported this approach, noting especially the potential for technological challenges to impact the ability of a person seeking to rely on the rule to comply with certain requirements.491 One commenter also raised concerns regarding how compliance with certain requirements might be determined, and the potential subjectivity involved in that assessment.492 We received no comments opposing or suggesting modifications to this aspect of the proposal and are adopting as proposed. Failure to comply with the ‘‘other requirements’’ in the rule will, however, constitute a violation of Commission rules.
7. Incorporation by Reference
a. Permissible Incorporation by Reference The final rule, as proposed, permits a registrant to incorporate by reference into the summary prospectus information contained in the contract statutory prospectus and SAI, subject to certain conditions.493 As discussed in the Proposing Release, we do not intend the variable contract summary prospectus to be a self-contained disclosure vehicle, but rather one element in a layered disclosure regime.494 Any information incorporated by reference must be separately made available to investors, either electronically or in paper. A Form N–3 registrant also could incorporate by reference into the summary prospectus information from its reports to shareholders that the registrant has incorporated by reference into its statutory prospectus.495 Under the final rule, a registrant is not permitted to incorporate by reference into the summary prospectus information from any other source. Moreover, a registrant may not incorporate by reference any information that will be required to appear in the contents of the initial summary prospectus or the updating summary prospectus.496 Information could be incorporated by reference into the summary prospectus only by reference to the specific document that contains the information, and not by reference to another document that incorporates the information by reference.497 For example, if a contract statutory prospectus were to incorporate the

498Cf. rule 411(e) under the Securities Act (‘‘[U]nless expressly permitted or required, disclosure must not be incorporated by reference from a second document if that second document incorporates information pertinent to such disclosure by reference to a third document.’’). Rule 411 was recently amended as part of the 2019 FAST Act Modernization rulemaking adoption (which includes amendments to the Commission’s rules on incorporation by reference). See FAST Act Modernization and Simplification of Regulation S–K, Securities Act Release No. 10618 (Mar. 20,
2019) [84 FR 12674 (Apr. 2, 2019)] (‘‘FAST Act
Adopting Release’’). General Instruction D.1 to amended Forms N–3, N–4, and N–6 makes rule 411 applicable to incorporation by reference for a variable contract’s statutory prospectus. 499See rule 498A(d)(2)(i) (referencing rule 498A(h), among other paragraphs in the final rule); see also supra Section II.A.5. 500See rule 498A(b)(3)(i) and 498A(c)(4). 501 Id. This requirement mirrors the requirements of rule 498(b)(1)(v)(B), and is similar to the requirements of rule 411(e) under the Securities Act, which states that a document that incorporates information by reference must ‘‘include an express statement clearly describing the specific location of the information you are incorporating by reference. The statement must identify the document where the information was originally filed or submitted and the location of the information within that document.’’ 502 Id.; see also supra discussion in Section II.A.5 and 6. 503See supra note 494 and accompanying text. 504Rule 498A(d)(1). 505See rule 159 under the Securities Act. Under Section 12(a)(2) of the Securities Act, sellers have liability to purchasers for offers or sales by means of a prospectus or oral communication that includes an untrue statement of material fact or omits to state a material fact that makes the statements made, based on the circumstances under which they were made, not misleading. Section 17(a)(2) of the Securities Act is a general antifraud provision, which makes it unlawful for any person in the offer and sale of a security to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 506Rule 498A(d)(3). 507See 2009 Summary Prospectus Adopting Release, supra note 17, at nn.109 and 110 (discussing further considerations of liability under Sections 12(a)(2) and 17(a)(2) of the Securities Act, as well as reliance under Section 19(a) of the Securities Act). See also infra note 571 and accompanying text. 508See Item 32(r) of amended Form N–3; Item 26(o) of amended Form N–4; Item 29(r) of amended Form N–6. In modifying the proposed exhibit requirement, we revised the exhibit heading, replacing ‘‘Preliminary Summary Prospectuses’’ with ‘‘Form of Initial Summary Prospectus.’’ 509See Lincoln Comment Letter; Brighthouse Comment Letter; Transamerica Comment Letter; ACLI Comment Letter. See also Section II.C.4.b. 510See ACLI Comment Letter; see also CAI Comment Letter, Brighthouse Comment Letter (seeking clarification regarding whether and how template and selective review might apply to summary prospectuses). contract SAI by reference, the summary prospectus could not incorporate information in the SAI simply by referencing the statutory prospectus but will be required to reference the SAI directly.498 Incorporation by reference is permissible only if the registrant satisfies the rule’s conditions that
prescribe the means by which the required online contract documents must be made available to investors.499 In addition, if a registrant incorporates information by reference into a summary prospectus, the summary prospectus legend must specify the type of document (e.g., statutory prospectus) that contains the incorporated information and the date of the document.500 If a registrant incorporates a part of a document by reference into the summary prospectus, the summary prospectus legend must clearly identify the part by page, paragraph, caption, or otherwise.501 The legend must also explain that the incorporated information may be obtained, free of charge, in the same manner as the contract statutory prospectus.502 The conditions on the availability of information that is incorporated by reference into the contract summary prospectus, and on identifying the information that is incorporated by reference, are intended to facilitate access to this information. Parallel conditions exist in the rule governing mutual fund summary prospectuses. Based on our experience, we believe that investors have found this approach to be useful. Therefore, the final rule includes similar conditions for incorporation by reference for variable contract summary prospectuses.503 A registrant that fails to comply with any of the above conditions is not permitted to incorporate information by reference into its summary prospectus. A registrant that does comply with these conditions, however, including the conditions for providing the documents that include the incorporated information online, is also not required to send or give the incorporated information to investors together with the summary prospectus.504 The contract summary prospectus, together with information incorporated therein by reference, would be subject to liability under Sections 12(a)(2) and 17(a)(2) of the Securities Act. b. Effect of Incorporation by Reference Title 17 CFR 230.159 (rule 159 under the Securities Act) provides that any information ‘‘conveyed’’ to a purchaser after the time of sale will not be taken into account, for purposes of determining whether a prospectus or oral statement included an untrue statement of material fact at the time of sale for purposes of Sections 12(a)(2) and 17(a)(2) of the Act.505 As proposed, the final rule provides that, for purposes of rule 159, information is conveyed to a person not later than the time the person receives a summary prospectus, if that information is incorporated by reference into the summary prospectus in accordance with the rule’s conditions.506 This addresses the question of when information that is incorporated by reference into the contract summary prospectus is conveyed for purposes of liability under Sections 12(a)(2) and 17(a)(2) of the Securities Act.507
8. Filing Requirements for the Summary
Prospectus a. Form of Summary Prospectus Under the final rule and as proposed, registrants must file as an exhibit to the registration statement any form of any initial summary prospectus the registrant intends to use on or after the effective date of the registration statement. Registrants are only required to file the form of initial summary prospectus exhibit with an initial registration statement or with a pre￾effective amendment or a post-effective amendment filed in accordance with paragraph (a) of rule 485 under the Securities Act. In a change from the proposal, however, registrants are not required to file any form of updating summary prospectus.508 Commenters objected to filing a preliminary summary prospectus for each contract as unduly burdensome and time consuming for issuers to prepare and file and Commission staff to review, and instead recommended that insurers be permitted to file a ‘‘form of’’ or ‘‘template’’ summary prospectus under rule 485(a) for contracts that are substantially similar, or that the registrant asserts is meaningfully representative of similar contracts pursuant to rule 485(b)(1)(vii).509 In support of this request, one commenter asserted that staff review of the ‘‘template’’ or representative summary prospectus would provide adequate protection for investors, while relieving burdens on issuers and Commission staff.510 We believe that it is important that Commission staff have the opportunity to review a variable contract’s summary prospectus for compliance with the rule and the relevant form requirements prior to its first use. The approach for variable contract summary prospectus differs from that of mutual fund summary prospectuses, where the Commission did not require such a filing because the content of that summary prospectus is essentially identical to the content of the summary
section of the statutory prospectus,

511See 2009 Summary Prospectus Adopting Release, supra note 17, at n.73. The contents of a mutual fund summary prospectus consist of the information required or permitted by Items 2–8 of Form N–1A, which constitutes the summary section of the statutory prospectus. See rule 498(b)(2). 512See, e.g., Items 2 and 3 of amended Forms N– 3, N–4, and N–6. 513See, e.g., Item 10(a) of amended Form N–6; Items 11(a), 10(a), and 11(a) of Forms N–3; N–4, and N–6, respectively. (‘‘Death Benefits’’ for amended Form N–6, and ‘‘[Other] Benefits Available Under the Contract’’ for amended Forms N–3, N–4, and N– 6.). While only certain information in the statutory prospectus is required to be included in the summary prospectus, rule 498A permits the summary prospectus to incorporate by reference some or all of the information contained in the statutory prospectus or SAI. See supra Section II.A.7. 514See rule 498A(b)(1). 515See rule 498A(c)(2) (updating summary prospectus). 516For example, in the initial summary prospectus, the Fee Table is located towards the end of the prospectus, with more summary type of fee information provided earlier in the summary prospectus as part of the Key Information Table. In contrast, the Fee Table in the statutory prospectus is closer to the front of the document, where it has been traditionally located. 517See 17 CFR 232.301 (rule 301 of Regulation S– T). Changes may also be indicated in blacklined versions the registration statement that registrants or their counsel commonly supply to the staff as courtesy copies. 518Rule 497(k). 519A summary prospectus filed with the Commission will be publicly available; however, a registrant could not rely on this availability to satisfy the requirements to post the document online. See supra Section II.A.5. 520See rule 497(k). 521See IRI Comment Letter I; Comment Letter of the Insured Retirement Institute (Nov. 6, 2019) (‘‘IRI Comment Letter II’’). 522See Anonymous Comment Letter III. 523As noted above, however, we believe that only the initial summary prospectus needs to be filed prior to use. See supra text surrounding note 517. 524 15 U.S.C. 77j(b) and 77k. Under Section 11 of the Securities Act [15 U.S.C. 77k], purchasers of an issuer’s securities have private rights of action for untrue statements of material facts or omissions of material facts required to be included in the registration statement or necessary to make the statements in the registration statement not misleading. Congress provided a specific exception from liability under Section 11 for summary prospectuses under Section 10(b) of the Securities Act in order to encourage the use of summary prospectuses. L. Loss & J. Seligman, Securities Regulation, section 2–b–5 (3d ed. 2006) (citing S. Rep. 1036, 83d Cong., 2d Sess. 17–18 (1954) and H.R. Rep. 1542, 83d Cong., 2d Sess. 26 (1954)). 525Section 10(b) of the Securities Act (‘‘A prospectus permitted under this subsection shall, except to the extent the Commission by rules or
regulations deems necessary or appropriate in the public interest or for the protection of investors otherwise provides, be filed as part of the registration statement but shall not be deemed a
part of such registration statement for purposes of
Section 11.’’).
which is filed prior to its first use.511 In contrast, while some variable contract summary prospectus disclosures will be identical to those in the statutory prospectus,512 others will include only
part of the information required in the
statutory prospectus.513
For example, the final rule requires an initial summary prospectus only to describe the features and options of the contract that the registrant currently offers,514 while the statutory prospectus (and updating summary prospectus) 515 could include information regarding contracts that the registrant no longer sells to new investors. The initial and updating summary prospectuses will also present certain information in a different order than might appear in the contract statutory prospectus.516 Furthermore, certain disclosure requirements differ depending on whether the summary prospectus is an initial summary prospectus or an updating summary prospectus. We do not believe that registrants would need to visually identify or otherwise segregate those portions of the statutory prospectus that are also summary prospectus disclosures, and we recognize that doing so could impede the effective presentation of information in a contract statutory prospectus to investors. For these reasons, we continue to believe it is important for the staff to review the form of initial summary prospectus. However, in response to commenter concerns, we note that nothing in the amended forms or the summary prospectus framework generally precludes the use of ‘‘form of’’ or ‘‘template’’ review pursuant to rule 485(b)(1)(vii). Thus, registrants are permitted to seek such staff review in appropriate circumstances. On the other hand, the updating summary prospectus will contain the Key Information Table and Appendix that will be in the statutory prospectus. Moreover, while the updating summary prospectus will also contain a brief summary of specified changes to the statutory prospectus (which we anticipate to typically be limited since variable contracts tend not to change their contract features very often), any material changes should be reflected in a post-effective amendment filing under rule 485(a), which will be marked to indicate such changes and subject to staff review.517 Because the information contained in the updating summary prospectus will mirror information contained in the statutory prospectus, we do not believe the staff needs to separately review a form of updating summary prospectus prior to first use. Therefore, to relieve burdens on registrants, we are not requiring it as an exhibit to the registration statement. b. Definitive Form of Summary Prospectus In addition to requiring registrants to file a form of initial summary prospectus with the Commission prior to use, we are, as proposed, amending rule 497 under the Securities Act to require a registrant to file a definitive form of summary prospectus—whether an initial summary prospectus or an updating summary prospectus—after it is first used.518 This will ensure that the Commission receives a copy of every summary prospectus in use.519 This is consistent with the filing requirement for mutual fund summary prospectuses under rule 497.520 To allow investors and staff to more easily locate an initial
summary prospectus or updating summary prospectus when searching on EDGAR, one commenter asked that we consider whether initial and updating summary prospectuses should be filed under differentiating form type designations (though noting that separate filing designations could cause filing errors).521 We agree and anticipate having different EDGAR submission types for initial and updating summary prospectus. Notice of EDGAR system readiness to accept summary prospectuses using differentiated filing types will be provided in a manner similar to notices of taxonomy updates and EDGAR Filer Manual updates. Until then, registrants may file definitive forms of summary prospectuses using submission type 497H2. Another commenter asked us to amend rule 497 so insurers could customize and make prospectuses more interactive without having to file every variation on EDGAR.522 While we support the goal of making prospectuses more interactive, as with statutory prospectuses, it is important for investor protection purposes that our staff is able to review every form of summary prospectus that is used.523 Accordingly, we are not modifying rule 497 as this commenter suggests.
c. Investor Protection and Liability
Under Section 11 of the Securities Act
Section 10(b) of the Securities Act
provides that a prospectus permitted under that section must, unless Commission rules provide otherwise, be filed as part of the registration statement but would not be deemed a part of the registration statement for purposes of
Section 11 of the Securities Act.524
Accordingly, as discussed in the proposal, a summary prospectus that is filed as part of the registration statement (e.g., as an exhibit or otherwise) would not be deemed a part of the registration statement for purposes of Section 11 of the Securities Act.525

526See 2009 Summary Prospectus Adopting Release, supra note 17, at n.344 and accompanying text. 527The Commission noted that: (1) The final rule required the information contained in a summary prospectus that is used to satisfy prospectus delivery obligations must be the same as the information contained in the summary section of the fund’s statutory prospectus; and (2) information may be incorporated by reference into a summary prospectus only if it is contained in the fund’s statutory prospectus, SAI, or has been incorporated into the statutory prospectus from the shareholder report. Id. at nn.111 and 112; see also rules 498(f)(4) and 498(b)(3). 528See supra Section II.A.1.b. The updating summary prospectus could include information that does not appear in the related contract statutory prospectus if the updating summary prospectus discloses changes to the contract that the issuer has made after the most recent updating summary prospectus or statutory prospectus was sent or given to investors. See supra
Section II.A.2.c.ii.(a); see also rule 498A(c)(6)(i) and
(ii). This information that only appears in the updating summary prospectus therefore would not be deemed a part of the registration statement for purposes of Section 11 of the Securities Act. For example, if a particular fee has changed from x% to y%, while the disclosure of the current fee rate (y%) would appear in both the updating summary prospectus and the related statutory prospectus, the earlier fee rate (x%) and the fact that the fee was changed would likely not be disclosed in the statutory prospectus. 529See rule 498A(d); see also rule 498(b)(3) (parallel provisions in the rule governing the use of mutual fund summary prospectuses). 530See Proposing Release, supra note 6, at nn.329–332 and accompanying text. 531Rule 498A(a). 532Although proposed, we are not including in the final rule a definition for ‘‘prospectus supplement’’ because the term is not used elsewhere in the final rule. See proposed rule 498A(a)(8). This is the only change from the proposal regarding the rule’s defined terms. 533We understand that this is how the term is commonly used in industry practice. See Proposing Release, supra note 6, at note 334. 534See CAI Comment Letter (a variable contract can and ‘‘frequently does have ‘‘classes’’ that differ in ways other than distribution-related fees and expenses . . . [t]hus, the concepts of classes with respect to mutual funds and classes with respect to variable products do not necessarily correspond. Indeed, with respect to variable products, the term ‘‘class’’ is often used interchangeably with ‘‘versions’’); see also ACLI Comment Letter (‘‘While we do not suggest any specific additions or exclusions to the defined terms, we note that flexibility should be provided to permit a registrant’s use of alternative terms used by the company in its contracts that reflect the substance of the defined terms in the proposal’’). 535See also rule 498A(a) and 17 CFR 270.18f–3 (rule 18f–3) (permitting registered investment companies to issue multiple classes of voting stock);
Part A (‘‘Definitions’’) of the General Instructions to
Form N–1A (defining ‘‘class’’ as ‘‘a class of shares issued by a Multiple Class Fund that represents interests in the same portfolio of securities under rule 18f–3 [17 CFR 270.18f–3] or under an order exempting the Multiple Class Fund from Sections 18(f), 18(g), and 18(i) [15 U.S.C. 80a–18(f), 18(g), and 18(i)]’’). 536See, e.g., Item 4 of Form N–4 (requiring separate responses for each Class regarding the Example in the Fee Table). 537See Proposing Release, supra note 6, at
Section II.B.1 (stating that, typically, prospectuses
for all underlying portfolio companies are delivered to investors to avoid the administrative burden of tracking whether an investor has already received the current prospectus). Some commenters in connection with the mutual fund summary prospectus proposal expressed concerns that the mutual fund summary prospectus would not be subject to Section 11 liability, suggesting that this would result in a diminution of funds’ liability under that section.526 The Commission stated in response that while Section 11 prescribes that the mutual fund summary prospectus will not itself be deemed a part of the registration statement for purposes of Section 11, all of the information in the summary prospectus will be subject to liability under Section 11, either because the information is the same as information contained in the statutory prospectus or because the information is incorporated by reference from the registration statement.527 For similar reasons, it is our view that while a variable contract summary prospectus under the final rule will not itself be deemed a part of the registration statement for purposes of
Section 11, the information in the
summary prospectus will generally be subject to liability under Section 11. While rule 498A does not have a comparable provision to the one in rule 498 requiring that the information in the summary prospectus must be the same as in the statutory prospectus, we believe that the substance of the information itself would be the same, even though the language in both documents relating to the information may not be identical. For example, the language of the initial summary prospectus could differ from the language used in the statutory prospectus because rule 498A requires that the initial summary prospectus may only describe a single contract that the registrant currently offers for sale, whereas we understand that certain contract statutory prospectuses include disclosure about contract features and options that the registrant may no longer offer to new investors. Nevertheless, the substance of the information for any currently offered features and options will be the same.528 In addition, rule 498A includes the same provisions regarding information permitted to be incorporated into the summary prospectus as those in rule 498.529 As discussed in the Proposing Release, the summary prospectus also would be subject to other liability and antifraud provisions of the federal securities laws.530
9. Defined Terms in Final Rule
We are adopting, substantially as proposed, a section of definitions for certain terms used throughout new rule 498A.531 These definitions generally: (1) Identify specific prospectuses described in the proposed rule (e.g., ‘‘initial summary prospectus’’); (2) mirror the existing definitions used in Forms N–3, N–4, and N–6 (e.g., ‘‘variable annuity contract’’ as used in Forms N–3 and N–
4) or other rules (e.g., ‘‘statement of
additional information’’ as used in rule 498); or (3) combine other defined terms in the rule (e.g., ‘‘summary prospectus’’).532 We received no comments regarding these terms. In recognition that today a variable contract may offer classes with the same currently available features and options but different pricing structures, the Commission proposed to define ‘‘class’’ to mean a class of a contract that varies principally with respect to distribution￾related fees and expenses.533 While we received comments suggesting we broaden the definition of ‘‘class,’’ 534 we are adopting the definition as proposed, which we believe has an appropriate scope.535 We believe that investors value the ability to understand which fees apply to the products that they purchase, and defining ‘‘class’’ in relation to the fees charged ensures that investors will receive a level of granularity to the fees disclosed such that they should be better able to make an informed investment decision.536 B. Optional Method To Satisfy Portfolio Company Prospectus Delivery Requirements

1. Current Delivery Practices for
   Portfolio Company Prospectuses As discussed in greater detail in the Proposing Release, we understand that summary prospectuses, as opposed to statutory prospectuses, are typically delivered to investors for all the underlying portfolio companies offered under the contract.537 As with contract prospectuses, portfolio company prospectuses may be delivered electronically pursuant to the Commission’s guidance. Delivery of prospectuses for underlying portfolio companies is typically effected by the insurance company rather than the portfolio company. Based on a staff review of participation agreements between insurance companies and underlying portfolio companies, we understand that there is diversity in practice as to whether the insurance company or portfolio company bears the printing and mailing costs associated with portfolio company prospectus deliveries.

538Rule 498A(j). In a conforming change, we have revised the language in rule 498A(j)(1) regarding prospectus delivery obligations to more closely track the language in Section 5(b)(2) of the Securities Act. 539Rule 498A(j)(1)(i). 540Rule 498A(j)(1)(ii). 541Rule 498A(j)(1)(iii). 542Rule 498A(j)(2). 543See, e.g., CAI Comment Letter; Comment Letter of the Independent Directors Council (Feb. 15, 2019); WFA Comment Letter; Comment Letter of TIAA (Feb. 15, 2019). 544See ACLI Comment Letter; Capital Group Comment Letter. 545See ACLI Comment Letter. 546See CFA Comment Letter. 547See, e.g., Anonymous Comment Letter III (questioning why the Commission had proposed the optional delivery method); VIP Working Group (asking whether a filing on Form N–14 could incorporate by reference a portfolio company prospectus that is delivered pursuant to the optional delivery method). See supra Section II.B.2.d (discussing the delivery of portfolio company prospectuses in connection with Form N–14). 548 Variable annuity contracts offer an average of 60 portfolio companies as investment options. See supra note 16. While we intended mutual fund summary prospectuses to be three to four pages in length, rule 498 does not provide page length or similar restrictions and some summary prospectuses have been as long as 19 pages. See Request for Comment on Fund Retail Investor Experience and Disclosure, Investment Company Act Release No. 33113 (June 5, 2018) [83 FR 26891 (June 11, 2018)] (‘‘Request for Comment on Fund Retail Investor Experience’’), at n.27 and accompanying text. If we conservatively estimate that each portfolio company summary prospectus is four pages in length, an investor who purchases a variable contract that offers 60 portfolio companies would receive 240 pages of portfolio company disclosure materials, in addition to the contract prospectus. 549Rule 498A(j)(3) and (i)(1). 550A contract summary prospectus will include an Appendix that will provide for each portfolio company its name, type or investment objective, adviser and subadviser, expense information, and average annual returns for the past year, five years, and ten years. See supra discussion at Section II.A.1.c.ii.(i); see also infra Section II.C.2.t (discussing inclusion of this Appendix also in variable contracts’ statutory prospectuses). Registrants on Form N–3, who will not be relying upon this optional method to satisfy portfolio company prospectus delivery obligations, will have the option of omitting the Appendix from the summary prospectus and instead providing more detailed disclosures for the investment options offered under the contract that will be required by new Item 19 of Form N–3. See supra note 331 and accompanying text. In addition, each summary prospectus will also include a Key Information Table that will provide certain disclosures about portfolio company risks and investment restrictions. See supra discussion at
Section II.A.1.c.ii.(a); see also infra Section II.C.2.b
(discussing the Key Information Table in amended Forms N–3, N–4, and N–6). 551See supra note 267.
2. New Option To Satisfy Prospectus
Delivery Requirements a. Overview As proposed, new rule 498A provides an optional method for satisfying portfolio company prospectus delivery obligations under section 5(b)(2) of the Securities Act by making portfolio company summary and statutory prospectuses available online, with certain key information about the portfolio companies provided in the contract’s summary prospectus.538 This new option is available to Form N–4 and Form N–6 registrants, but is not available to Form N–3 registrants because they do not have underlying portfolio companies. This option allows satisfaction of prospectus delivery obligations with respect to a portfolio company, if: (1) An initial summary prospectus is used for each currently offered contract described under the related registration statement; 539 (2) a summary prospectus is used for the portfolio company (only if the portfolio company is registered on Form N–1A); 540 and (3) the portfolio company’s current summary prospectus, statutory prospectus, SAI, and most recent shareholder reports are posted online under similar posting requirements for the variable contract’s summary prospectuses and other documents.541 In addition, the rule provides that any communication related to a portfolio company, other than a prospectus permitted or required under Section 10 of the Securities Act, would not be deemed a prospectus if the above conditions are satisfied.542 Many commenters agreed that the proposed delivery option for underlying portfolio company prospectuses would produce cost savings for funds and shareholders and directly align with shareholder preferences for accessing fund information online.543 Commenters also stated that the proposed delivery option would meaningfully improve the experience of investors by allowing them to navigate funds’ prospectus disclosures in a manner responsive to their needs and financial sophistication.544 One commenter agreed with the optional nature of the proposed delivery option, stating that it would provide registrants time to build the process out for the delivery option.545 This commenter further agreed that a communication relating to a portfolio company should not be deemed a prospectus if the conditions of rule 498A were satisfied. However, one commenter opposed the proposed delivery option on the grounds that investors who choose to receive their disclosures in paper are unlikely to seek out portfolio company prospectuses.546 The commenter noted, for example, that only a small percentage of variable annuity investors have chosen to receive disclosures electronically. Other commenters did not express either agreement or disagreement with the proposed delivery option, but requested clarity regarding the purpose and mechanics of this option.547 As noted below, the purpose of this option is to help reduce the volume of documents investors receive that may prevent effective disclosure. Under the layered disclosure framework we are adopting in this document, summary
information as to the portfolio companies will be provided in the Appendix and more fulsome information available to investors online or on request. We are concerned that the volume of disclosure materials variable contract investors currently receive may discourage them from reading the materials or prevent them from fully understanding these products. While the new variable contract summary prospectus framework is intended to provide investors with key information relating to the contract’s terms, benefits, and risks in a concise and more reader￾friendly format, we are concerned that investors may not read or understand information if the variable contract summary prospectus is accompanied by hundreds of pages of underlying portfolio company prospectuses.548 We also note that, to the extent that an investor wants additional information regarding a portfolio company beyond that provided in the Appendix and cannot or chooses not to view that information online, the final rule provides that an investor may always request paper or electronic copies of these documents be sent to them at no charge to them.549 To address this issue, the new option for satisfying portfolio company prospectus delivery requirements provides investors with certain key summary information about underlying portfolio companies in an Appendix to the contract summary prospectus.550 This information is formatted in a tabular presentation to facilitate the ability of investors to compare key information relating to those portfolio companies.551 If an investor desires more detailed information about a particular portfolio company, prospectuses and other documents relating to the portfolio company will be available online and in paper or electronically upon request. b. Conditions As a condition to relying on the new option, as proposed, we are requiring that the related variable contract use an initial summary prospectus for each

552Rule 498A(j)(1)(i).
553See ACLI Comment Letter.
554Rule 498A(j)(1)(ii).
555See CAI Comment Letter; Transamerica Comment Letter; ACLI Comment Letter. 556See CAI Comment Letter; ACLI Comment Letter. As discussed above, we estimate approximately 93% of mutual funds and ETFs use summary prospectuses. See supra note 21. 557Portfolio companies today are incentivized to use summary prospectuses because of the cost savings associated with printing and mailing summary prospectuses as opposed to lengthier statutory prospectuses. 558See generally supra note 551. 559Rule 498A(j)(1)(iii). 560Rule 498A(h)(2)(i); rule 498A(j)(1)(iii). In addition, as proposed, the documents must be presented on the website in a format or formats that are convenient for reading online and printing on paper. Rule 498A(i)(3)(i); rule 498A(j)(1)(iii). 561Rule 498A(h)(2)(ii). 562Rule 498A(j)(1)(iii); rule 498A(h)(3). In addition, as proposed, persons must be able to permanently retain these documents in a format or formats that are convenient for reading online and printing on paper. Rule 498A(j)(1)(iii); rule 498A(i)(3)(ii). 563Rule 498A(j)(1)(iii); rule 498A(i)(1). 564Rule 498A(j)(1)(iii); rule 498A(h)(4). 565See ICI Comment Letter; ACLI Comment Letter; CAI Letter. 566See ACLI Comment Letter. 567See, e.g., VIP Working Group Comment Letter; Anonymous Comment Letter III; see also supra
Section II.A.5.
currently offered contract described under the related registration statement.552 One commenter stated that eliminating this condition would ‘‘provide enhanced readable consumer disclosure’’ by ‘‘reducing the totality of the [paper] documentation that consumers must confront’’ even when the registrant is not using a summary prospectus.553 We disagree. We continue to believe that this condition is an important part of the layered disclosure framework that we are establishing in this document. This requirement is designed to encourage registrants to utilize the summary prospectus framework and provide a more consistent disclosure experience to investors, and reinforces the parallel requirement by tying the use of an updating summary prospectus to the condition that an initial summary prospectus be used for each currently offered contract. Together, we expect that these requirements will provide significant incentives for registrants to embrace the new summary prospectus framework and will further the adoption of the new framework for the mutual benefit of investors and registrants. Therefore, we are requiring a variable contract to use an initial summary prospectus for each currently offered contract described under the related registration in order to rely upon the optional delivery method. As a second condition, as proposed, a portfolio company that is registered on Form N–1A must use a summary prospectus.554 Several commenters suggested that registrants should be able to use the optional method for delivering portfolio company prospectuses in order to reduce costs and provide consistent disclosures of portfolio company information even when portfolio company summary prospectuses are not available.555 Commenters also stated that not all portfolio companies currently use summary prospectuses, and concluded that the ability of insurers to rely on the optional delivery method rests at the mercy of those portfolio companies.556 Absent this requirement, we believe that portfolio companies may be disinclined to use summary prospectuses,557 potentially resulting in investors having to obtain information as to a particular portfolio company by reviewing a lengthy statutory prospectus offering multiple funds. We anticipate that this condition could further increase the likelihood that portfolio companies will use summary prospectuses, which will provide investors with summary information about portfolio companies that we believe they are more likely to use and understand. We also note that use of the delivery option is not contingent on every portfolio company offered as an investment option under the contract using a summary prospectus. Rather, the delivery option is available on a portfolio company by portfolio company basis so an insurer will only be ineligible to use the delivery option as to those portfolio companies that do not use a summary prospectus. Thus, an insurer could use the delivery option to satisfy delivery obligations as to those
portfolio companies using summary prospectuses, and continue to mail statutory prospectuses for those portfolio companies that do not use summary prospectuses as under current practice. Regardless of the method used to satisfy prospectus delivery obligations as to a given portfolio company, all portfolio companies offered under a variable contract shall be included in the Appendix.558 Finally, as a third condition to rely on the delivery option, as proposed, the portfolio company’s current summary and statutory prospectus, SAI, and most recent annual and semi-annual shareholder reports (together, the ‘‘required online portfolio company documents’’) must be posted online under similar conditions for the posting of required online contract documents:

• The required online portfolio
  company documents are publicly accessible, free of charge, at the website address specified on the cover page or beginning of the summary prospectuses for the variable contract, for the time period specified in rule 498A(h)(1); 559
• The required online portfolio
  company documents are presented on the website in a format, or formats, that are human-readable and capable of being printed on paper in human￾readable format,560 and permit persons accessing the documents to move directly back and forth between each
  section heading in a table of contents
  and the corresponding section of the document; 561
• Persons accessing the required
  online portfolio company documents must be able to permanently retain, free of charge, an electronic version of such documents in a format, or formats, that is human-readable and permits persons accessing the materials to move directly back and forth between each section heading in a table of contents and the corresponding section of the document; 562
• Requested required online portfolio
  company documents must be sent in paper or electronically upon request within three business days after receiving a request; 563 and
• The safe harbor specified in
  paragraph (h)(4) of the rule will be available if the required online portfolio company documents are temporarily unavailable at the specified website.564 Several commenters urged the Commission to permit flexibility regarding the website where required online portfolio company documents would be posted, and stated that insurers should be permitted to include website addresses or links to portfolio companies’ existing website document libraries.565 One commenter asserted that the costs of posting the required online portfolio company documents online in machine-readable format(s) would greatly outweigh the benefits.566 As discussed above, many commenters also commented on the web-posting requirements for variable contract materials in the context of the variable contract summary prospectus, and suggested that those requirements (which are largely replicated in the context of portfolio company materials) should be made more principles-based and less regimented.567 We believe that the ‘‘publicly accessible’’ provision of the rule as proposed already contemplated flexibility for issuers with respect to website posting requirements. Therefore, as proposed, the final rule

568See rule 498A(j) (conditioning reliance upon the new portfolio company prospectus delivery option on satisfaction of the conditions in paragraphs (h)(1), (h)(2)(i) and (ii), and (h)(3) and (4)), (h)(1) (providing that the required online portfolio company documents must be posted online at the website address referenced in paragraph (h)(1), which refers to the website on the cover page or beginning of the summary prospectus where the required online contract documents are posted). As proposed, both sets of materials were required to be posted on the website specified on the cover page or beginning of the summary prospectus, but we revised rule 498A(j)(1)(iii) to clarify that the website address used for the required online portfolio company documents must be the same website used for the required online contract documents. 569See rule 498A(b)(2)(v)(B). 570See Request for Comment on Fund Retail Investor Experience, supra note 548. 571See CAI Comment Letter. See generally supra note 505 (discussing the significance of rule 159 in the context of liability under Sections 12(a)(2) and 17(a)(2) of the Securities Act). 572See rule 498A(j)(1). 573The proposal addressed this issue for the summary prospectus itself, but not with regards to portfolio company prospectuses. See Proposing Release, supra note 6, at notes 264 and 298 and accompanying text. 574See rule 498A(j)(3). 575See Proposing Release, supra note 6, at
Section II.B.2.a.
576 Id. at note 46 and accompanying text. 577Rule 498(f)(5). 578See rule 498A(i)(5) (‘‘Compliance with this paragraph (i) of this section is not a condition to the ability to rely on paragraph (f) or (g) of this
section with respect to a Contract, and failure to
comply with paragraph (i) does not negate the ability to rely on paragraph (f) or (g) of this
section.’’).
579Rule 497 under the Securities Act. 580For investors who received a summary prospectus for a portfolio company, we understand that amendments are typically delivered to investors only if the amendments relate to the summary prospectus and summary section portion of the statutory prospectus. 581See, e.g., ACLI Comment Letter and CAI Comment Letter. permits flexibility regarding the website where the required online portfolio company documents are posted, so long as electronic versions of the required online portfolio company documents (or links to those documents) are posted at the same website where the required online contract documents for the variable contract prospectus (or links to those documents) are posted.568 This requirement is designed to allow flexibility regarding the location where electronic versions of those materials are posted (and permits the website to be hosted, for example, by a financial intermediary or other entity than the insurer), while still ensuring that access to all materials relating to the contract is provided in a central location. Also as proposed, the website address must be specific enough to lead investors directly to the required online portfolio company documents, although the website can be a central site with prominent links to each document.569 Thus, while portfolio company documents may be hosted at multiple locations, for purposes of compliance with the rule, a summary prospectus may only include a single website address where each of the required online portfolio company documents together with the required online contract documents may be accessed. This requirement is designed to ensure that the required online portfolio company documents are collectively located at the same website address (or can be readily accessed from the same website address) as the related variable contract materials, as opposed to being scattered across various disconnected websites which could discourage investors from seeking those materials. As discussed above, the Commission is currently engaged in an overall review of the retail fund investor experience. The Commission and its staff will continue to consider further in the broader context of that overall review whether more global changes to the online disclosure framework should be made with regards to the other issues raised by commenters regarding making the web-posting requirements more principles-based and less regimented, as well as whether documents should be required to be posted online in machine-readable format.570 Another commenter observed that proposed rule 498A did not clarify when information in a portfolio company’s statutory prospectus is deemed to be conveyed to investors for purposes of rule 159 under the Securities Act.571 Although the commenter’s letter only addressed a portfolio company’s statutory prospectus, we believe similar concerns would also apply to a portfolio company’s Statement of Additional Information and shareholder reports.
Accordingly, in a change from the proposal, the final rule provides that information contained in the required online portfolio company documents is conveyed for purposes of rule 159 when portfolio company prospectus delivery obligations under section 5(b)(2) of the Securities Act are satisfied pursuant to the optional portfolio company prospectus delivery method.572 Finally, in a change from the proposal,573 we are correcting an oversight and adding language to the rule to clarify that failure to comply with the delivery upon request and ‘‘convenient for reading and printing’’ requirements with regards to the required online portfolio company documents will not negate the ability to rely on the portfolio company prospectus delivery method.574 This failure would, however, constitute a violation of Commission rules. The proposal did not address this issue, but we believe that this provision is consistent with our stated intention to both address the problem of the high volume of disclosure materials variable contract investors receive,575 and to build upon our experience regarding mutual fund summary prospectuses.576 The new language, which parallels a similar provision in rule 498,577 is intended to provide greater certainty to market participants who seek to rely on the rule, and conforms to similar language regarding the application of those same requirements to the ability of funds and financial intermediaries to rely on the rule to satisfy prospectus delivery obligations.578
c. Interim Amendments to Portfolio
Company Prospectuses
When a portfolio company supplements or otherwise amends its summary or statutory prospectus between annual updates, the amendment is typically filed with the Commission pursuant to rule 497 under the Securities Act.579 In addition, we understand that the amendment is typically delivered to investors, either by special mailing or by including it with another mailing, such as with the account statement or confirmation.580 As proposed, the new option for satisfying portfolio company prospectus delivery requirements will require that current portfolio company summary prospectuses and statutory prospectuses are posted online. If a portfolio company amends its prospectus between annual updates, the updated prospectus (including any prospectus supplements) must be posted online. However, as proposed, we are not separately requiring delivery of portfolio company prospectus amendments to investors. Commenters generally supported this aspect of our proposal.581 In addition, if an interim amendment to a portfolio company prospectus affects the information provided in the initial or updating summary prospectus (e.g., a change to the type/investment objective or current expenses of the portfolio company provided in the required Appendix to the contract summary prospectus), then investors will receive notice of the change through an amendment to the contract summary prospectus which will be delivered to investors. As proposed, the new rule will not, however, affect the requirements to deliver other materials specified under other rules or terms of exemptive orders, and in such cases, the

582See, e.g., 17 CFR 270.35d–1 (rule 35d–1 under the Investment Company Act) (requiring a registered investment company with a name suggesting investment in certain investments or industries, or investment in countries or geographic regions, to adopt a policy to invest at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in investments suggested by its name, and if not a fundamental policy, to provide investors with at least 60 days prior notice of any change in that investment policy). 583See General Instruction A to Form N–14. 584See, e.g., Items 3, 5, and 6 of Form N–14. 585See Item 6.(2)(ii) of Form N–14. 586See VIP Working Group Comment Letter. 587See General Instruction G to amended Form N–14. 588 In a change from the proposal, we are also making non-substantive amendments to the forms to standardize and conform the use of certain terminology and references to defined terms, such as changing references from ‘‘contractowner’’ to the more plain English term ‘‘investor.’’ 589See, e.g., CAI Comment Letter (‘‘[T]he Committee applauds the Commission for dedicating considerable time and effort to revamp the variable product registration statement forms. . . .’’); XBRL U.S. Comment Letter (‘‘Making variable annuity data consistent, comparable from product to product, and easily accessible on a timely basis, will improve the investor’s ability to evaluate these offerings, and is a task best handled through standardized reported data.’’). 590While the amended General Instructions in Forms N–3 and N–4 are structured like the General Instructions in current Form N–6, there are certain new instructions that we are adopting to add to each of the forms. See, e.g., amended General Instructions C.3.(a), C.3.(b), C.3.(c), C.3.(e), and C.3.(h) to Forms N–3, N–4, and N–6, each described infra. 591The final forms include, as part of the instruction to avoid excessive detail, technical or legal terminology, and complex language, amended General Instruction C.1.(c) which clarifies the instruction to avoid the use of formulas as the primary means of communicating certain terms or features of the contract. This specific text was not included in the proposal, and is not intended to discourage use of a formula, but rather, to clarify that if a formula is used in connection with a term or feature, investors are first provided appropriate plain English disclosure regarding the operation of the term or feature. This amendment is consistent with a frequent staff comment provided as part of the disclosure review process that is intended to help facilitate registration statement disclosures that are clear and concise. 592Amended General Instruction D also reflects the amendments recently adopted pursuant to the Commission’s FAST Act rulemaking in 2019. See Continued materials specified under those rules or terms of exemptive orders must be delivered to investors.582 d. Delivery of Portfolio Company Prospectuses in Connection With Form
N–14 Proxy Statement/Prospectuses Management investment companies and business development companies use Form N–14 to register certain transactions under the Securities Act. These include a merger in which a vote or consent of the security holders of the company being acquired is not required, an exchange offer for securities of the issuer or another person, a public reoffering or resale of any securities acquired in an offering registered on Form N–14, or any combination of such transactions.583 Among other things, Form N–14 requires the disclosure of certain information about the registrant and the company being acquired, such as fees, synopsis information of the information contained in their prospectuses, and risk factors.584 If the transaction will not be submitted to security holders of the registrant for approval or consent, then some of the required information about the company being acquired may be incorporated by reference from that company’s current prospectus without being sent to investors, on the grounds that investors in the company being acquired have already received the prospectus for their fund.585 While the Commission did not propose any changes to Form N–14 in the Proposing Release, one commenter asked whether a filing on Form N–14 could similarly incorporate by reference a portfolio company prospectus without delivering it if the investor had received a variable contract prospectus which offered the portfolio company as an underlying investment option.586 We believe the same policy rationale behind the incorporation by reference provision in current Form N–14 should also apply here so long as prospectus delivery obligations for the portfolio company have been satisfied pursuant to the new portfolio company prospectus delivery option. Accordingly, we are now amending Form N–14 to provide that a portfolio company prospectus whose delivery obligations were satisfied via new rule 498A(j) may be incorporated by reference into a filing on Form N–14 without being sent to investors, so long as that portfolio company was listed in the variable contract summary prospectus Appendix at the time the disclosures required by Form N–14 were delivered to investors.587
C. Amendments to Registration Forms
We are adopting amendments to Forms N–3, N–4, and N–6 to update and enhance the disclosures to investors in variable contracts, and to implement the summary prospectus framework. These amendments include new disclosure requirements to reflect the evolution of variable contract features, including, in particular, the prevalence of optional benefits that insurers offer under these contracts. In addition, we are adopting amendments to provide greater consistency among the registration forms for variable contracts. Form N–6, which was adopted in 2002 and is the newest variable contract form, served as a model for many of the revisions to Forms N–3 and N–4. Accordingly, we are adopting fewer changes to Form N– 6 than the other forms. Certain investors who are considering variable annuities may also be considering variable life insurance (and vice versa). We believe a consistent presentation could reduce investor confusion and promote investor understanding through common disclosure across types of variable products on elements that we consider useful in explaining variable contracts’ features and risks. Also, we believe that more uniformity of disclosures across variable contract types may make it easier for investors to compare similar products. We also believe that increasing consistency of disclosure requirements among registration forms could increase efficiencies among sponsors of variable contracts that register on multiple of these registration form types, and other market participants. We are adopting amendments to the registration statement forms substantially as proposed with some modifications in response to comments on specific reporting items.588 The comments that we received relating to our proposal to amend variable contract registration statements were generally supportive of our efforts to improve the information that is provided to shareholders and filed with the Commission.589 Although commenters did not raise broad objections to our proposed amendments, commenters raised concerns with and/or requested clarification on various items, as discussed in more detail below. To the extent we received no comments on certain items, we are adopting them as proposed, as discussed further below.

1. General Instructions
   We are adopting amendments to the General Instructions of Forms N–3, N– 4, and N–6 regarding the preparation and filing of registration statements. Although commenters did not raise broad objections to our proposed amendments, commenters raised concerns with and/or requested clarification on General Instruction C.3, as discussed in more detail below. To the extent we received no comments on the other General Instructions, we are adopting them as proposed. The amended General Instructions, like the General Instructions in current Form N–6,590 are structured to include four parts: (A) Definitions; (B) Filing and Use of Form; (C) Preparation of the Registration Statement; 591 and (D) Incorporation by Reference.592 With the

FAST Act Adopting Release, supra note 501 (among other things, consolidating and harmonizing rules and instructions in registration statements regarding incorporation by reference). These amendments became effective April 2 and May 2, 2019. As discussed below in Section II.E, EDGAR will be modified to create a new submission type under which registrants may file required financial statements. Notice of EDGAR system readiness to accept filings pursuant to the new submission type will be provided in a manner similar to notices of EDGAR Filer Manual updates. This submission type will be available to all variable contract registrants, including those with actively selling or discontinued contracts. Thus, registrants may incorporate by reference into their post-effective amendment and other filings the financial statements filed under the new submission type. 593See ACLI Comment Letter. 594See CAI Comment Letter. 595The disclosure that amended Items 2 and 3 requires also will appear at the beginning of the initial summary prospectus. See supra note 60 and accompanying text. 596 In a change from the proposal, this instruction further provides that information regarding non￾principal risks that is not otherwise required to be in the prospectus must be disclosed in the SAI, as opposed to the prospectus, in accordance with the items regarding principal and non-principal risk disclosure. As discussed below, we believe that prospectus disclosure of non-principal risks that are not otherwise required to be in the prospectus could add complexity and length to the prospectus and obscure principal risks that are more relevant to investors, and therefore such non-principal risks should only be included in the SAI. See note 690. 597See, e.g., Kleimann Presentation, supra note 112 (encouraging, for example, the use of question￾and-answer format, the use of headings to make structure clear, using a strong design grid to organize elements, making line length readable, and using common words and sentence constructions as ways of designing disclosure to promote readability). 598See supra note 76 and accompanying text. 599The examples clarify that a contract that does not offer optional benefits would not be essentially identical to one that does for a charge. Similarly, group and individual contracts would not be essentially identical. However, contracts that vary only due to state regulatory requirements would be essentially identical. exception of General Instruction C.3, these amendments are largely organizational in nature and incorporate minor changes that are not intended to significantly alter the content of the current General Instructions for these forms. General Instruction C.3 provides substantive requirements for the preparation of the registration statement, including instructions relating to the organization, presentation, and prospectuses permitted to be included in a registration statement. The instruction parallels Instruction C.3 of current Form N–6
in substance, except as described below. Organization of Information As proposed, General Instruction C.3.(a) requires the disclosures in response to Item 2 (Key Information), Item 3 (Overview of the Contract), and Item 4 (Fee Table) of the registration forms to appear in numerical order at the front of the prospectus, and not be preceded by anything other than a cover
page (Item 1), a glossary, or a table of
contents. One commenter stated that registrants should be given flexibility to present disclosure where it makes most logical sense, and recommended against an approach that would require those disclosures to be segregated and placed at the beginning of the statutory prospectus.593 Another commenter disagreed and supported the proposed order of the items in the amended forms and the related General Instructions.594 We continue to believe that these disclosures should appear at the beginning of the prospectus because they contain the most salient information about a variable contract’s key features, costs, and risks and standardization of these disclosures will aid investors in comparing different products.595 We also believe that the instruction incorporates a certain degree of flexibility for issuers. As proposed and adopted, the instruction also provides that if the discussion of the information that Items 2 or 3 requires also responds to disclosure requirements in other items of the prospectus, a registrant need not include additional disclosure that repeats this information. Other Information As proposed, General Instruction C.3.(b) provides that, except in response to Items 2 and 3, a registrant is permitted to include information in the prospectus or SAI that is not otherwise required, so long as it is not incomplete, inaccurate, or misleading and does not, because of its nature, quantity, or manner of presentation, obscure or impede understanding of the information that is required to be included.596 This instruction is intended to provide flexibility to registrants to include contextual and other information that could aid investors’ understanding of variable contracts and assist them in making informed investment decisions. Presentation of Information As proposed, General Instruction C.3.(c) encourages registrants to use, as appropriate, question-and-answer presentations, tables, side-by-side comparisons, captions, bullet points, numeric examples, illustrations or similar presentation methods.597 We believe that these alternative ways of presenting information could increase readability and that this instruction could encourage registrants to use these presentation options, where appropriate. Use of Terms As proposed, General Instruction C.3.(d)(i) includes in substance the requirements of Item 2 (Definitions) of current Forms N–3 and N–4. The changes conform this instruction to the language in the parallel current General Instruction of Form N–6, which we believe will improve readability and consistency across form types. As discussed above, and in response to requests from commenters, General Instruction C.3.(d) includes new subparagraph (ii) which provides registrants with the flexibility to use alternate terminology other than that used by the form, so long as the alternate terminology clearly conveys the meaning of, or provides comparable information as, the terms used by the form.598 Use of Form To Register Multiple Contracts
General Instruction C.3.(e) provides new guidance addressing when a registrant may describe multiple contracts in a single prospectus, and include multiple prospectuses in a single registration statement. We are generally adopting these amendments as proposed, with certain modifications described below. As proposed, General Instruction C.3.(e)(i) provides that registrants may describe multiple contracts in a single prospectus when the contracts are ‘‘essentially identical.’’ Whether the contracts are essentially identical will depend on the facts and circumstances. The instruction includes examples to provide guidance on this point, although we have revised one of the proposed examples to clarify that a contract that does not offer optional benefits could still be essentially identical to one that offers optional benefits without charge (e.g., optional benefits offered without charge may include dollar-cost averaging programs, automatic transfer programs, etc.).599 If a prospectus becomes unwieldy because of multiple discontinued or changed features such that an investor might become overwhelmed or confused, the registrant should consider issuing a new prospectus, which could be included in the same registration statement, as discussed further below. One commenter asserted that the specific examples proposed by the Commission outlining when this practice would be permitted were unnecessarily restrictive. The

600See CAI Comment Letter.
601 Id.
602The examples clarify that a registrant could determine it is appropriate to include multiple prospectuses in a registration statement in the following situations: (1) The prospectuses describe the same contract that is sold through different distribution channels; (2) the prospectuses describe contracts that differ only with respect to underlying funds offered; or (3) the prospectuses describe both the original and a ‘‘modified’’ version of the same contract (where the ‘‘modified’’ version modifies the features or options that the registrant offers under that contract). 603See CAI Comment Letter. 604For the reasons set forth above, we find that this exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Investment Company Act. See Section 6(c) of the Investment Company Act; Section 28 of the Securities Act. 605See infra Sections II.E.2 and 3.a (taking a similar approach regarding discontinued contracts for similar reasons). 606Specifically, registrants may do so when providing disclosure in a single prospectus for more than one contract. However, the order of information required by each item must remain the same, and they must still present the required information clearly and effectively. 607The example clarifies that a prospectus may present all of the Item 2 information for several contracts (e.g., by providing several Key Information Tables sequentially or by providing a single Key Information Table containing separate disclosures for each contract to the extent that such disclosures vary by contract), followed by all of the Item 3 information for the contracts, and followed by all of the Item 4 information for the contracts. Alternatively, the prospectus may present Items 2, 3, and 4 for each of several contracts sequentially. Other presentations also could be acceptable if they are consistent with the form’s intent to disclose the information required by Items 2, 3, and 4 in a standard order at the beginning of the prospectus. commenter suggested that the Commission should permit insurers reasonable flexibility to describe, in a single prospectus, the same contract (or contracts) offering different versions of a particular optional benefit, different combinations of optional benefits, and other variations.600 As the number of optional benefits offered under variable insurance contracts have proliferated, registrants have gravitated towards increasingly larger and more complex prospectuses, including prospectuses describing multiple contracts offering different versions and combinations of optional benefits, even though not all of those contracts or optional benefits would be relevant for investors to whom the prospectus would be sent or given. To provide guidance to registrants, and in order to avoid overwhelming investors with voluminous and potentially irrelevant prospectus information, General Instruction
C.3.(e)(i) provides that registrants may only describe multiple contracts in a single prospectus when the included contracts are ‘‘essentially identical,’’ and further provides specific examples that we believe are helpful in outlining when this condition is met. General Instruction C.3.(e)(ii) further provides that a registrant may combine multiple prospectuses in a single registration statement under certain conditions. The Commission proposed permitting such combinations when the prospectuses describe contracts that are ‘‘essentially identical.’’ One commenter expressed confusion that the same standard would be used to determine when multiple contracts can be described in one prospectus and also when multiple prospectuses can be combined in one registration statement, even though different examples are provided to demonstrate what would be appropriate in each context.601 The commenter further stated that registrants currently have reasonable flexibility to include multiple reasonably related prospectuses in a single registration statement, and asserted that practice should be permitted if the prospectuses describe different versions or iterations of contracts that are on the same or substantially similar policy forms, offer different combinations and/or iterations of benefits, or address different distribution arrangements. Although we agree that under certain circumstances it would be appropriate to include more than one prospectus in a single registration statement, as discussed above we believe that specific criteria will be helpful to provide guidance to registrants and to limit the potential for investors to become overloaded with voluminous and potentially irrelevant registration statement information. Accordingly, we have modified the General Instruction to permit registrants to combine multiple prospectuses in a single registration statement when the contracts are ‘‘substantially similar.’’ The instruction also includes examples to provide guidance on this point, as proposed, although we are modifying one of the proposed examples to replace the word ‘‘enhanced’’ with ‘‘modified,’’ because not all material changes to riders are necessarily improvements that ‘‘enhance’’ the rider.602 We believe these examples are generally consistent with current industry practice. When a registrant files its initial registration statement and post-effective amendments thereto with the Commission, Commission staff could request the registrant to resubmit the filing with separate prospectuses or registration statements if the filing falls outside the guidelines specified in General Instruction C.3.(e). One commenter stated that many prospectuses currently describe more than one contract, and many variable product registration statements currently include more than one prospectus, and suggested that the Commission should grandfather such existing filings.603 Recognizing the potential confusion for existing investors and burdens for registrants associated
with splitting up prospectuses and registration statements into multiple documents, we are exempting registrants from the requirement to take such actions as to existing prospectuses and registration statements.604 Existing prospectuses and registration statements as of the effective date of the form amendments are exempt from these requirements—that is, existing prospectuses that describe more than one contract, and existing registration statements that include more than one prospectus, will not need to be split into separate documents. However, after the effective date of the form amendments, a registrant that seeks to describe a new contract under a particular prospectus or add a new prospectus to a registration statement, must comply with the guidelines specified in General Instruction C.3.(e) as to that new contract or new prospectus. Further, while we generally believe that insurers should limit the contracts covered in a single prospectus and prospectuses covered in a single registration statement as discussed above, we also believe that the costs and burdens that would be imposed should we not provide this exemption may not justify the benefits of such limitations in the case of existing prospectuses and registration statements.605 Order of Information in Prospectus As proposed, while paragraph (a) of General Instruction C.3 generally requires registrants to disclose the information required by Items 2, 3, and 4 in numerical order at the front of the prospectus, General Instruction C.3.(e)(i)(A) allows registrants to depart from this requirement under certain circumstances.606 The amended instruction includes an example to provide guidance on this point, largely as proposed.607 Registrants that present Items 2, 3, and 4 for each of several contracts sequentially or that utilize another presentation should consider whether investors might benefit from a brief explanation about how the information in the prospectus is presented, such as headings for each contract in the prospectus’ table of contents and/or a brief narrative at the beginning of the prospectus explaining

608See General Instruction C.3.(e)(i)(A) to Forms N–3, N–4, and N–6. 609 Id. 610While not specific to use of a single prospectus to describe more than one contract, one commenter did raise a concern about the ability of investors to understand multiple contracts in the context of the initial summary prospectus. See AARP Comment Letter. 611See General Instruction C.3.(e)(i)(B). 612See General Instruction C.3.(h) to amended Forms N–3, N–4, and N–6; see also Items 3, 4, 5, 11, 18, and 19 of amended Form N–3; Items 3, 4, 5, 10, and 17 of amended Form N–4; Items 3, 4, 5, 10, 11, and 18 of amended Form N–6. 613See General Instruction C.3.(i) to amended Forms N–3, N–4, and N–6. 614 Id.; see also rule 105 of Regulation S–T [17 CFR 232.105] (prohibiting hyperlinking to websites, locations, or other documents that are outside of the EDGAR system). Because this is an existing EDGAR restriction, we do not believe it is necessary to add this provision to registration statements. Thus, in a change from the proposal, amended Forms N–3, N– 4, and N–6 do not include this provision. 615See supra note 488 and accompanying and following text. 616See ACLI Comment Letter; Ameritas Comment Letter. 617See Chemas Comment Letter. 618Compare with rule 498A(h)(4) (providing safe harbor under similar circumstances with regards to the requirement to make certain documents available on a website, among other conditions). the presentation.608 Registrants are encouraged to present information in a manner that limits repetition.609 Regardless of the presentation method chosen, when disclosing information relating to one of several contracts, registrants should clearly identify to which contract the information relates. In a change from the proposal, and consistent with our effort to provide greater clarity to investors,610 the amended forms contain a new instruction that requires registrants to generally include appropriate titles, headings, or any other information to promote clarity and facilitate understanding regarding which disclosures apply to which contract, if such disclosures vary based on the contract.611 Interactive Data Files In the case of contracts currently offered to new investors, paragraph (h) of General Instruction C.3 requires registrants to use the Inline XBRL format for the submission of certain required disclosures in the variable contract statutory prospectus.612 We discuss the requirement to file using Inline XBRL in Section II.D below. Website Addresses Paragraph (i) of General Instruction C.3 requires any website address that is included in an electronic version of the statutory prospectus (i.e., electronic versions sent to investors or available online) to include an active hyperlink.613 In response to comments discussed below, in a change from the proposal, registrants may also utilize any other means of facilitating access that leads directly to the relevant website address or cross-referenced information. This instruction is intended to ensure that
investors viewing electronic versions of the prospectus are able to easily access website addresses that are referenced in the prospectus and to provide registrants with flexibility to take advantage of potential technological improvements. This requirement does not apply to an electronic version of a statutory prospectus filed on the EDGAR system.614 Although we proposed that this requirement would also apply to cross￾references included in an electronic version of the statutory prospectus, for the reasons discussed above, and to parallel a similar change with regards to a parallel provision for summary prospectuses, we are not adopting this requirement with regards to electronic versions of the statutory prospectus.615 Several commenters asserted that the proposed requirement could be burdensome because it would necessitate continuous maintenance to determine whether the hyperlinked websites have changed locations of information.616 From staff’s experience with insurer websites, we understand that insurers typically link to landing pages which are unlikely to change locations, and thus any such burden would be minimal relative to the benefits investors and others receive from such hyperlinks. Another commenter asked for guidance regarding what would constitute noncompliance with regards to failure to update an active hyperlink that had become a ‘‘dead link.’’ 617 Although a finding of noncompliance would depend on the facts and circumstances in question, we would generally consider the hyperlinking requirement to be met if the insurer has reasonable procedures in place to ensure compliance, and the insurer takes prompt action to ensure that the hyperlink is active as soon as practicable following the earlier of the time at which it knows or reasonably should have known that the hyperlink is not active.618
2. Part A (Information Required in a
Prospectus)
Table 4 shows how our amendments
revise the item requirements of Part A of the variable contract registration forms. Although commenters did not raise broad objections to our proposed amendments, commenters raised concerns with and/or requested clarification on various items, as discussed in more detail below. To the extent we received no comments on certain items, we are adopting them as proposed, as discussed further below.
TABLE 4—AMENDMENTS TO PART A OF FORMS N–3, N–4, AND N–6
Item description Amended item No. Form N–3 Form N–4 Form N–6 Front and Back Cover Pages (in Forms N–3 and N–4, cur￾rently ‘‘Cover Page’’).

• Form N–3: Item 1 (currently
  Item 1).
• Form N–4: Item 1 (currently
  Item 1).
• Form N–6: Item 1 (currently
  Item 1).
  Revised .................................... Revised .................................... Revised. Definitions ................................ N/A (currently, Item 2 in Forms N–3 and N–4). Revised (incorporated in Gen￾eral Instructions). Revised (incorporated in Gen￾eral Instructions). N/A (incorporated in General Instructions).
  Key Information ........................ • Form N–3: Item 2 .................
• Form N–4: Item 2 .................
• Form N–6: Item 2 .................
  New Item (also in ISP, USP) ... New Item (also in ISP, USP) ... New Item (also in ISP, USP).
  Overview of the Contract ......... • Form N–3: Item 3 .................
• Form N–4: Item 3 .................
• Form N–6: Item 3 .................
  New Item (also in ISP) ............ New Item (also in ISP) ............ New Item (also in ISP).

TABLE 4—AMENDMENTS TO PART A OF FORMS N–3, N–4, AND N–6—Continued
Item description Amended item No. Form N–3 Form N–4 Form N–6 Fee Table (in Form N–3, cur￾rently ‘‘Synopsis or High￾lights,’’ in Form N–4, cur￾rently ‘‘Synopsis,’’ and in Form N–6, currently ‘‘Risk/ Benefit Summary: Fee
Table’’).

• Form N–3: Item 4 (currently
  Item 3).
• Form N–4: Item 4 (currently
  Item 3).
• Form N–6: Item 4 (currently
  Item 3)..
  Revised (also in ISP) ............... Revised (also in ISP) ............... Revised (also in ISP). Condensed Financial Informa￾tion.
• Form N–3: Item 17 (currently
  Item 4).
  Revised .................................... N/A ........................................... N/A. Principal Risks of Investing in the Contract (in Form N–6, currently ‘‘Risk/Benefit Sum￾mary: Benefits and Risks’’).
• Form N–3: Item 5 .................
• Form N–4: Item 5 .................
• Form N–6: Item 5 (currently
  Item 2).
  New Item .................................. New Item .................................. Revised. In Form N–3: General Descrip￾tion of Registrant, Insurance Company, and Investment Options (currently ‘‘General Description of Registrant and Insurance Company’’). In Forms N–4 and N–6: Gen￾eral Description of Reg￾istrant, Depositor, and Port￾folio Companies.
• Form N–3: Item 6 (currently
  Item 5).
• Form N–4: Item 6 (currently
  Item 5).
• Form N–6: Item 6 (currently
  Item 4).
  Revised .................................... Revised .................................... Revised. Management ............................ • Form N–3: Item 7 (currently Item 6). Revised .................................... N/A ........................................... N/A. Charges (in Form N–3, cur￾rently ‘‘Deductions and Ex￾penses,’’ in Form N–4, cur￾rently ‘‘Deductions’’).
• Form N–3: Item 8 (currently
  Item 7).
• Form N–4: Item 7 (currently
  Item 6).
• Form N–6: Item 7 (currently
  Item 5).
  Revised .................................... Revised .................................... Revised. General Description of Con￾tracts (in Form N–4, cur￾rently ‘‘General Description of Variable Annuity Con￾tracts’’).
• Form N–3: Item 9 (currently
  Item 8).
• Form N–4: Item 8 (currently
  Item 7).
• Form N–6: Item 8 (currently
  Item 6).
  Revised .................................... Revised .................................... Revised. Annuity Period ......................... • Form N–3: Item 10 (currently Item 9).
• Form N–4: Item 9 (currently
  Item 8).
  Revised .................................... Revised .................................... N/A. Premiums ................................. • Form N–6: Item 9 (currently Item 7). N/A ........................................... N/A ........................................... Revised (part also in ISP). Death Benefits (in Forms N–3 and N–4, currently ‘‘Death Benefit,’’ and in Form N–6, currently ‘‘Death Benefits and Contract Values’’).
• Form N–3: N/A (currently
  Item 10).
• Form N–4: N/A (currently
  Item 9).
• Form N–6: Item 10 (currently
  Item 8).
  Eliminated ................................ Eliminated ................................ Revised (part also in ISP). In Forms N–3 and N–4: Bene￾fits Available Under the Con￾tract. In Form N–6: Other Benefits Available Under the Contract.
• Form N–3: Item 11 ...............
• Form N–4: Item 10 ...............
• Form N–6: Item 11 ...............
  New Item (part also in ISP) ..... New Item (part also in ISP) ..... New Item (part also in ISP). Purchases and Contract Value • Form N–3: Item 12 (currently Item 11).
• Form N–4: Item 11 (currently
  Item 10).
• Form N–6: N/A .....................
  Revised (part also in ISP) ....... Revised (part also in ISP) ....... N/A. Surrenders and Withdrawals (in Forms N–3 and N–4, cur￾rently ‘‘Redemptions,’’ in Form N–6, currently ‘‘Sur￾renders, Partial Surrenders, and Partial Withdrawals’’).
• Form N–3: Item 13 (currently
  Item 12).
• Form N–4: Item 12 (currently
  Item 11).
• Form N–6: Item 12 (currently
  Item 9).
  Revised (part also in ISP) ....... Revised (part also in ISP) ....... Revised (part also in ISP).
  Loans ....................................... • Form N–3: Item 14 ...............
• Form N–4: Item 13 ...............
• Form N–6: Item 13 (currently
  Items 10 and 23).
  New Item .................................. New Item .................................. Revised. Lapse and Reinstatement ........ • Form N–6: Item 14 (currently Item 11). N/A ........................................... N/A ........................................... Revised (part also in ISP). Taxes ....................................... • Form N–3: Item 15 (currently Item 13).
• Form N–4: Item 14 (currently
  Item 12).
• Form N–6: Item 15 (currently
  Item 12).
  Revised .................................... Revised .................................... Unchanged.

619As discussed below, we are eliminating the
Table of Contents of the SAI that is required by Item
15 of current Form N–3 and Item 14 of current Form N–4. We do so to streamline the prospectus and avoid duplicative disclosure with the SAI, which separately requires a Table of Contents. See infra
Section II.C.3.
620We added the legends required by rule 498A(b)(2)(v)(E) and (F) as a new part of Item 1 and made other slight clarifications that were not in Item 1 as proposed. See supra notes 90 and 91 and accompanying text. 621 Item 1(a)(5) of amended Form N–3; Item 1(a)(4) of amended Forms N–4 and N–6. 622 Item 1(a)(8) of amended Form N–3; Item 1(a)(7) of amended Forms N–4 and N–6; see also supra note 88 and accompanying text. 623 Item 1(a)(10) of amended Form N–3; Item 1(a)(8) of amended Forms N–4 and N–6; see also supra text following note 86 and accompanying text. In addition, the forms include a legend informing investors about the optional internet availability of shareholder reports, if applicable, pursuant to the requirements of rule 30e–3. Item 1(a)(11) of amended Form N–3; Item 1(a)(9) of amended Forms N–4 and N–6; see also rule 30–3; supra note 86 and accompanying and following text. 624See CAI Comment Letter (stating that such disclosures on the cover page would be unnecessarily duplicative of the new Appendix and further stating that, as the number of portfolio companies has proliferated, listing such options on the cover page has lengthened cover pages to the point that they have strayed far from the concise overview that the Commission originally intended). 625 Item 1(b) of amended Forms N–3, N–4, and N–6. 626See supra Sections II.A.1.c.ii.(a) and II.A.2.c.ii. for a discussion of these requirements in more detail.
TABLE 4—AMENDMENTS TO PART A OF FORMS N–3, N–4, AND N–6—Continued
Item description Amended item No. Form N–3 Form N–4 Form N–6 Legal Proceedings ................... • Form N–3: Item 16 (currently Item 14).

• Form N–4: Item 15 (currently
  Item 13).
• Form N–6: Item 16 (currently
  Item 13).
  Revised .................................... Revised .................................... Unchanged.
  Table of Contents of the SAI ... N/A (currently, Item 15 of Form
  N–3 and Item 14 of Form N–

Eliminated ................................ Eliminated ................................ N/A.
Financial Statements ............... • Form N–3: Item 17 ...............

• Form N–4: Item 16 ...............
• Form N–6: Item 17 (currently
  Item 14).
  New Item .................................. New Item .................................. Unchanged. In Form N–3: Investment Op￾tions Available Under the Contract. In Forms N–4 and N–6: Port￾folio Companies Available Under the Contract.
• Form N–3: Item 18 ...............
• Form N–4: Item 17 ...............
• Form N–6: Item 18 ...............
  New Item (also in ISP, USP if disclosures from Item 19 are not included). New Item (also in ISP, USP) ... New Item (also in ISP, USP). In Form N–3: Additional Infor￾mation About Investment Options Available Under the Contract.
• Form N–3: Item 19 ............... New Item (also in ISP, USP if
  disclosures from Item 18 are not included). New Item .................................. New Item. a. Front and Back Cover Pages (Item 1 of Forms N–3, N–4, and N–6) We are adopting these amendments to the front and back cover pages of Forms N–3, N–4, and N–6 largely as proposed. We are amending Item 1 of each registration form, largely as proposed,620 to reflect the requirements for the prospectus cover pages required by Item 1 of current Form N–6, with three additional disclosures that will be made on the front cover page. We received no comments regarding these proposed additional disclosures.
• First, the name of the contract and
  the class or classes, if any, to which the contract relates to help clarify the specific contract and class or classes covered by the prospectus; 621
• Second, as with the initial summary
  prospectus and updating summary prospectus, a statement directing an investor to the Investor.gov website for additional information; 622 and
• Third, as with the initial summary
  prospectus, a legend informing investors about the free look period, if applicable.623 To streamline the front cover page and because similar information would appear in tabular presentation in the prospectus, the Commission proposed to eliminate the current requirements in Forms N–3 and N–4 that the registrant include on the front cover page the type of separate account and names of the available portfolio companies. We received one comment letter which supported removal of the names of the available portfolio companies and did not object to removal of the name of the type of separate account, and we are adopting these changes as proposed.624 Additionally, as proposed, we are amending the prospectus back cover
  page to include certain additional
  information concerning: (1) The availability of the SAI and how to request other information about the contract; (2) whether and from where information is incorporated by reference into the prospectus as permitted by proposed Part D of the Form’s General Instructions; and (3) the EDGAR contract identifier for the contract.625 b. Key Information (Item 2 of Forms N–3, N–4, and N–6) Largely as proposed, we are adding new Item 2 to the registration forms, which requires a statutory prospectus to include the Key Information Table providing a brief description of key facts about the variable contract.626 The Key Information Table also appears in the initial summary prospectus and the updating summary prospectus, except that it can vary depending on the scope of the initial summary prospectus (which can only describe a single contract that the registrant currently offers for sale), in contrast to the updating summary prospectus and statutory prospectus (which can describe multiple contracts under the conditions of the amended General Instructions to the registration forms). An updating summary prospectus that describes multiple contracts can contain a separate Key Information Table for each of the contracts, or use a different presentation approach that consistently discloses the required information for each contract in the required order. We received several comments on the substance and location of this Item in the context of the initial summary prospectus and the updating summary prospectus. As discussed above in the context of the summary prospectus, we are largely adopting the disclosure

627See supra Sections II.A.1.c.ii.(b) for a discussion of these requirements in more detail. Item 2(d) of amended Form N–6 includes the requirements that appear in Item 2(a) of current Form N–6. 628Rule 498A(b)(5)(i). 629See supra Section II.A.1.c.ii.(b). 630 Id. 631We are also changing the title of the Item from ‘‘Synopsis of Highlights’’ in Form N–3, ‘‘Synopsis’’ in Form N–4, and ‘‘Risk/Benefit Summary: Fee
Table’’ in Form N–6 to ‘‘Fee Table’’ in all three
forms.
632See CAI Comment Letter.
633See supra note 598.
634See Instruction 1 to Item 4 of amended Forms N–3 and N–4 and Instruction 1(b) to Item 4 of amended Form N–6. 635See Breacher Comment Letter. 636See Instruction 3 to Item 4 of amended Forms N–3 and N–4 and Instruction 1(c) to Item 4 of amended Form N–6. In a change from the proposal, we are revising those instructions to clarify that a registrant that does not charge the fees or expenses covered by the captions but reserves the right to do so must include those captions in the Fee Table. We understand that this is consistent with insurers’ current practices. In a conforming change, we are also removing language in those instructions permitting a registrant to modify or add captions under certain circumstances, because we believe that language is no longer necessary in light of the new flexibility permitted by the General Instructions to the registration statements and the instructions to the fee table. See supra notes 633– 634. 637See, e.g., VIP Working Group Comment Letter; AARP Comment Letter. We note that the Commission is looking at disclosures and technology tools as part of a broader modernization initiative. See supra Section I. 638See VIP Working Group Comment Letter. 639See Transamerica Comment Letter; CAI Comment Letter. 640As a conforming change, we are removing Instruction 2(c) to Item 3 of current Form N–3 and Instruction 10 to Item 3 of current Form N–4 and revising Instruction 2(b) to Item 3 of current Form N–3 and Instruction 9 to Item 3 of current Form N–4 (which we are re-numbering as Instruction 9 in each form) to clarify that the term ‘‘deferred sales load’’ includes surrender charges. requirements of this Item as proposed, with certain modifications to address points raised by commenters, including shifting the location of this Item forward to be closer to the beginning of the summary prospectus. For similar reasons discussed with respect to the summary prospectus, we believe that those modifications should apply equally in the context of the statutory prospectus.
c. Overview of the Contract (Item 3 of
Forms N–3, N–4, and N–6)
As proposed, we are adding new Item 3 to the registration forms, which requires registrants to include certain basic and introductory information about the contract and its benefits.627 These disclosures are also required in initial summary prospectuses.628 We received several comments on the substance of this Item in the context of the initial summary prospectus.629 As discussed above, however, we are adopting the disclosure requirements of this Item as proposed for the initial summary prospectus.630 d. Fee Table (Item 4 of Forms N–3, N–4, and N–6) Largely as proposed, we are amending Item 3 of the current registration forms (which we are re-designating as Item 4) to simplify and update current fee and expense disclosure obligations.631
i. General Comments (Forms N–3, N–4,
and N–6)
One commenter stated that many statutory prospectuses currently use terminology for fees and charges that differs from the terminology that appears in the proposed Fee Table, and suggested that the imposition of standardized terminology might obligate an insurer to re-file contract forms with state insurance departments.632 The commenter concluded that the Commission should permit insurers the flexibility to use existing and prior terminology in the Fee Table, as well as new terminology in the future. As discussed above, we are revising the General Instructions of the registration forms to generally provide broad flexibility to use alternate terminology other than that specified in the applicable registration statement, so long as the alternate terminology clearly conveys the meaning of, or provides comparable information as, the terms used in the registration statement.633 In addition, as proposed, we are providing further flexibility by allowing registrants to modify a narrative explanation in the Fee Table if the explanation contains comparable information to that shown.634 Another commenter asked generally for clarification whether disclosure is needed for fees that are zero (e.g., front￾end load for a fund with no front-end load).635 Largely as proposed, we are adopting Instruction 3 to the Fee Table, which states that a registrant may omit captions if the registrant does not charge or reserve the right to charge the fees or expenses covered by the captions.636 Therefore, in response to the commenter, if a registrant that does not charge or reserve the right to charge a particular fee wishes to omit that information, it may. Other commenters suggested changes to the Fee Table that are beyond the scope of this current rulemaking, including interactive fee calculators and customized disclosures that would be accessed via links available only through password protected login-in screens.637 More generally, one commenter noted that Fee Tables can be long and complex, and suggested that the Commission consider ways to streamline presentation of information in Fee Tables.638 We recognize that variable insurance products can in some cases feature numerous optional benefits and investment options—each of which may be associated with a different fee and collectively may result in lengthy disclosures. However, we continue to believe that the full Fee Table should remain included in variable insurance contract prospectuses to provide investors with comprehensive fee and expense information regarding the optional benefits, investment options, and other charges associated with the contracts being offered. In order to provide investors with shorter, more tailored discussion, as discussed above, we are requiring the disclosure of certain summary information in the Key Information Table to convey the importance of the contract’s fee and expense structure. This framework allows an investor to determine the level of fee information that best suits his or her
informational needs (i.e., the summary fee information in the Key Information Table or the more detailed and comprehensive information in the Fee Table).
ii. Transaction Expenses (Forms N–3
and N–4)
The Commission proposed to retitle the current ‘‘Contractowner Transaction Expenses’’ table in Forms N–3 and N– 4 as ‘‘Annual Transaction Expenses.’’ Commenters pointed out that certain of the listed fees in the table are not deducted on an annual basis but instead are deducted only when the investor initiates certain transactions (e.g., sales loads, exchange fees, etc.).639 Accordingly, we are retitling this table as ‘‘Transaction Expenses.’’ As proposed, we are removing the current ‘‘Surrender Fees’’ line-item in this table, on the grounds that the current ‘‘Deferred Sales Load’’ line-item in the table should already capture these fees.640 Correspondingly, we are revising the title of the ‘‘Deferred Sales Load’’ line-item to include ‘‘Deferred Sales Load (or Surrender Charge)’’ to clarify that a registrant should continue to include surrender charges in the
table.
One commenter stated that surrender terms need to be clear and prominent, including penalties for early withdrawal or loans and tax consequences, as well as the date that is specific to that investor when he or she can access the

641See AARP Comment Letter.
642See, e.g., Item 2 of amended Form N–3 (Key Information Table); Item 12 of amended Form N–4 Surrenders and Withdrawals); Item 13 of amended Form N–4 (Loans); Item 15 of amended Form N–6 (Taxes). 643 In current Form N–3, these items are each presented as line-items in the table that Item 3(a) requires. 644Although these revisions generally apply to Forms N–3 and N–4, as discussed below, the new line-item for optional benefits is also added to the ‘‘Periodic Charges Other Than Annual Portfolio Company Expenses’’ table in amended Form N–6. 645We also are making conforming changes to Instruction 3 to Item 3 of current Form N–3 and Instruction 7 to Item 3 of current Form N–4, which we are renumbering as new Instruction 12 in both forms. 646See CAI Comment Letter. 647 Instruction 3 to Item 3 of current Form N–3 and Instruction 7 to Item 3 of current Form N–4. In a conforming change, we are also adding this definition to Form N–6. See Instruction 3.(e) to Item 4 of amended Form N–6. 648We also are making conforming changes to each form’s instructions. We are removing Instruction 4(b) to Item 3 of current Form N–3 and Instruction 13 to Item 3 of current Form N–4, which permit ‘‘Mortality and Expense Risk Fees’’ to be listed separately on two lines in the table. We also are revising Instruction 14 to Item 3 of current Form N–4 (which we are renumbering as Instruction 13), and adding a corresponding new Instruction 13 to Item 4 of amended Form N–3, to state that ‘‘Base Contract Expenses’’ includes mortality and expense risk fees, and account fees and expenses. We are also including a new Instruction 3(g) to Item 4 of amended Form N–6 permitting Registrants to consolidate any charges that are assessed on a similar basis (e.g., Administrative Fees and Mortality and Expense Risk Fees). 649We are revising and renumbering Instruction 15 to Item 3 of current Form N–4 (which currently appears under the heading ‘‘Portfolio Company Annual Expenses’’) as Instruction 15 to Item 4 of amended Form N–4 (to appear under the heading ‘‘Annual Contract Expenses’’) to make clear that other annual expenses are required to be disclosed (not just other portfolio company annual expenses, as the current instruction provides). In a conforming change, we are also revising an instruction in Form N–3 regarding when expense reimbursements or fee waiver arrangements that reduce operating expenses can be reflected to parallel a similar instruction in Form N–1A. Compare Instruction 15(e) to Item 4 of amended Form N–3 with Instruction 3(e) to Item 3 of Form N–1A. 650See Instruction 7 to Item 4 of amended Form N–3. 651See Instruction 14 to Item 4 of amended Forms N–3 and N–4. 652See Instruction 3.(f) to Item 4 of amended Form N–6. 653See CAI Comment Letter. contract value without penalty.641 We note that the disclosures we are adopting in this document are not intended to provide information tailored to the particular circumstances of each investor. We further note, however, that under
the form amendments we are adopting in this document, disclosure regarding surrender charges is required in the Fee Table as well as in the new Key Information Table, while additional disclosure requirements will govern the disclosure of surrenders and withdrawals, loans, and taxes elsewhere in the prospectus.642 Collectively, we believe these disclosure requirements are sufficient to address the concerns raised by the commenter.
iii. Annual Contract Expenses (Forms
N–3 and N–4) and Periodic Charges Other Than Annual Portfolio Company Expenses (Form N–6) We are adopting, as proposed, several changes to the current ‘‘Annual Account Fee’’ and ‘‘Annual Expenses’’ line-items in Form N–3,643 and the current ‘‘Annual Contract Fee and Separate Account Annual Expenses’’ table in Form N–4. As proposed, each is retitled, as a stand-alone table, under the heading ‘‘Annual Contract Expenses’’ in both forms to clarify that the item reflects insurance-related annual contract fees and not the fees related to investment options. In addition, largely as proposed, we are modifying the captions for existing line-items, consolidating certain line￾items, and adding a new line-item for optional benefits in this table in each form.644 Under the amendments, the ‘‘Annual Contract Expenses’’ table in Forms N–3 and N–4 is composed of the following line-items:

• Administrative Expenses. As
  proposed, the line-item ‘‘Annual Contract Fee’’ in Form N–4 (‘‘Annual Expenses’’ in Form N–3) is replaced with the more plain-English ‘‘Administrative Expenses.’’ 645 One commenter requested clarification about what expenses should be included in Administrative Expenses as opposed to Base Contract Expenses.646 In response to this comment, we are revising the instruction to the Administrative Expenses line-item to clarify that Administrative Expenses include any contract, account, or similar fee imposed on all investor accounts on a dollar basis (e.g., $50 per year).647 As discussed further below, Base Contract Expenses include similar charges that are imposed on a percentage basis.
• Base Contract Expenses. Largely as
  proposed, we are consolidating the current line-item under ‘‘Annual Expenses’’ in Form N–3 (‘‘Mortality and Expense Risk Fees’’), and the current line-items under ‘‘Separate Account Annual Expenses’’ in Form N–4 (‘‘Mortality and Expense Risk Fees,’’ ‘‘Account Fees and Expenses,’’ and ‘‘Total Separate Account Annual Expenses’’) under a single new line-item in each table, ‘‘Base Contract Expenses,’’ which discloses those fees in the aggregate as a percentage of average account value. Collapsing these fees into a single line-item is intended to make it easier for investors to understand the annual cost of investing in the basic variable contract.648 Any other recurring charge (other than charges associated with the portfolio companies) appears as an additional line-item in the Annual Contract Expenses table in Form N–4, which discloses the maximum amount or basis on which the charge is deducted.649
• Other Expenses. Similarly, and in a
  change from the proposal, ‘‘Other Expenses’’ remains a separate line-item in Form N–3 and is not consolidated as
  part of ‘‘Base Contract Expenses.’’
  Registrants on Form N–3 are management investment companies and are subject to certain expenses that do not apply to unit investment trust registrants on Form N–4 and N–6. Because such expenses can vary over time, we believe it may be helpful for investors to continue to see such expenses as part of a separate line-item rather than consolidated as part of Base Contract Expenses.
• Management Fees. Unlike Forms
  N–4 and N–6, which as discussed below require separate disclosures about annual portfolio company expenses, Form N–3 does not require such disclosures because Form N–3 registrants have a single-tier structure and do not have underlying portfolio companies. However, Form N–3 registrants generally do have distinct management fees for each investment option offered under the contract. Since these management fees can vary significantly, we are requiring disclosure of the management fee for each investment option, as proposed.650
• Optional Benefits. In recognition of
  the fact that variable contracts today commonly offer optional benefits, the
  table in Forms N–3, N–4, and N–6
  requires, as proposed, a new line-item that requires registrants to list any optional benefit available under the contract, along with its corresponding annual charge.651 In Form N–6, this same new line-item, as proposed, is added in the ‘‘Periodic Charges Other Than Portfolio Company Operations Expenses’’ table.652 One commenter suggested that insurers should be permitted, but not required, to include benefits available at no additional charge in the Fee Table.653 We believe that inclusion of these benefits could add complexity and length to the Fee
  Table and obscure significant fees that
  are more relevant to investors, and therefore benefits available at no additional charge are neither required nor permitted to be included in the Fee
  Table. As discussed further below,
  registrants that wish to itemize all these

654See infra text following note 742. 655See Instruction 16 to Item 4 of amended Form N–3. 656See ‘‘Annual Contract Expenses’’ table in Item 4 of amended Form N–4. 657While the text of the Proposing Release only mentioned Form N–4 with regards to this item, both Forms N–4 and N–6 themselves, as proposed, included the changes that we indicate ‘‘as proposed.’’ 658See Item 17 to amended Form N–4; Item 18 to amended Form N–6. 659See Instruction 20 to Item 3 in Form N–4; Instruction 4.(f) to Item 3 in Form N–6. 660See VIP Working Group Letter (asking how ‘‘fund facilitation fees’’ should be disclosed, and stating these fees are charged by the insurance company for offering a low cost fund that would not otherwise provide sufficient distribution fees or revenue sharing to the insurance company); Instruction 16 to Item 4 of amended Form N–4; Instruction 4.(a) to Item 4 of amended Form N–6. 661See Item 4 of amended Form N–4 (‘‘[These amounts also include applicable Platform Charges if you choose to invest in certain Portfolio Companies.’’]); Item 4 of amended Form N–6 (same). 662See Instruction 17(a) to Item 3 of Form N–4 (which we are re-designating as Instruction 16 to Item 4 of amended Form N–4); Instruction 4.(b) to Item 3 of Form N–6 (which we are re-designating as Instruction 4.(a) to Item 4 of amended Form N–6). 663Because this simplification renders obsolete the rest of Instruction 17, as well as Instructions 16 and 18, to Item 3 of Form N–4, we are eliminating them. Similarly, this simplification renders obsolete the rest of Instruction 4.(b), as well as Instructions 4.(c) through (d), to Item 3 of Form N–6, and therefore we are eliminating those instructions as well. 664See Instruction 19 to Item 3 of Form N–4 (which we are renumbering as Instruction 17 to Item 4 of amended Form N–4); Instruction 4.(e) to Item 3 of Form N–6 (which we are renumbering as Instruction 4.(b) to Item 4 of amended Form N–6). 665See 2002 Adopting Release, supra note 286, at n.14 and accompanying text (‘‘We intend that the staff construe the amendments to the fee table of Form N–4 consistent with the approach taken under Form N–1A, to permit the addition of one line to the fee table showing the range of net Portfolio Company operating expenses after taking account of contractual limitations that require reimbursement or waiver of expenses.’’). 666See VIP Working Group Letter. See Instruction 17 to Item 4 of amended Form N–4; Instruction 4.(b) to Item 4 of amended Form N–6. benefits can do so in their disclosure of benefits available under the contract.654

• Total Annual Contract Expenses. In
  Form N–3, we are adopting, as proposed, a new requirement to disclose total annual contract expenses, and a related instruction specifying that total annual contract expenses should be disclosed as a percentage of account value.655 While annual contract expenses are generally calculated as a percentage of account value, optional benefit expenses may be calculated on a different basis, such as a percentage of the benefit base or as a percentage of average net assets. The new instruction provides that if optional benefit expenses are calculated on a basis other than account value, registrants should prominently indicate that those optional benefit expenses are not included in total annual contract expenses (because they are calculated on different bases and cannot be added). However, we understand that most registrants on Form N–3 either do not offer optional benefits or else calculate optional benefit expenses on an account value basis. We therefore believe that requiring disclosure of total annual contract expenses is appropriate for Form N–3 registrants, because the disclosure will be practicable and could help investors understand the total expenses (not including portfolio company fees and expenses) that they will pay each year. The requirement to disclose total annual contract expenses in Form N–3 differs from the approach to disclosing annual contract expenses in amended Form N–4, which requires separate line-items for administrative expenses, base contract expenses, and optional benefit expenses, but does not require the disclosure of a composite total of these line-items.656 We understand that most registrants on Form N–4 calculate optional benefit expenses on a basis other than contract value. Because of this, it would generally be infeasible to sum optional benefit expenses with other expenses that are presented as annual contract expense line-items.
  iv. Annual Portfolio Company Expenses
  (Forms N–4 and N–6)
  Largely as proposed, we are amending the disclosures that registrants provide with respect to the ‘‘Annual Portfolio Company Expenses’’ table in Forms N–4 and N–6.657 As proposed, we are revising the legend that precedes the
  table to direct investors to the new
  Appendix relating to the portfolio
  companies available under the contract.658 As a conforming change, and as proposed, we are eliminating an instruction in each form stating that a registrant may include additional tables showing annual expenses separately for each portfolio company immediately following the required table, as this information will duplicate the fee information that appears in the new
  Appendix.659
  In a change from the proposal, and in response to commenters, a new instruction in each form provides that if the registrant charges a platform charge to make any of the portfolio companies available as investment options under the contract, the registrant should include the maximum platform charge associated with each portfolio company when calculating minimum and maximum annual portfolio company expenses.660 In a conforming change, we are also revising the name of this table from ‘‘Total Annual Portfolio Company Operating Expenses’’ to ‘‘Annual Portfolio Company Expenses’’ to clarify that the expenses included within the
  table are not limited to total operating
  expenses. If platform charges are charged, registrants must also provide a brief statement regarding the inclusion of these platform charges.661 We are also simplifying other instructions to the table. As proposed, we are revising an instruction in each form to instruct registrants to use the gross expense ratio presented in the fee
  table of a portfolio company’s current
  prospectus when disclosing the minimum and maximum ‘‘Annual Portfolio Company Expenses.’’ 662 The current instruction contains instructions for calculating Annual Portfolio Company Expenses, which results in a
  figure that is the same as the gross
  expense ratio presented in a portfolio company’s prospectus fee table. Directing registrants to use the gross expense ratio reflected in a portfolio company’s current prospectus avoids the need to provide detailed instructions in the form regarding how to calculate this figure (as is the case with the current instruction).663 Also, as proposed, we are revising an instruction in each form to modify the way that registrants could reflect operating expenses that include expense reimbursement or fee waiver arrangements.664 Currently, the instruction specifies that such expenses could appear in a footnote to the table. The revised instruction instead states that these could appear as an additional line-item to the table. We believe that including these disclosures as a separate line-item in the table provides a clearer presentation for investors than a footnote to the table.665 In a change from the proposal, and in response to commenters, this instruction also provides that if the registrant charges a platform charge to make any of the portfolio companies available as investment options under the contract, the registrant should include the current platform charge associated with each portfolio company when calculating minimum and maximum annual portfolio company expenses that include expense reimbursement or fee waiver arrangements.666
  v. Example (Forms N–3 and N–4)
  We are updating the requirements for the Example that will appear in the Fee
  Table in Forms N–3 and N–4 in several
  respects. First, as proposed, we are revising the legend accompanying the

667See supra note 131 and accompanying and following text. 668The instruction for the Example in Item 3 of current Form N–3 (currently unnumbered) is new Instruction 17 to Item 4 of amended Form N–3. Instruction 21 to Item 3 of current Form N–4 is renumbered as Instruction 18 to Item 4 of amended Form N–4. 669When Forms N–3 and N–4 were first adopted, the references in Form N–3 to amortization costs were inadvertently included in Form N–4. Because investors in UITs (Form N–4 and N–6 filers) do not pay amortization costs, we are removing this reference from the instruction. In a conforming change, we are also revising an instruction in Form N–3 regarding amortization of organizational expenses to parallel similar instructions in Form N–1A. Compare Instruction 17(a) to Item 4 of amended Form N–3 with Instruction 4(a) to Item 3 of Form N–1A. 670See Item 4 of amended Form N–3. 671See Item 3 of Form N–1A. The brief statement required by Form N–3 will not include the language from the parallel item in Form N–1A stating that a higher portfolio turnover rate may indicate higher taxes, because variable annuity products are tax￾deferred and thus that language is inapplicable to registrants on Form N–3. 672See Instruction 1(a) to Item 3 of current Form N–6. 673See Instruction 1(a) to Item 4 of amended Form N–6. 674Our staff has observed that some registrants disclose a fee range for certain optional benefits based on a benchmark (e.g., a fee that varies according to volatility levels or Treasury yields), without also disclosing a firm cap on the maximum amount an investor may have to pay for that contract feature. 675We are removing from Instruction 6 to Item 3 of current Form N–4 and Instruction 1.(f) to Item 3 of current Form N–3 the statement that ‘‘[i]f a Registrant uses one prospectus to offer a contract in both the group and individual variable annuity contract markets, the Registrant may a) add narrative disclosure following the fee table identifying markets where certain fees are either inapplicable or waived or lower fees charged to investors in group markets, or b) provide a separate fee table for group and individual contracts,’’ because amended General Instruction C.3.(e) of Forms N–3 and N–4 will address the registration of multiple contracts. Example to reflect the revised Fee Table headings and to reference the inclusion of optional benefits in the Example’s assumptions. We believe the Example should reflect the highest cost that an investor may pay under the contract, inclusive of any available optional benefits. As proposed, we are increasing the value of the assumed investment from $10,000, as required under Item 3 of current Form N–4 (and $1,000, as required under Item 3 of current Form N–3), to $100,000. Several commenters objected to this change but, as discussed above, we continue to believe that $100,000 more closely approximates the current average value of a variable annuity and is more likely to result in cost projections that
align with actual investor expectations and experience.667 As proposed, we are revising the instructions for the Example to clarify that registrants must provide an example for each contract class, consistent with current practice.668 Also, as proposed, we are revising Instruction 21(b) in current Form N–4 (which we are re-numbering as Instruction 18(b)), and adding new Instruction 17(b) in Form N–3, to make clear that that an example showing the most expensive combination of contract features should be shown first, while additional expense examples are permitted, but not required. In addition, as proposed, we are removing the last sentence of Instruction 21(b) of current Form N–4, which states that in lieu of providing the required example based on maximum portfolio company expenses, a registrant may include separate expense examples based on the expenses of each portfolio company. In our experience, registrants rarely include separate expense examples based on the expense of each portfolio company (likely because to do so would add extensive length to the Example
section of the prospectus). Eliminating
this option therefore not only reflects actual practice, but is also consistent with our goal of streamlining prospectus disclosure. As proposed, we are also making certain technical corrections to Instructions 21(a) and (b) of current Form N–4, by eliminating references to amortization costs, which do not apply to variable annuity contracts that are structured as UITs.669
vi. Portfolio Turnover (Form N–3)
Because Form N–3 registrants have a single-tier structure, investors do not receive separate prospectuses containing portfolio turnover information for investment options offered under the contract, as is the case for portfolio companies offered under contracts registered on Forms N–4 and N–6. As proposed, we are requiring disclosure of portfolio turnover for each investment option in Form N–3, as well as a brief statement explaining that portfolio turnover has associated transaction costs, and that a higher portfolio turnover rate may indicate higher transaction cost, which affect the investment option’s performance.670 These disclosure requirements largely restate existing requirements in caption 10 of Item 4(a) of current Form N–3, although they include the brief statement that is required by the parallel item in Form N–1A in order to provide more context and information for investors.671
vii. General Instructions (Forms N–3,
N–4, and N–6)
In addition to specific instructions associated with each of the tables and the Example(s) that appear in response to the amended Item 4 disclosure requirements, we are also updating the general instructions associated with this item. Instruction 1(a) to the Fee Table in current Form N–6 instructs registrants to round all dollar figures to the nearest dollar and all percentages to the nearest hundredth of one percent.672 Because of the underwriting process inherent in variable life insurance contracts, rounding dollar figures to the nearest dollar for certain younger and healthier investors may result in disclosures of zero cost for certain fees, which may be misleading for investors. Therefore, as proposed, we are modifying this instruction to only require rounding percentages to the nearest hundredth of one percent.673 We are also, as proposed, revising Instruction 5 to the Fee Table in Form N–4 to state that if a fee is calculated based on a benchmark (e.g., a fee that varies according to volatility levels or Treasury yields), the registrant must disclose a maximum guaranteed charge as a single number. We believe that this revised instruction will help minimize confusion regarding how much an investor can expect to pay under the contract and will better assist investors in understanding the costs they will pay when investing in a variable annuity. Without this clarifying statement, registrants that offer variable annuity contracts that link certain fees to benchmarks might seek only to present the maximum fee as a range (e.g., a certain percentage plus or minus a stated benchmark).674 Under the revised instruction, a registrant that chooses to disclose the fee range (e.g., a fee that varies based on the 10-year Treasury rate) associated with a particular feature could do so, as long as it also discloses the maximum possible charge (e.g., 3%). We are also, as proposed, adding a parallel provision to Form N–3 as Instruction 5 to the Fee Table. As part of our effort to update the Fee
Table, we are, as proposed, modifying
current Instruction 1.(f) to the Fee Table in Form N–3 and Instruction 6 to the Fee Table in Form N–4 to eliminate language that is redundant in light of new General Instruction C.3.(e) of both forms.675 We are also including new Instruction 7 to the Fee Table in Forms N–3 and N–4, which requires registrants offering a contract with more than one class to provide fee and expense information for each class (and, for Form N–3 registrants, to require

676This harmonizes the instructions associated with the Fee Table for Forms N–3 and N–4 with parallel instructions in Form N–1A. See Instruction 1(d)(ii) to Item 3 of Form N–1A (‘‘If the prospectus offers more than one Class of a Multiple Class Fund or more than one Feeder Fund that invests in the same Master Fund, provide a separate response for each Class or Feeder Fund.’’). 677 Item 4(a) of current Form N–3; Item 4(a) of current Form N–4. The Commission had proposed to relocate the disclosures required by these items from the prospectus to the SAI, with certain other modifications. See Proposing Release, supra note 6, at Section II.D.3.d. 678When Form N–6 was proposed, it did not include AUV tables ‘‘[b]ecause [due to] the individual nature of variable life insurance charges, such as the cost of insurance, there does not appear to be a comparable measure of performance that is applicable to all holders of a particular variable life insurance policy.’’ See Form N–6 Proposing Release, supra note 688, at 17. 679See Forms N–3 and N–4 Adopting Release, supra note 29. 680As discussed in the Proposing Release, the staff issued a no-action letter stating that the staff would not recommend enforcement action if registrants were to depict in the prospectus only two classes of unit values (one reflecting the highest possible combination of contract charges, the other reflecting the lowest possible combination of contract charges) shown for each available portfolio company, so long as the SAI were to include the full disclosure that current Item 4 would require. See Nationwide Life Insurance Company, SEC Staff No-Action Letter (pub. avail. Mar. 16, 2001) (‘‘Nationwide 2001 Letter’’). With the elimination of the AUV table requirement, the Nationwide 2001 Letter is rendered moot, and this letter will be withdrawn. 681 In addition, while the AUV tables are designed to reflect the performance of a subaccount after reflecting contract charges that are based on separate account value, many contract charges today are based on other values, such as a benefit base, which cannot be reflected in AUV values. Instead, when these charges are assessed, the number of accumulation units is reduced. As a result, AUV tables may only reflect a portion of a contract’s fees, diminishing their usefulness to investors. 682See VIP Working Group Comment Letter; Transamerica Comment Letter; IRI Comment Letter II; CAI Comment Letter (stating that while the AUV tables are designed to reflect the performance of a sub-account after reflecting contract charges that are based on separate account value, many contract charges today are based on other values (such as benefit base), and thus instead of these charges reducing the value of a particular class of accumulation units, the assessment of these charges reduces the number of accumulation units in an investor’s account). 683See CAI Comment Letter. registrants offering more than one investment option to provide a separate response for
each investment option).676
viii. Instructions for New Variable
Contract Registrants (Forms N–3, N–4, and N–6) Finally, as proposed, we are eliminating certain instructions in Item 3 of current Forms N–3, N–4, and N–6 relating to new variable contract registrants. Specifically, we are eliminating Instructions 4(d)(i), 4(f)(ii), 4(g)(vi) and Instruction (f) under ‘‘Example’’ in Form N–3, Instruction 22 of Form N–4, and Instruction 5 of Form N–6 as the staff has found these instructions to be unnecessary. For example, Instruction 4(d)(i) to Item 3 of current Form N–3, Instruction 22(a) to Item 3 of current Form N–4, and Instruction 5(a) to current Item 3 of Form N–6 instruct a registrant to base the percentages in the Annual Portfolio Company Expenses table on estimated amounts for the current fiscal year, but we understand that these operating expenses need not be estimated because they do not vary based on whether the registrant is new or already exists. Likewise, Instructions 4(f)(ii) and 4(g)(vi) to Item 3 of current Form N–3, Instruction 22(b) to Item 3 of current Form N–4, and Instruction 5(b) to Item 3 of current Form N–6 state that a new registrant may disclose any expense reimbursement or fee waiver arrangements that are expected to reduce the expenses that the table would show. Because Instruction 15(e) in Item 4 of amended Form N–3, Instruction 17 in Item 4 of amended Form N–4, and Instruction 4(b) in Item 4 of amended Form N–6 address this same issue, and we do not see a reason to distinguish between new and existing registrants for this purpose, these current Instructions are unnecessary. Lastly, Instruction (f) under the ‘‘Example’’ in Item 3 of current Form N–3 and Instruction 22(c) to Item 3 of current Form N–4 state that new registrants must only complete the 1- and 3- year period portions of the Example and estimate any annual contract fees collected. However, because variable contract charges at the separate account level are contractual and do not vary based on whether the variable contract registrant is new or existing, we believe a new registrant’s Example should include the full 1-, 3-, 5-, and 10-year periods required of existing registrants. For these reasons, we are, as proposed, eliminating these current Instructions in their entirety from the forms. e. Accumulation Unit Value Disclosure (Not Included in Amended Forms N–3 and N–4) In a change from the proposal, we are eliminating the requirement in Forms N–3 and N–4 for a registrant to disclose, for the last ten fiscal years and for each subaccount, the accumulation unit value at the beginning and end of each period and the number of accumulation units outstanding at the end of each period (the ‘‘AUV tables’’).677 For variable annuity contracts, the change in accumulation unit value provides a measure of performance of the registrant’s sub-accounts.678 When the AUV tables were adopted in 1985, the approach did not anticipate the proliferation of variations in contract charges and optional benefits that has resulted in numerous
possible combinations of contract charges.679 Since registrants commonly maintain a separate class of accumulation units for each combination of separate account charges, the AUV tables add considerable length (sometimes hundreds of pages) to the contract prospectus, which may overwhelm other important information.680 Because only one combination of contract charges is relevant to any individual investor (depending on the contract features he or she selects), much of the required disclosure is of limited value to most investors.681 Several commenters generally stated that the AUV tables do not include all the fees paid by investors because many of the fees are assessed at the contract level, rather than the unit level, and concluded that the AUV tables are confusing to investors, burdensome for insurers, and should be entirely eliminated.682 In responding more specifically to the proposed amendments, one commenter stated that registrants would need to engage in massive system investments in order to provide investors with individualized subaccount performance for each subaccount held by that investor, and suggested the Commission should revise its proposed amendments to: (1) Reduce the information required to be included in AUV tables included in registration statements; (2) reduce the information required to be included in account statements for those registrants who wish to provide AUV information there instead of in registration statements; and (3) permit registrants to post AUV tables online rather than in registration statements.683 After considering the points raised by commenters and reevaluating the continued utility of these disclosures, we have decided to eliminate the AUV
table requirement for variable annuities
in its entirety. Although AUV tables served a helpful role at the time those requirements were initially adopted, the current proliferation of variations in optional benefits and contract charges has resulted in AUV tables which in some cases span hundreds of pages in order to encompass all such possible combinations, even though only one combination of optional benefits and contract charges would be applicable to a given investor. In addition, there are separate AUVs for each investment

684 Variable annuities issued through managed separate accounts have not offered optional benefits. Owners of these annuities, however, generally have several investment options to choose from, with the result that understanding the value of their investment in the annuity would require working with several accumulation unit values. 685See Separate Accounts Offering Variable Life Release, supra note 29. 686See supra note 779; Item 17 of amended Form N–3 and Item 16 of amended Form N–4; see also infra Section II.C.2.s. 687We are not including risk of contract lapse in Item 5 of amended Form N–3 or amended Form N–4 because lapse, which occurs when there is insufficient cash value to pay insurance policy charges, is a less significant risk for variable annuities. Lapse is a greater risk for variable life insurance contracts, which, unlike variable annuities, generally require continuing premium payments (failure to pay premiums generally triggers a lapse and terminates the contract). In addition, the expenses associated with the death benefit for a variable life insurance contract tend to be higher than those for a variable annuity (in proportion to contract cash value). Higher expenses more quickly erode a variable life insurance contract’s cash value, which if insufficient to pay policy charges, will cause the contract to lapse. 688See Registration Form for Insurance Company Separate Accounts Registered as Unit Investment Trusts that Offer Variable Life Insurance Policies, Investment Company Act Release No. 23066 (Mar. 13, 1998) [63 FR 13988 (Mar. 23, 1998)] (‘‘Form N–6 Proposing Release’’), at n.8 (noting that ‘‘[v]ariable life insurance prospectuses generally disclose [information required under the item as proposed], particularly risk information, in the context of long, often complex descriptions of the policy. The Commission believes that the proposed narrative summary will help achieve more effective communication of risks.’’). 689See CAI Comment Letter. option based on those individual combinations of optional benefits, further complicating efforts to understand the net performance of the overall account. Further, to the extent an investor seeks to understand the net performance of any individual option, the investor could much more easily get the summary information that is provided in the Appendix to the summary prospectus.684 Our decision to eliminate AUV tables is also consistent with our overarching goals of this rule adoption, which are to streamline the forms for variable contracts and to provide investors with pertinent information that is most likely to be used by, and useful to, them. When the registration form for variable life insurance contracts was adopted in 2002, the Commission determined not to require disclosure of AUV tables for variable life prospectuses, The Commission recognized that the individualized nature of variable life insurance charges (i.e., as part of the underwriting process, charges are assessed
individually to each investor based on his or her particular characteristics) made it difficult to provide measures of performance that applied were meaningful across the full investor base.685 Similarly, because of the numerous permutations of variable annuity contract charges today (due to classes of contracts, availability of multiple optional benefits, etc.), it is difficult to provide a standard set of disclosures that are relevant to the investor base at large of a particular variable annuity contract. In addition, while the AUV tables are designed to reflect the performance of a sub-account after reflecting contract charges that are based on separate account value, we recognize many contract charges today are based on other values (such as benefit base), which cannot be reflected in AUV values. Instead of these charges reducing the value of a particular class of accumulation units, the assessment of these charges reduces the number of accumulation units in an investor’s account. Moreover, we understand that registrants currently provide investors with periodic disclosures about their investments in the contract that include sub-account related information, such as account statements that disclose the number of each class of accumulation units and the dollar value of each such class. Although such disclosures generally do not include the actual performance of each subaccount, we understand that such measures of performance would be difficult to generate and may not be necessary given the other disclosures provided to investors. After considering the limited utility of the AUV table disclosures to investors (as well as to Commission staff) and the substantial burdens necessary for registrants to prepare them, we have decided to eliminate the requirement for these disclosures in their entirety rather than move them to the SAI as proposed (or require them to be posted online as suggested by commenters). As discussed above, however, we are adopting the other amendments to this item (i.e., re￾designating Item 4(c) of current Form N–3 and Item 4(b) of current Form N– 4 as Items 17 and 16, respectively) as proposed.686 f. Principal Risks of Investing in the Contract (Item 5 of Forms N–3, N–4, and N–6) As proposed, we are adding new Item 5 to Forms N–3 and N–4, which requires registrants to summarize the principal risks of purchasing a contract, including the risks of poor investment performance, that contracts are unsuitable as short-term savings vehicles, limitations on access to cash value through withdrawals, and the possibility of adverse tax consequences. The new disclosure item for Forms N– 3 and N–4 generally mirrors Item 2(b) of current Form N–6 (which we are re￾designating as Item 5), with the exception of the risk of contract lapse.687 Although registrants currently include risk disclosures in their prospectuses without an explicit form requirement to do so, in some cases the risk discussions are provided across various sections of the
prospectus. We believe the approach taken in Form N– 6 of requiring a consolidated summary of the principal risks associated with the contract provides more effective communication of risks to investors. Although current Form N–6 requires risk disclosures to be presented in a summary section at the front of the statutory prospectus, we are requiring for each registration form that the risk
section be provided after the Key
Information Table and Fee Table. While the Key Information Table includes a condensed discussion of contract risks, new Item 5 gives registrants the flexibility to describe the principal risks of investing in the contract in more detail than what could reasonably appear in a table meant to summarize the contract’s key risks and features. While we are not limiting the length of the summary of principal risks in response to new Item 5, we believe that the utility of a summary would be undermined by the long, complex descriptions we sought to avoid when we adopted the summary principal risk
section as part of Form N–6.688
One commenter asked whether the inclusion of a consolidated principal risk section meant that registrants were permitted, but not required, to repeat principal risks elsewhere throughout the prospectus.689 The commenter also asked whether non-principal risks needed to be included in the principal risk section. The principal risks section is designed to provide a consolidated presentation of principal risks which can be cross-referenced by registrants to reduce repetition that might otherwise occur if the same principal risks are repeated in different sections of the prospectus. For example, in order to facilitate the ability of investors to understand principal risks in the context of other, related disclosures, a variable life insurance registrant disclosing other benefits available under the contract could briefly mention and cross-reference the relevant principal risks discussion of limitations on death benefits due to war or active duty service in the military. At the same

690See General Instruction C.3.(b) of Forms N–3, N–4, and N–6; see also supra note 596. 691See also ADI 2019–08, SEC, Improving Principal Risks Disclosure (last modified Sept. 9, 2019), available at https://www.sec.gov/investment/ accounting-and-disclosure-information/principal￾risks/adi-2019-08-improving-principal-risks￾disclosure (providing views of the Division of Investment Management regarding mutual fund principal risk disclosures). 692 Item 6(a) and (b) of amended Forms N–3 and N–4; Item 21(a) and (b) of amended Form N–3; Item 19 of amended Form N–4; see also Item 5(a) and 5(b) of current Forms N–3 and N–4. 693See, e.g., Item 17(c) of current Form N–6; Item 19(h) of Form N–1A. 694See Item 24(g) of amended Form N–3; Item 20(c) of amended Form N–4. 695See CAI Comment Letter. Under an exemptive provision of the Investment Company Act that insurers serving as depositors of separate accounts organized as unit investment trusts rely on to operate the separate account, those insurers are restricted in how they vote shares of investment companies held on behalf of contract owners. Specifically, Section 12(d)(1)(E) of the Investment Company Act conditionally allows separate accounts organized as unit investment trusts to establish subaccounts each holding shares of an investment company, without violating the limitations in Section 12(a)(1)(A) of the Investment Company Act on investment company ownership. Under one of the conditions, the separate account must either seek instructions from contract owners with regard to the voting of all proxies for the investment company shares held by the subaccount or vote the shares it holds of that investment company in the same proportion as the vote of all other shareholders of that investment company. See
Section 12(d)(1)(E)(iii)(aa).
696 Item 5(c) through (e) of current Form N–3; Item 5(c) and (d) of current Form N–4; Item 4(c) and (d) of current Form N–6. 697See infra Section II.C.2.r (discussing Item 17 of amended Form N–3, Item 16 of amended Form N–4, and Item 18 of amended Form N–6). 698See Item 5(c) of current Form N–4; Item 4(c) of current Form N–6. 699 Item 6(c) of amended Forms N–4 and N–6. 700 Instruction 1(c) to new Item 18 of amended Form N–3; see also supra text accompanying notes 331 and 388. As discussed above, the summary prospectus disclosure requirements are designed to substantively track parallel disclosure requirements in the statutory prospectuses to ensure that the summary prospectus disclosures are subject to liability under Section 11 of the Securities Act. Requiring a registrant on Form N–3 that includes an Appendix in its summary prospectus to also include an Appendix in its statutory prospectus helps to further this goal. See generally Section II.A.8.(c) (discussing investor protection and liability under Section 11). 701See infra text following note 796 (discussing the disclosure requirements of new Item 19 of amended Form N–3). 702See Item 5 of current Form N–6. time, we believe that the inclusion of non-principal risks (that are not otherwise required to be disclosed in the prospectus) could add complexity and length to the prospectus and obscure principal risks that are more relevant to investors, and therefore such non-principal risks are neither required nor permitted to be included in the prospectus.690 In drafting their principal risk disclosures, registrants generally should consider approaches that may improve these disclosures for investors. For example, we encourage registrants to:

• List their principal risks in order of
  importance rather than alphabetically;
• Tailor their risk disclosures to the
  particular contract offered, as opposed to providing generic, standardized risk disclosures or risks that generally are not inherent in an investment in the contract;
• Consider disclosing that the
  contract is not appropriate for certain investors given the particular characteristics of the contract; and
• Periodically review their risk
  disclosures, including the order of their risks, and consider whether the disclosures remain adequate in light of the contract’s characteristics and market conditions.691 g. General Description of Registrant, Depositor, and Investment Options/ Portfolio Companies (Item 6 of Forms N–3, N–4, and N–6) As proposed, we are amending Item 5 of current Forms N–3 and N–4, and Item 4 of current Form N–6, which we are re￾designating as Item 6 in each of the registration forms. Reflecting the more up-to-date requirements of the parallel item of current Form N–6, we are amending Forms N–3 and N–4 to relocate certain information from the prospectus to the SAI: (1) With respect to the depositor, a description of the general nature of its business, its date and form of organization and the state or other jurisdiction under which it is organized, and information relating to persons controlling the depositor; and (2) with respect to the registrant, its date and form of organization and classification pursuant to Section 4 of the Investment Company Act, and whether there are sub-accounts of the registrant.692 In addition, for consistency with Form N–6 and our newer registration forms,693 in Forms N–3 and N–4 we are relocating the requirement to identify and state the principal business address of any person who provides significant administrative or business affairs management services, and a description of those services, from the prospectus to the SAI.694 One commenter noted that our proposed amendments would not affect current prospectus requirements to concisely describe investor rights to instruct the voting of portfolio company shares.695 The commenter asserted that this disclosure is largely boilerplate and is typically carried forward each year without change or modification, and recommended that this disclosure be moved to the SAI. We are retaining this disclosure in the prospectus as proposed. We believe that this disclosure provides important information to investors of their rights in this regard, and that the prospectus, rather than the SAI, is the more appropriate location for the disclosure. As proposed, we are also amending the information required by the current item in Forms N–4 and N–6 regarding portfolio companies (and for Form N–3, investment options).696 As discussed below, and as proposed, we are moving the summary of certain information about the portfolio companies and investment options to an Appendix in the prospectus.697 Therefore, with respect to Forms N–4 and N–6, we are revising this item to replace the current requirement to briefly describe each portfolio company 698 with a requirement to state that certain information about the portfolio companies is available in the Appendix and to cross-reference that Appendix, to further state that more detailed information is available in the portfolio companies’ prospectuses, and to explain how investors may obtain copies of those prospectuses.699 As proposed, new Item 18 of Form N–3 similarly
  requires a comparable
  Appendix of investment options, but
  only if the Appendix is included in a summary prospectus.700 Registrants also must include more detailed disclosures about investment options as required by new Item 19, as proposed. New Item 19 generally includes the disclosures required by current Item 5(c) through (e) regarding investment objectives and policies and principal risk factors associated with investing, as well as additional disclosures regarding the performance of each investment option.701 Similar to Forms N–4 and N–6, amended Item 6 requires a Form N–3 registrant to state that certain information about the investment options is available in the Appendix (pursuant to new Item 18) or elsewhere in the prospectus (pursuant to new Item 19), and provide cross-references as appropriate. h. Charges (Item 8 of Form N–3, Item 7 of Forms N–4 and N–6) Largely as proposed, we are amending Item 7 of current Form N–3 and Item 6 of current Form N–4 (which we are re￾titling, and re-designating as Item 8 (in the case of Form N–3) and Item 7 (in the case of Form N–4)) to reflect the more up-to-date requirements of the parallel item of current Form N–6.702 As proposed, paragraph (a) expands the disclosure requirements of the

703This instruction is based on Instruction 1 to Item 5(a) of current Form N–6. 704This instruction is based on Instruction 3 to Item 5(a) of current Form N–6. 705See Anonymous Comment Letter III. 706See Item 8(b) of amended Form N–3 (‘‘State the commissions paid to dealers as a percentage of purchase payments.’’); Item 7(b) of amended Forms N–4 and N–6 (same). 707See Item 8(a) of amended Form N–3; Item 7(a) of amended Forms N–4 and N–6. 708See Item 4 of amended Forms N–3, N–4, and N–6. 709 Item 20(d) of current Form N–6. 710 Item 7(b) of amended Form N–6. 711See Item 7(d) of current Form N–3; Item 6(d) of current Form N–4. 712 Item 7(e) of proposed Form N–6. If organizational expenses of the registrant are to be paid out of its assets, this item also requires an explanation of how the expenses will be amortized and the period over which the amortization will occur. 713See Item 7(f) of current Form N–3; Item 6(f) of current Form N–4. 714See CAI Comment Letter. 715This new instruction is also being added to Form N–6. 716 In addition, subparagraph (b)(iii) of current Forms N–3 and N–4 is re-designated as subparagraph (b)(5) and revised to replace ‘‘exchanges’’ with ‘‘buyout offers’’ of variable annuity contracts, including interests of participations therein. current item in Forms N–3 and N–4 to include certain additional disclosure requirements that currently appear in the parallel item of Form N–6. The amended items require a registrant to provide a brief description of charges deducted from ‘‘any other source’’ (in addition to charges specifically deducted from purchase payments, investor accounts or assets of the registrant, which is currently required). These additional charges could include, for example, contract loan charges and optional benefit charges. In addition, and as proposed, we are requiring that the registrant describe: (1) The frequency of deductions (e.g., daily, monthly or annually) for any recurring charges; and (2) the consideration provided for particular charges (e.g., use of sales load to pay distribution costs), to the extent it is possible to identify such consideration. We believe these additional disclosures could help alleviate investor confusion about costs by more specifically describing the types of charges that might be incurred under a variable annuity contract. In addition, and as proposed, Instruction 1 to paragraph (a) of the amended item in Forms N–3 and N–4 requires a description of the factors affecting the computation of the amount of the sales load.703 For contracts with a deferred sales load, Instruction 1 requires the registrant to describe the sales load as a percentage of the applicable measure of purchase payments (or other basis) that the deferred sales load may represent, rather than the amount withdrawn or surrendered. Additionally, and as proposed, registrants must identify any events that will cause the deduction of a deferred sales load (e.g., surrender or withdrawal). The description of any
deferred sales load must include how the deduction will be allocated if the investor has allocated contract value among multiple sub-accounts and when, if ever, the sales load will be waived (e.g., if the contract provides a free withdrawal amount). As proposed, we are also adding new Instruction 4 to paragraph (a) of the amended item of Forms N–3 and N–4.704 If the contract’s charge for premium taxes or other taxes varies according to jurisdiction, new Instruction 4 clarifies that identifying the range of current premium taxes or other taxes in this paragraph is sufficient. One commenter noted that our proposed amendments would not revise the current requirement in paragraph (b) to state the commissions paid to dealers as a percentage of purchase payments.705 The commenter suggested the Commission should revise this requirement to include upfront and trail commissions as well as other methods of compensation. We believe that registrants responding to this disclosure requirement currently already include all compensation provided to dealers because the wording of the current instruction does not limit or otherwise specify certain types of compensation and the disclosure, as adopted, mirrors that in Form N–1A, and do not believe that any further changes are needed to this disclosure requirement.706 As proposed, we are also amending the item related to charges in each form to clarify that the required disclosures should relate to ‘‘current’’ charges.707 Disclosure of ‘‘maximum’’ charges would be redundant because those charges are encompassed in the Fee
Table that would be included in the
prospectus.708
In addition, and largely as proposed, we are amending the item of Form N– 6 relating to charges in two respects. First, as proposed, we are relocating disclosures on commissions paid to dealers from the SAI 709 to the prospectus.710 We believe that this disclosure, which is currently required in the prospectus under Forms N–3 and N–4,711 is more appropriate in the prospectus due to potential conflict of interest concerns. Second, the Commission also proposed to require a description of the type of operating expenses for which the registrant is responsible,712 which Forms N–3 and N–4 currently require in the prospectus.713 One commenter suggested that this requirement is generally not relevant to contracts registered on Forms N–4 and N–6, because those contracts typically have charges deducted at the subaccount level as opposed to the registrant level.714 In response to this comment we are modifying this disclosure requirement to cover ‘‘any’’ (as opposed to ‘‘the’’) type of operating expense for which the registrant is liable. We believe this modification maintains comparability between the forms and also future-proofs the forms to the extent operating expenses may be deducted at the registrant level in the future. Operating expenses paid by the registrant can be significant, and we believe this is appropriate disclosure for an item discussing contract charges.
i. General Description of the Contracts
(Item 9 of Form N–3, Item 8 of Forms N–4 and N–6) As proposed, we are amending Item 8 of current Form N–3, Item 7 of current Form N–4, and Item 6 of current Form N–6 (which we are re-designating as Items 9, 8, and 8, respectively) to reflect the more up-to-date requirements of Form N–6 (in the case of the amendments to Forms N–3 and N–4) and also to harmonize this disclosure item with other amendments to the forms. Except as described below, we do not intend these amendments to significantly alter current disclosure obligations. As proposed, we are amending the current instruction to subparagraph (a) of Forms N–3 and N–4, which states that the registrant need not repeat rights that are described elsewhere in the prospectus, and replacing it with a new instruction to subparagraph (a) in each of the forms 715 that requires registrants to disclose all material state variations and intermediary-specific variations (e.g., certain contract features that may vary by distribution channel). Due to differences in state insurance law, there may be significant variations in a contract based on the state in which a contract is offered. We have also observed that certain contract features may not be available through certain intermediaries. As proposed, we are also revising current subparagraph (b) of Forms N–3 and N–4 regarding contract provisions and limitation in two ways.716 First, we are requiring registrants to briefly describe any provisions and limitations

717 Item 9(b)(1) of amended Form N–3; Item 8(b)(1) of amended Form N–4. For example, some contracts specify that if the contract’s value falls below a certain threshold, the contract terminates and an investor’s contract value is returned. 718 Item 9(b)(4) of amended Form N–3 and related proposed instruction; amended Item 8(b)(4) of Form N–4 and related proposed instruction; see also Item 8(b)(3) and related instruction of amended Form N– 6; Item 6(b)(3) of current Form N–6. 719 Item 9(b)(3) of amended Form N–3; Item 8(b)(3) of amended Form N–4; Item 8(b)(2) of amended Form N–6. 720 Item 9(c) of amended Form N–3; Item 8(c) of amended Form N–4; Item 8(c) of amended Form N–6. 721See Instruction 3(d) to new Item 2 of Forms N–3, N–4, and N–6. 722See Instruction to Item 9(d) of amended Form N–3; Instruction to Item 8(d) of amended Form N–4; Instruction to Item 8(d) of amended Form N– 6. 723See ICI Comment Letter; Capital Group Comment Letter. One commenter requested that the Commission amend rule 0–2 under the Investment Company Act to require notice to contract holders of the filing of a substitution application, and reconsider the broader process for review and approval of substitution requests under Section 26(c) of the Investment Company Act. See Capital Group Comment Letter. This request raises issues and considerations beyond the scope of the rule and form amendments we are adopting. 724See Changes in Investment Company Act Made by 1970 Amendments Act, Investment Company Act Release No. 6506 [36 FR 9130 (May 5, 1971)] (depositors of UITs should notify investors of the possibility that underlying securities may be substituted). 725 Item 1(a)(iv) of current Forms N–3 and N–4. 726 Item 9(e) of amended Form N–3; Item 8(e) of amended Form N–4. 727See Item 6(e) of current Form N–6. Like Form N–6, Form N–1A also requires disclosure of limitations on the purchasers to whom the Contracts are offered further back in the prospectus, and not on the cover page. See Items 6 and 11 of Form N–1A. 728 Item 10(g) of amended Form N–3; Item 9(g) of amended Form N–4. 728 Item 2(c)(2) of amended Forms N–3 and N–4. 730Proposed Item 11 of Form N–3; proposed Item 10 of Forms N–4 and N–6. 731See supra note 220 and accompanying and following text. 732See supra note 222 and accompanying and following text. See Item 10(a) of amended Form N–6. 733New Item 11 of amended Form N–3; new Item 10 of amended Form N–4; new Item 11 of amended Form N–6. for minimum contract value and the consequences of falling below that amount, because those consequences in some cases can be significant.717 Second, we are modifying the current requirement in Forms N–3 and N–4 regarding exchanges of contracts to more broadly describe provisions or limitations on conversion or exchange of the contract for another contract (which could include a fixed or variable annuity or life insurance contract) as currently required by Form N–6.718 As proposed, we are also revising the disclosure requirement in
each registration form to clarify that the existing requirement to describe any provisions and limitations on transfer of contract value between sub-accounts includes transfer programs, such as dollar-cost averaging, portfolio rebalancing, asset allocation programs, and automatic transfer programs.719 As proposed, we are also newly requiring the prospectus to provide a description of the obligations under the contract that the insurer’s general account funds (e.g., death benefits, living benefits, or other benefits available under the contract) and include a statement that these amounts are subject to the insurer’s claims￾paying ability and financial strength.720 While some of this information will appear in the Key Information Table,721 this item requires registrants to provide more detailed disclosure later in the prospectus. As proposed, we are also modifying the instruction to the current subparagraph in each form relating to contract or registrant changes to explicitly require disclosure of reservation of the right to substitute one portfolio company for another.722 We received two comment letters in favor of this change, on the grounds that this disclosure provides investors with important information about the possibility of future substitutions.723 This amendment is intended to formalize the Commission’s long￾standing position that investors should be put on notice of the possibility that an insurer may substitute one portfolio company for another portfolio company.724 As proposed, we are also eliminating the current subparagraph (d) in Forms N–3 and N–4, which requires a description of how investor inquiries may be made. This description duplicates information required to appear on the back cover page of the prospectus pursuant to Item 1(b)(1) of the amended forms. Finally, with respect to Forms N–3 and N–4 and as proposed, we are relocating disclosures regarding limitations on classes of purchasers from the cover page of the prospectus 725 to the item requiring the general description of contracts.726 This revision mirrors Item 6(e) of current Form N–6, helps streamline cover page disclosure, and permits registrants to describe this limitation more fully than if the disclosures had to appear on the cover page (which would necessarily entail space constraints).727 j. Annuity Period (Item 10 of Form N–3, Item 9 of Form N–4) As proposed, we are amending Item 9 of current Form N–3 and Item 8 of current Form N–4 (which we are re￾designating as Items 10 and 9, respectively) to include a new requirement that a registrant state, if applicable, that the investor will not be able to withdraw any contract value amounts after the annuity commencement date.728 While the new ‘‘Overview’’ section of the prospectus contains similar information,729 the amended annuity period item requirement provides investors with more complete disclosure about a key aspect of annuitization that we believe investors often misunderstand in the context of a more detailed
discussion about the annuity benefits under the contract. k. Standard Death Benefits (Item 10 of Form N–6) The Commission proposed to amend Item 10 of current Form N–3, Item 9 of current Form N–4, and Item 8 of current Form N–6 (which we are re-designating as Items 11, 10, and 10, respectively) to clarify that the current disclosures required by the item would only apply to the standard death benefit under the contract.730 As proposed, registrants would include prospectus disclosure about optional death benefits (as well as standard and optional living benefits) pursuant to proposed Item 12 to Form N–3, and proposed Item 11 to Forms N–4 and N–6. As discussed above, and in response to issues raised by commenters, we are not requiring this item as a separate disclosure item for variable annuity contracts but are retaining it as a separate disclosure item for variable life insurance contracts.731 In addition, as discussed above, and in response to issues raised by commenters, we are largely adopting the substantive disclosure requirements of this item as proposed but are consolidating the disclosure requirements for the initial summary prospectus into paragraph (a) of this item.732
l. Benefits Available Under the Contract
(Item 11 of Form N–3, Item 10 of Form N–4), (Other Benefits Available Under the Contract) Item 11 of Form N–6) Largely as proposed, we are adding a new item to each registration form that requires a registrant to discuss benefits available under the contract (e.g., accumulation benefit, withdrawal benefit, long-term care benefit, etc.).733 The Commission proposed that this disclosure item would include optional death benefits but not standard death benefits. As discussed above, we are revising this item to encompass all death benefits for variable annuity

734See supra text accompanying and following note 223; see also Item 10 of amended Form N–6. 735The summary table will include the name of each benefit, its purpose, whether the benefit is standard or optional, associated fees (as a stated percentage of contract value, benefit base, etc.), and a brief description of limitations or restrictions. See supra Section II.A.1.c.ii(d). 736See rule 498A(b)(5)(iv); see also supra Section II.A.1.c.ii(d). 737See Instruction 1.(b) to Item 11 of amended Form N–3, Item 10 of amended Form N–4, and Item 11 of amended Form N–6. Registrants that choose to use a single table should consider whether grouping together multiple benefits of the same type, with appropriate headings, might similarly permit better comparisons of those benefits. 738See Instruction 1.(c) to Item 11 of amended Form N–3, Item 10 of amended Form N–4, and Item 11 of amended Form N–6. 739See Instruction 5 to Item 11 of Form N–3; Instruction 5 to Item 10 of Form N–4. 740See Instruction 6 to Item 11 of Form N–3; Instruction 6 to Item 10 of Form N–4. 741As discussed above, the Fee Table includes the minimum fee, maximum fee, and fee for a representative investor for each benefit. See supra note 652 and accompanying text. This information should help provide better context for investors to understand the fees for the other benefits available under the contract. See also supra note 235 and accompanying text. 742See CAI Comment Letter. 743We understand that many registrants offer benefits that are available without charge, such as dollar-cost averaging programs, automatic transfer programs, etc. 744See, e.g., VIP Working Group Comment Letter (‘‘Some insurance company [sic] offers 3 withdrawal benefits at the same time on a single contract that would be indistinguishable using the
table. . . . Also, consider whether a one-page
description of each rider may be more appropriate.’’); Anonymous Comment Letter III; Nedar Comment Letter (‘‘Investors should be told more about each benefit, like that you can withdraw 6% per year for the rest of your life.’’). 745This brief description is required to include a discussion of: (1) Whether the benefit is standard or elected; (2) the operation of the benefit, including the amount of the benefit and how the benefit amount may vary, the circumstances under which the value of the benefit may increase or be reduced (including the impact of withdrawals), and how the benefit may be terminated; (3) fees and costs, if any, associated with the benefit; and (4) how the benefit amount is calculated and payable, and the effect of choosing a specific method of payment on calculation of the benefit. See Item 11(b) of amended Form N–3; Item 10(b) of amended Form N–4; Item 11(b) of amended Form N–6. 746For example, this could include restrictions on which portfolio companies may be selected, risk of reduction or termination of benefit or of additional costs resulting from excess withdrawals, etc. See Item 11(c) of amended Form N–3; Item 10(c) of amended Form N–4; Item 11(c) of amended Form N–6. 747See Instruction to new Item 11 of amended Form N–3; Instruction to new Item 10 of amended Form N–4; Instruction to new Item 11 of amended Form N–6. contracts but only non-standard death benefits for variable life insurance contracts (i.e., optional or supplemental death benefits that are available for a separate charge), since standard death benefits for variable life insurance contracts will be disclosed pursuant to a standalone disclosure item titled ‘‘Standard Death Benefits.’’734 Accordingly, we are revising the title of this item to read ‘‘Benefits Available Under the Contract’’ for Forms N–3 and N–4, although it remains ‘‘Other Benefits Available Under the Contract’’ for Form N–6. Largely as proposed, subparagraph (a) of the new item requires a tabular summary overview of each benefit available under the contract (other than death benefits for variable life insurance contracts).735 This tabular summary is also required in any initial summary prospectus.736 If the contract offers multiple benefits of the same type (e.g., death benefit, accumulation benefit, etc.), the registrant may include multiple tables, if doing so might better permit comparisons of different benefits of the same type.737 Registrants should include appropriate titles, headings, or any other information to promote clarity and facilitate understanding of the
table(s).738 These instructions are
designed to accommodate the variety of benefits currently offered or that might be offered in the future, and provide registrants flexibility in presenting this information. As discussed above, and in response to issues raised by commenters, we are revising the instructions to this table in Forms N–3 and N–4 to clarify that registrants must disclose the maximum limit to which each benefit fee may be raised.739 The instructions to this table in Forms N–3 and N–4 also permit registrants to disclose the current charge in a separate column, if the disclosure of the current charge is no more prominent than, and does not obscure or impede understanding of, the disclosure of the maximum charge.740 For variable life products registered on Form N–6, where fees are based in part on the personal characteristics of the insured, this item in Form N–6 does not require disclosure of maximum fees, but instead requires a statement explaining that the Fee Table contains information about the fees for each benefit.741 Another commenter suggested that the Benefits Table should not include actual fees, but instead should refer readers to consult the Fee Table which appears elsewhere in the document.742 We believe the fee charged for each benefit is an important piece of information that should be included in the tabular summary required by this item to assist investors wishing to compare benefits available under the contract. To further assist investors in making this comparison, we also would not object if registrants included benefits available without charge in this tabular summary of benefits.743 Several commenters stated that the tabular summary contemplated by proposed paragraph (a) does not provide sufficient information for investors to fully understand the differences between the benefits and the choices available to investors under each benefit.744 As proposed, paragraphs (b) and (c) of the new item require the statutory prospectus to include narrative disclosures that provide more detailed information regarding each of the benefits presented in the tabular summary and we believe that this, coupled with the table in paragraph (a), will provide sufficient detail regarding the contract benefits without being overly complicated. As proposed, a registrant is required to include a brief description of each benefit (other than the standard death benefit in the case of variable life insurance registrants) offered under the contract,745 and a brief description of any limitations, restrictions and risks associated with each benefit.746 Some benefits offered by a contract may have complicated terms that do not readily lend themselves to being fully described in a tabular summary. The narrative disclosures are intended to complement the tabular summary presentation by allowing registrants to discuss the benefits, as well as the limitations, risks, and restrictions associated with each, in more detail without being constrained by the limitations of a tabular
presentation. The requirement to discuss the limitations, risks, and restrictions associated with each benefit will also help ensure that these aspects of contract benefits—along with the value they could provide to investors—are discussed in a standardized manner among contract prospectuses. As proposed, we are including an instruction directing registrants in responding to paragraphs (b) and (c) to provide one or more examples illustrating the operation of each benefit in a clear, concise, and understandable manner.747 This instruction is intended to further assist investors in understanding the other benefits offered under the contract. m. Purchases and Contract Value (Item 12 of Form N–3, Item 11 of Form N–4) and Premiums (Item 9 of Form N–6) Largely as proposed, we are amending Item 11 of Form N–3 and Item 10 of current Form N–4 (which we are re￾designating as Items 12 and 11, respectively) to re-structure the disclosure item and make other minor revisions that do not substantively

748 Item 12 of amended Form N–3; Item 11 of amended Form N–4. 749See supra note 245. 750See supra note 248 and accompanying and following text. See also Item 14(a) through (c) of amended Form N–6. 751See infra notes 757 and 768 and accompanying text. 752See Item 12(b)(D) of amended Form N–3; Item 11(b)(D) of amended Form N–4; Item 9(e)(4) of amended Form N–6. These provisions require disclosure of how accumulation unit value or premiums are allocated to the investment options, including how such allocation takes place in the absence of instructions from the investor. 753See Item 9 of current Form N–6. 754 Item 13(a) of amended Form N–3; Item 12(a) of amended Form N–4. As proposed, we are eliminating Item 12(b) of current Form N–3 and Item 11(b) of current Form N–4 (requirement to disclose any restrictions on redemption that may apply if the registrant offers the contracts in connection with the ‘‘Texas Optional Retirement Program’’) and Item 12(c) of current Form N–3 and Item 11(c) of current Form N–4 (requirement to briefly describe whether a request for redemption may not be honored for a period of time after an investor makes a purchase payment). We believe that these requirements are generally encompassed by the proposed requirements (discussed in the following paragraph) to disclose any limits on the ability to surrender, including any limits on the availability of surrenders and withdrawals. 755See rule 498A(b)(5)(vii); see also supra Section II.A.1.c.ii(g). To clarify the scope of paragraph (a), and to simplify this item in general, we are also removing references to ‘‘partial surrender’’ and ‘‘partial withdrawal.’’ See supra note 257. 756See CAI Comment Letter; Transamerica Comment Letter; AARP Comment Letter. See supra notes 255 and 256 and accompanying text. 757 Item 13(b) through (d) of amended Form N– 3; Item 12(b) through (d) of amended Form N–4. These disclosure requirements will conform to those that appear in the parallel provisions of current Form N–6. See Item 9(b) through (d) of current Form N–6. 758See supra note 752 and infra note 768 and accompanying text. 759See Item 13(d) of amended Form N–3; Item 12(d) of amended Form N–4; Item 12(d) of amended Form N–6. These provisions require registrants to describe allocation of surrenders and withdrawals with respect to the investment options, including how such allocation takes place in the absence of instructions from the investor. 760 Item 13(e) of amended Form N–3; Item 12(e) of amended Form N–4. 761See supra note 687 and accompanying text. 762These disclosure requirements conform to those that appear in the parallel provisions of current Form N–6. See Item 9(e) of current Form N– 6. 763See supra paragraphs accompanying note 47. 764See Items 10 and 23 of current Form N–6. 765New Item 13 of amended Form N–6. change current disclosure requirements.748 As discussed above, variable annuity initial summary prospectuses will include the disclosures required by subparagraph (a), which
requires registrants to briefly describe the procedures for purchasing a contract.749 As discussed above, and in response to issues raised by commenters, we are consolidating the premiums disclosure requirements for the variable life insurance initial summary prospectus into paragraphs (a) through (c) of this item.750 These revisions are not intended to substantively alter the disclosures regarding premiums in variable life insurance statutory prospectuses, but instead are simply intended to implement the final disclosure requirements for the initial summary prospectus. In a change from the proposal, and to parallel other similar changes,751 we are also restating certain disclosure requirements to clarify that registrants should provide the required disclosures with regards to investment options (which include any fixed account investment option) as opposed to sub￾accounts (which do not include any fixed account investment option).752 We understand that this is broadly consistent with current disclosure practices, and we do not believe that these changes should alter existing disclosure requirements. n. Surrenders and Withdrawals (Item 13 of Form N–3, Item 12 of Form N–4, Item 12 of Form N–6) We are amending Item 12 of current Form N–3 and Item 11 of current Form N–4 (which we are re-titling and re￾designating as Items 13 and 12, respectively) to generally reflect the more up-to-date requirements of the parallel item of Form N–6 and standardize these disclosure requirements across variable product registration forms.753 Largely as proposed, paragraph (a) of the amended item consolidates the current disclosure requirements regarding surrenders and delays in effecting requests for surrender and provides a high-level overview of how an investor can surrender and make withdrawals from a contract, including any limits on the ability to surrender, how the proceeds are calculated, and when they are payable.754 As discussed above, the initial summary prospectus also includes the amended paragraph (a) disclosures to provide summary information to investors regarding surrenders and withdrawals.755 As discussed above, several commenters stated that investors viewing initial summary prospectuses would also benefit from disclosures regarding the negative effects of partial withdrawals on benefits, as well as withdrawals made to pay adviser fees.756 We agree with those comments, and accordingly we are revising paragraph (a) to include those disclosures and to require disclosure of this information in initial summary prospectuses. Largely as proposed, paragraphs (b) through (d) require additional information related to the operation of surrenders and withdrawals under the contract, including: (1) Whether and under what circumstances they are available; (2) how they will affect a contract’s cash value, death benefit(s), and/or any living benefits; and (3) how partial surrenders and withdrawals will be allocated among the investment options.757 In a change from
the proposal, and to parallel other similar changes,758 we are also restating certain disclosure requirements to clarify that registrants should provide the required disclosures with regards to investment options as opposed to sub-accounts.759 As proposed, paragraph (e) requires registrants to describe any provision for involuntary redemptions and the reasons for such provision.760 While Item 12(d) of current Form N–3 and Item 11(d) of current Form N–4 specifically also require a description of any provision for lapse, we are eliminating the requirement to discuss lapse provisions because contract lapse is more relevant in the context of variable life products.761 As proposed, paragraph (f), like Item 12(e) of current Form N–3 and Item 11(e) of current Form N–4, requires the disclosure of any revocation rights. However, to provide additional information relating to an investor’s revocation rights, paragraph (f) also requires: (1) A description of how the amount refunded is determined; (2) the method for crediting earnings to purchase payments during the free look period; and (3) whether investment options are limited during the free look period.762 We believe these disclosures are particularly important because the free look is typically the only time the investor may leave the contract for multiple years after investing in the contract without paying significant surrender fees and penalties.763 o. Loans (Item 14 of Form N–3, Item 13 of Form N–4, Item 13 of Form N–6) Largely as proposed, we are amending Form N–6 to consolidate required prospectus and SAI disclosures relating to contract loans 764 into a single item in the prospectus.765 Given that investors will receive summary information relating to loan provisions in the Overview section of the statutory prospectus (and initial summary prospectus), we believe that investors will benefit from having more complete information on contract loans in a single location. Specifically, a registrant must briefly describe: (1) The availability of loans;

766New Item 14 of amended Form N–3; new Item 13 of amended Form N–4. 767See supra notes 752 and 757 and accompanying text. 768See Item 14(c) through (d) of amended Form N–3; Item 13(c) through (d) of amended Form N– 4; Item 13(c) through (d) of amended Form N–6. These provisions require registrants to describe how loans and loan repayments, and interest on loans, will be allocated to the investment options, including, if applicable, how such allocation takes place in the absence of instructions from the investor. 769See proposed rule 498A(b)(5)(vi). 770See supra note 253 and accompanying and following text. See also Item 14(a) through (c) of amended Form N–6. 771See Item 12 of current Form N–6. 772 Item 15 of amended Form N–3; Item 14 of amended Form N–4. 773See Item 13 of current Form N–6. 774 Item 16 of amended Form N–3; Item 15 of amended Form N–4. 775 Id.; see also Item 13 of current Form N–6; Item 10(a)(3) of Form N–1A. 776New Item 17 of amended Form N–3; new Item 16 of amended Form N–4. 777 Id. 778See General Instruction C.3.(b) to amended Forms N–3, N–4, and N–6. 779A similar requirement to this new item appears in paragraph (c) of Item 4 of current Form N–3 and paragraph (b) of Item 4 of current Form N–4. (2) any limitations on that availability (e.g., a prohibition on loans during the first contract year); (3) interest provisions; (4) the effects of loans on contract value and death benefits; (5) any other effects that a loan could have on the contract (e.g., the effect of a contract loan in excess of contract value); and (6) loan procedures. We understand that variable annuities, like variable life insurance contracts, often offer investors the opportunity to borrow money against the cash value of their contract, and that insurers and intermediaries frequently promote this contract feature in their sales of variable annuities. Therefore, we are also adding new Item 14 to Form N–3 and new Item 13 to Form N–4, which require similar prospectus disclosure about the availability and terms of loans under the contract.766 In a change from the proposal, and to parallel other similar changes,767 we are also restating certain disclosure requirements to clarify that registrants should provide the required disclosures with regards to investment options as opposed to sub-accounts.768 p. Lapse and Reinstatement (Item 14 of Form N–6) The Commission proposed no changes to Item 11 of current Form N– 6 (other than re-designation as Item 14). We also proposed that the disclosures required by this item would be included in variable life initial summary prospectuses to provide investors with information about lapse and reinstatement.769 As discussed above, and in response to issues raised by commenters, we are consolidating the lapse and reinstatement disclosure requirements for the initial summary prospectus into paragraphs (a) through (c) of this item.770 These revisions are not intended to substantively alter the disclosures regarding lapse and
reinstatement in variable life insurance statutory prospectuses, but instead are simply intended to implement disclosure requirements for the initial summary prospectus. q. Taxes (Item 15 of Form N–3, Item 14 of Form N–4, Item 15 of Form N–6) As proposed, we are amending Item 13 of current Form N–3 and Item 12 of current Form N–4 (which we are re￾designating as Items 15 and 14, respectively) to reflect the more up-to￾date presentation and disclosure requirements of the parallel provisions of Form N–6.771 As amended, this item continues to require registrants to (a) describe the material tax consequences to the investor and beneficiary of buying, holding, exchanging, or exercising rights under the contract, (b) identify the types of qualified plans for which the contract is intended to be used, and (c) describe the effect, if any, of taxation on the determination of cash values or sub-account values.772 However, the amendments specifically limit required disclosures to ‘‘material’’ tax consequences. While the instructions to subparagraph (a) of Item 13 of current Form N–3 and Item 12 of current Form N–4 provide that the ‘‘disclosure need not include detailed description of applicable law,’’ we are eliminating this instruction in light of the amended language limiting disclosures to ‘‘material’’ consequences. We do not expect any of the amendments to this item to significantly alter current disclosure obligations. r. Legal Proceedings (Item 16 of Form N–3, Item 15 of Form N–4, Item 16 of Form N–6) As proposed, we are amending Item 14 of current Form N–3 and Item 13 of current Form N–4 (which we are re￾designating as Items 16 and 15, respectively) to reflect the more up-to￾date presentation and disclosure requirements of the parallel provisions of Form N–6.773 As currently required by Form N–6, the amendments require registrants on Forms N–3 and N–4 to (1) provide a description of the factual basis alleged to underlie the proceeding, and the relief sought, and (2) in addition to describing proceedings that a governmental authority has instituted, include information about proceedings ‘‘known to be contemplated’’ by governmental authorities.774 The amendments also eliminate the requirement to discuss pending legal proceedings against any subsidiary of the registrant to mirror the parallel provision in Form N–6 (and Form N– 1A) and provide consistency across forms. We believe this is appropriate in the context of separate account registrants, which are unlikely to have subsidiaries.775 These amendments are not expected to significantly alter current disclosure obligations. s. Financial Statements (Item 17 of Form N–3, Item 16 of Form N–4; Item 17 of Form N–6) As proposed, we are adding new Item 17 to Form N–3 and new Item 16 to Form N–4, which require a statement, under a separate caption, of where any required financial statements of the registrant and the depositor may be found if they are not included in the prospectus.776 As proposed, the
registrant also must briefly explain how investors may obtain any financial statements not provided in the SAI.777 These disclosure requirements conform to a similar requirement included in Item 14 of current Form N–6. As proposed, the forms’ amended General Instructions provide that registrants are free to include in the prospectus financial statements required to be in the SAI, and may also include in the SAI financial statements that may be placed in Part C.778 The new item is intended to assist investors in finding and obtaining any financial statements that have been moved at the registrant’s discretion from the location where they would otherwise be provided in the registration statement.779 t. Appendix: Portfolio Companies/ Investment Options Available Under the Contract (Item 18 of Form N–3, Item 17 of Form N–4, and Item 18 of Form N– 6) Largely as proposed, we are adding a new disclosure item to each registration form (new Item 18 of Form N–3, new Item 17 of Form N–4, and new Item 18 of Form N–6), which requires registrants to include as an Appendix to the prospectus a table that will streamline and replace current prospectus disclosures about the portfolio companies and investment options

780See, e.g., Item 1(a)(viii) of current Form N–4 (requiring the outside cover page of the prospectus to include the names of portfolio companies); Item 4(c) of current Form N–6 (requiring registrants to briefly describe the registrant’s sub-accounts and each portfolio company, including its name, its type or a brief statement concerning its investment objectives, and its investment adviser and any sub￾adviser). 781See supra discussion at note 265 and accompanying and following text. 782 Id. (revising the proposed Appendix requirements to, among other things, revise the introductory legend, require presentation of current expense ratios (either net or gross), require disclosure of platform charges, require disclosure only of those portfolio company sub-advisers that manage a significant portion of the portfolio). 783See CAI Comment Letter (seeking clarification regarding whether the ‘‘currently offered’’ standard includes portfolio company options in which current, but not new, investors are permitted to invest (‘‘soft closed’’ fund options)); see also Instruction 1(a) to Item 18 of amended Form N–13, Item 17 of amended Form N–4, and Item 18 of amended Form N–6. 784See Instruction 1(a) to Item 18 of amended Form N–13, Item 17 of amended Form N–4, and Item 18 of amended Form N–6. 785See supra note 313 and accompanying and following text. 786See rule 498A(b)(5)(ix); rule 498A(c)(6)(iv); see also supra Sections II.A.1.c.ii(i), II.A.2.c.ii(c). 787As discussed above, an initial summary prospectus may only describe a single contract that the registrant currently offers for sale, whereas the updating summary prospectus and statutory prospectus may describe multiple contracts under the conditions of the General Instructions to Forms N–3, N–4, and N–6. See supra Sections II.A.1.b, II.A.2.b. 788See Instruction 1(a) to new Item 18 of amended Form N–3; see also rule 498A(b)(5)(ix), (c)(6)(iv) (the Appendix also can be omitted from the summary prospectus); infra paragraphs following note 796 (discussing new Item 19 of amended Form N–3). 789See Instruction 1(a) to new Item 18 of amended Form N–3; see also supra notes 331, 388, and 700. 790See supra Section II.A.1.c.ii(i). The sole exception involves registrants on Form N–3 that use a summary prospectus that includes the disclosures required by new Item 18. In this case, the portion of the legend in the summary prospectus explaining how more information about the investment options may be obtained will not be required to be included in the statutory prospectus. See note 792 and accompanying text. 791See supra note 313 and accompanying and following text. 792See Instruction 1(b) to new Item 17 of amended Form N–4 and new Item 18 of amended Form N–6 (‘‘Registrants not relying upon rule 498A(j) under the Securities Act [17 CFR 230.498A(j)] with respect to the Portfolio Companies that are offered under the Contract may, but are not required to, provide the next-to-last sentence of the first paragraph of the
introductory legend to the table regarding online availability of the prospectuses.’’). Registrants on Form N–3 that use a summary prospectus that includes the disclosures required by new Item 18 of amended Form N–3 will be required to include in that Appendix an introductory legend explaining how more information about the investment options may be obtained. See rule 498A(b)(5)(ix) and supra notes 323–326 (discussing legend in initial summary prospectus); rule 498A (c)(6)(iv) and note 387 (discussing legend in updating summary prospectus). However, that legend will not be required to be included in the statutory prospectus, because the statutory prospectus will already include those disclosures pursuant to new Item 19 (which requires more detailed disclosure regarding each of the investment options available under the contract). See Instruction 1(a) to new Item 18 of amended Form N–3; new Item 19 of amended Form N–3. available under the contract.780 This
table will appear under the heading
‘‘Portfolio Companies/Investment Options Available Under the Contract’’ and will consolidate certain summary information about each portfolio company into a concise, easy-to-read tabular presentation.781 As discussed above, in response to commenters’ suggestions regarding the summary prospectuses, we are making several changes to the content requirements for the Appendix.782 In particular, and in response to commenters, we are broadening the scope of the Appendix to encompass all portfolio companies/investment options available as investment options under the contract, as opposed to all portfolio companies/investment options currently offered under the contract, as proposed.783 This change is intended to improve disclosures about portfolio companies/investment options that are restricted to investors because of a ‘‘soft’’ or ‘‘hard’’ close, and consequently those portfolio companies/investment options will also be required to be identified as such.784 As proposed, if the availability of one or more portfolio companies varies by benefit offered under the contract, registrants are required to include a separate table or any other presentation that might promote clarity and facilitate understanding of which portfolio companies were available under each of those benefits.785 These same disclosures will also appear in the initial summary prospectuses and updating summary prospectus,786 except for variations due to the more limited scope of the initial summary prospectus (which can only describe one contract) in contrast to the updating summary prospectus and statutory prospectus (which could describe more than one contract).787 Because we understand that certain variable contracts registered on Form N– 3 have very few investment options (and sometimes have only one investment option), we recognize that the Appendix could have limited utility for certain Form N–3 registrants and their investors. For this reason, and as proposed, registrants on Form N–3 can omit the Appendix and instead provide the more detailed disclosures about the investment options offered under the contract required by new Item 19 of Form N–3.788 For Form N–3 registrants, the Appendix is required to appear in a statutory prospectus only if the
Appendix is included in a summary
prospectus.789
Largely as proposed, the same legends that precede the Appendix in the summary prospectus will generally also precede the Appendix in the statutory prospectus.790 As discussed above, in response to commenters’ suggestions, we are revising these legends to add additional disclosures about the availability of updated performance information, to clarify that performance information does not include platform charges, to state that certain investment options may not be available depending on the optional benefits selected, and to generally streamline the overall presentation.791 Under amended Form N–3, the legend preceding the Appendix must state, in
part, as follows: ‘‘The current expenses
and performance information below reflects contract fees and expenses that are paid by each investor’’ (in contrast, the parallel legend for Forms N–4 and N–6 will state that current expenses and performance do not reflect contract fees and expenses that are paid by each investor). This difference is intended to reflect the fact that insurance charges are inherently reflected in the expenses and performance of investment options for contracts registered on Form N–3, since those investment options are offered as part of the variable contract. The expenses and performance of portfolio companies offered under contracts registered on Forms N–4 and N–6 do not reflect insurance charges, because those portfolio companies are separately registered as entities distinct from the variable contract. Additionally, only registrants on Forms N–4 and N– 6 that chose to utilize the new portfolio company prospectus delivery option are required to include in the Appendix an internet address to a landing page, toll￾free telephone number, and email address that investors could use to obtain or request portfolio company statutory and summary prospectuses.792 u. Additional Amendments to Form N–3 As proposed, we are adopting additional amendments to Form N–3 that are generally intended to update and enhance disclosures related to investment options by requiring similar disclosures required for open-end management companies registered on Form N–1A.
v. Management (Item 7 of Form N–3)
As proposed, we are revising Item 6 of current Form N–3 (which we are re￾designating as Item 7) to increase

793See, e.g., Items 5 and 10 of Form N–1A. 794Registrants will disclose the aggregate fee paid to each investment adviser for the most recent fiscal year as a percentage of net assets or, if the adviser’s fee is not based on a percentage of net assets, a description of the basis of the adviser’s compensation. See Item 7(a)(1)(i) and (ii) of amended Form N–3. 795Compare current Item 21(a)(iii) of Form N–3 (requiring total compensation paid to the adviser under the investment advisory contract for the last three fiscal years) with Item 24(a)(3) of amended Form N–3 (same); see also Item 10 of Form N–1A. 796These disclosure requirements will be moved, respectively, to the following items of amended Form N–3: Item 23(b)(1) (‘‘Management of the Registrant’’); Item 24(g) (‘‘Investment Advisory and Other Services’’); and Item 26 (‘‘Brokerage Allocation and Other Practices’’). 797See, e.g., Item 9 of current Form N–1A. 798See infra Section II.C.3.d. 799See, e.g., Item 4(b)(2) of Form N–1A; see also Registration Form Used by Open-End Management Investment Companies, Investment Company Act Release No. 23064 (Mar. 13, 1998) [98 FR 13968 (Mar. 23, 1998)] (‘‘Form N–1A Adopting Release’’) at text accompanying and following n.51 (discussing the risk/return bar chart/table requirement). consistency among forms used to register management investment companies.793 Except as described below, we do not intend these amendments to significantly alter current disclosure obligations. Among other things, the amendments require disclosure of the compensation paid to each investment adviser of the registrant.794 Form N–3 currently includes three fiscal years of such disclosures in the SAI, where they will remain under our amendments, but our amendments also include such disclosures for the most recent fiscal year in the prospectus to highlight this information for investors and to update this aspect of Form N–3 to parallel Form N–1A.795 As proposed, the amendments also move certain information from the prospectus to the SAI, including responsibilities of the board of managers, disclosure regarding persons providing administrative or business affairs services, and information regarding brokerage allocations.796 We believe this information is more appropriate for disclosure in the SAI, and is consistent with how such information is presented in Form N–1A. w. Additional Information About Investment Options Available Under the Contract (Item 19 of Form N–3) As proposed, we are requiring a new item that will provide more detailed information about each of the investment options available under the contract. As proposed, new paragraphs (a) and (b) restate existing disclosure requirements contained in paragraphs (c), (d), and (e) of current Item 5 regarding investment strategies and risks to reflect the updated presentation and disclosure requirements of the parallel provisions of Form N–1A. These paragraphs re-focus these disclosure requirements to require more granular
disclosure related to each investment option as opposed to broader disclosure regarding registrants. Specifically, among other things, these amendments require disclosure of whether the investment option may take temporary defensive positions that are inconsistent with the investment option’s principal investment strategies in attempting to respond to adverse market, economic, political, or other conditions. We believe that investors should be informed about investment positions that an investment option can take from time to time that are inconsistent with the investment option’s central investment focus. As proposed, these amendments also require the registrant to disclose, for each investment option, whether it may engage in active and frequent trading of portfolio securities and, if so, the consequences of increased portfolio turnover to investors and the investment option’s performance. Increased portfolio turnover can result in increased transaction costs that are ultimately borne by investors. Collectively, these amendments are intended to clarify and enhance the disclosure requirements relating to investment options’ strategies and risks, and to increase consistency and thereby promote comparability among forms used to register management investment companies.797 As proposed, new paragraph (c) requires registrants with annual returns for at least one calendar year to provide, for each investment option:

• A bar chart showing the investment
  option’s annual total returns for each of the last 10 calendar years (or for the life of the investment option, if less than 10 years), as well as the investment option’s highest and lowest return for a quarter during the period displayed in the chart;
• A table showing the investment
  option’s average annual total returns (with and without taxes on distributions and redemptions) for 1-, 5-, and 10-year calendar periods ending on the date of the most recently completed calendar year (or for the life of the investment option, if shorter), as well as the returns of an appropriate broad-based securities market index for those same periods; and
• Certain explanatory statements,
  such as how the information in the chart and table illustrates the variability of the investment option’s returns, the investment option’s past performance is not necessarily an indication of how the investment option will perform in the future, and, if applicable, how updated performance information may be obtained. The disclosures that new paragraph (c) requires are modeled after the risk/ return bar chart and table that Form N– 1A currently requires and are intended to supplement the disclosures currently required by Form N–3 regarding accumulation unit income and capital changes 798 by providing investors and potential investors with more information about the performance of the investment options offered under the contract.799 In particular, the bar chart will illustrate the variability of the investment options’ returns and give investors an idea of the attendant risks of each investment option. Likewise, the accompanying table will help investors evaluate an investment option’s risks and returns relative to the market.

3. Part B (Information Required in a
   Statement of Additional Information)
   Table 5 shows how our amendments
   will revise the item requirements of Part B of our variable contract registration forms. Except as described below, our amendments to Part B of Forms N–3 and N–4 generally conform to the language of the related Part B disclosure items in current Form N–6. Although commenters did not raise broad objections to our proposed amendments, commenters raised concerns with and/ or requested clarification on various items, as discussed in more detail below. To the extent we received no comments on certain items, we are adopting them as proposed, as discussed further below.

ER01MY20.001</GPH>

800For example, edits to use defined terms where appropriate, to use synonyms for consistency across forms (e.g., ‘‘State the name . . .’’ instead of ‘‘Give the name . . .’’), and to add titles to sub-paragraphs for clarity and consistency across forms (and to help the reader navigate the form). a. Amendments Conforming Part B Items of Forms N–3 and N–4 to Presentation in Form N–6 As proposed, we are amending certain items of Part B of Forms N–3 and N–4 to reflect the more up-to-date presentation of corresponding items in Form N–6, and re-designating their numbering as shown in Table 5 above. To the extent that these amended items incorporate only minor wording changes,800 they are indicated as ER01MY20.002</GPH>

801 Item 20(a)(3) of amended Form N–3; Item 18(a)(3) of amended Form N–4; Item 19(a)(3) of amended Form N–6. 802 Item 20(a)(4)(iii) of amended Form N–3; Item 18(a)(4)(iii) of amended Form N–4. 803 Item 16(a)(iii)(B) of current Form N–3; Item 15(a)(iii)(B) of current Form N–4. 804 Item 20(b) of amended Form N–3; Item 18(b) of amended Form N–4. 805 Item 21 of amended Form N–3; Item 19 of amended Form N–4. 806 In Form N–3, the title of this disclosure item is ‘‘Investment Advisory and Other Services.’’ In addition to the amendments we are adopting to conform this disclosure item to the parallel item in Form N–6, we also are making additional amendments to this disclosure item, as discussed below, that will reflect the presentation of Item 19 in Form N–1A. See infra Section II.C.3.e. 807 Item 24(g) of amended Form N–3; Item 20(c) of amended Form N–4. 808 Instruction 1 to Item 31(b) of amended Form N–3; Instruction 1 to Item 26(b) of amended Form N–4. This instruction will be consistent with prior guidance we have provided in the context of registration statements on Form N–6, namely that statutory financial statements could be used in those limited circumstances when GAAP financial statements are not otherwise required to be prepared for either the depositor or its parent. See Separate Accounts Offering Variable Life Release, supra note 29, at n.58 and accompanying and following text. 809 Instruction 2 to amended Item 31(b) of Form N–3; Instruction 2 to amended Item 26(b) of Form N–4. 810 Instruction 3 to amended Item 31(b) of Form N–3; Instruction 3 to amended Item 26(b) of Form N–4. 811See VIP Working Group Comment Letter; CAI Comment Letter. 812See Instruction 1 to Item 23(b) of Form N–3; Instruction 1 to Item 24(b) of Form N–6. 813See Registration Form for Insurance Company Separate Accounts Registered as Unit Investment Trusts that Offer Variable Life Insurance Policies, Securities Act Release No. 8088, Investment Company Act Release No. 25552 (Apr. 11, 2002) (‘‘Form N–6 Adopting Release’’), text preceding n.56. 814See VIP Working Group Comment Letter. 815See Form N–6 Adopting Release, supra note 813, text following n.58. 816See Removal of Certain References to Credit Ratings Under the Investment Company Act, Securities Act No. 9506, Investment Company Act No. 30847 (Sept. 27, 2013) (‘‘Removal of Certain References to Credit Ratings Release’’). ‘‘unchanged items’’ in Table 5. Otherwise, each of these amended items is discussed in more detail below. Cover Page (Item 20 of Form N–3, Item 18 of Form N–4; Item 19 of Form N–6) As proposed, we are amending the outside front cover page requirements for each registration form to include the name of the contract and classes to which the contract relates.801 As proposed, we are also amending Forms N–3 and N–4 to: (1) Require a statement whether and from where information is incorporated by reference; 802 (2) remove the current required statement that the SAI should be read with the prospectus; 803 and (3)
consolidate the current item requiring a table of contents into the item specifying cover
page disclosures.804
General Information and History (Item 21 of Form N–3, Item 19 of Form N–4, Item 20 of Form N–6) As proposed, we are amending Item 18 of current Form N–3 and Item 17 of current Form N–4 (which we are re￾designating as Items 21 and 19, respectively) to require: (1) The date and form of organization of the depositor, the name of the state or other jurisdiction in which the depositor is organized, and a description of the general nature of the depositor’s business; and (2) the date and form of organization of the registrant and the registrant’s classification pursuant to
Section 4 of the Investment Company
Act.805
Services (Item 24 of Form N–3,806 Item 20 of Form N–4, Item 21 of Form N–6) As proposed, we are amending Item 21 of current Form N–3 and Item 18 of current Form N–4 (which we are re￾designating as Items 24 and 20, respectively) to require registrants to, unless disclosed elsewhere, identify and state the principal business address of any person who provides significant administrative or business affairs management services for the registrant (e.g., an ‘‘administrator,’’ ‘‘sub￾administrator,’’ ‘‘servicing agent’’), describe the services provided, and the compensation paid for the services.807 Financial Statements (Item 31 of Form N–3, Item 26 of Form N–4, Item 28 of Form N–6) As proposed, we are amending Item 28 of current Form N–3 and Item 23 of current Form N–4 (which we are re￾designating as Items 31 and 26, respectively) to: (1) Clarify that the depositor’s financial statements must be prepared in accordance with generally accepted accounting principles (‘‘GAAP’’) if the depositor prepares financial information in accordance with GAAP for use by the depositor’s parent in any report under Sections 13(a) and 15(d) of the Exchange Act or registration statement filed under the Securities Act; 808 (2) specify how an investor may request certain additional financial information about the depositor that is omitted from the SAI and is included in Part C of the registration statement; 809 and (3) clarify how current the depositor’s financial statements must be when the anticipated effective date of the registration statement falls within 90 days after the depositor’s fiscal year￾end.810 Several commenters requested that the Commission allow insurers to use financial statements prepared according to statutory accounting principles (‘‘SAP’’) instead of generally accepted accounting principles.811 Forms N–4 and Form N–6 currently permit a separate account depositor to file financial statements prepared using SAP in registration statements for contracts issued through the separate account if it would not have to prepare GAAP financial statements for use in its own registration statements or periodic reports or those of its parent company.812 As noted in the release adopting Form N–6 (‘‘Form N–6 Adopting Release’’), the Commission believes allowing the use of SAP financials statements permitted by these forms appropriately recognizes the cost burdens that would be imposed if we required GAAP financial statements in these circumstances.813 To promote uniformity and consistency in financial reporting, however, we do not believe it is appropriate to broaden the use of SAP financial statements by separate account depositors beyond these limited circumstances. The Commission generally requires that all financial statements be presented on a GAAP basis. However, the Commission has permitted the use of SAP financial statements—which insurers use to comply with state insurance regulation—in these limited instances because preparing GAAP financial statements would
be overly burdensome. In addition, one commenter stated that financial statements are difficult to comprehend, and suggested the Commission should remove the requirement to include separate account financial statements in registration statements or instead create a risk metric to show the financial strength of the depositor.814 We decline to adopt the suggestion to remove the requirement to include the separate account depositor’s financial statements in these filings. As noted in the Form N–6 Adopting Release, the financial condition of the depositor is relevant to its ability to pay the insurance benefits offered under variable life insurance policies, and therefore investors may find financial information about the depositor useful.815 We also note that the Commission has recently amended certain rules applicable to and registration forms used by certain investment companies,816 in compliance with the Congressional mandate in the Dodd Frank Act to remove references to credit quality ratings in these rules and forms to avoid any potential overreliance by

817See Section 939A of the Dodd-Frank Act. 818See Removal of Certain References to Credit Ratings Release, supra note 816, text accompanying n.44. 819See Request for Comment on Fund Retail Investor Experience, supra note 548. 820See Instructions 2–6 to Item 31(a) of amended Form N–3. 821See Instruction 5(ii) to Item 28 of Form N–3 (requiring the inclusion of AUV tables in shareholder reports); see also infra Section C.3.d (discussing elimination of the requirement to include AUV tables in variable contract prospectuses). 822See, e.g., CAI Comment Letter. 823As discussed above, we believe that the inclusion of non-principal risks could add complexity and length to the prospectus’s principal risks section and obscure principal risks that are more relevant to investors, and therefore non￾principal risks (that are not otherwise required to be disclosed in the prospectus) are neither required nor permitted to be included in the prospectus. See supra note 690; General Instruction C.3.(b) to Forms N–3, N–4, and N–6. 824See Item 22 of amended Form N–3. 825 Item 28(a) of amended Form N–3; Item 23(a) of amended Form N–4. Item 25(a) of current Form N–3 and Item 20(a) of current Form N–4 only require a registrant to state if the depositor or the affiliate of the depositor is the principal underwriter of the contract. 826See infra text accompanying and preceding note 878. Forms N–3, N–4, and N–6 also include in their disclosure requirements regarding underwriters other similar instructions, such as instructions stating that information need not be given about the service of mailing proxies or periodic reports of the registrant. 827See supra note 710 and accompanying text. 828 Item 29 of amended Form N–3; Item 24 of amended Form N–4. 829See General Instruction C.3.e.(i) to amended Forms N–3, N–4, and N–6. 830See VIP Working Group Comment Letter. 831See Instruction 4 to Item 29(a), Instruction 7 to Item 29(b)(1), and Instruction 9 to Item 29(b)(2) of amended Form N–3; Instruction 4 to Item 24(a), Instruction 7 to Item 24(b)(1), and Instruction 5 to Item 24(b)(2) of amended Form N–4. 832See Instruction 2 to Item 25 of current Form N–3; Instruction 2 to Item 20 of current Form N– 4; Instruction 2 to Item 20 of current Form N–6. investors of those ratings that might result from a perceived government endorsement of those ratings.817 In adopting these amendments, the Commission noted the absence of ‘‘reliable and objective shorthand measure[s] of credit risk.’’ 818 As discussed above, however, the Commission is currently engaged in an overall review of the retail fund investor experience, and will continue to consider ways to improve and simplify disclosure relating to separate account depositors.819 Amended Form N–3 will also retain certain requirements regarding the preparation of shareholder reports and disclosure of proxy voting information currently required by the form. These requirements were inadvertently omitted from the proposed Form N–3 at the time of
our proposed amendments to that form and will be carried forward without change to the amended form.820 In a conforming change, we are also eliminating the current Form N–3 requirement to include accumulation unit value tables in shareholder reports to parallel our elimination of those tables from variable contract prospectuses.821 b. Non-Principal Risks of Investing in the Contract (Item 20 of Form N–4, Item 21 of Form N–6) In a change from the proposal and in response to commenters requesting clarification on where non-principal risk disclosures should be located,822 we are adding a new item to Forms N– 4 and N–6 regarding the non-principal risks of investing in the contract, to the extent not otherwise required to be disclosed in the prospectus.823 Although registrants on Forms N–4 and N–6 currently include non-principal risks of investing in their registration statements, the forms lack an explicit disclosure requirement to do so. We believe the approach taken in Form N– 3 of including an explicit requirement in the SAI of the non-principal risks associated with the contract is appropriate to clarify the scope of registrants’ disclosure obligations.824 Having a separate disclosure requirement for non-principal risks in the SAI also helps to provide a clear delineation between disclosure of principal risks (in the prospectus) and non-principal risks (in the SAI). For these reasons, we are adopting this new item, which should also provide greater consistency among the registration forms for variable contracts and allow investors to more easily compare risks between different variable contracts.
c. Underwriters (Item 28 of Form N–3,
Item 23 of Form N–4, Item 25 of Form N–6) As proposed, we are amending Item 25 of current Form N–3 and Item 20 of current Form N–4 (which we are re￾designating as Items 28 and 23, respectively) to specifically require identification of all principal underwriters of the registrant (other than the depositor), their principal business addresses, and the source of any affiliation.825 As proposed, we are also adding an instruction to this item in Forms N–3, N–4, and N–6 stating that information need not be provided about bona fide contracts with the registrant or its insurance company for outside legal or auditing services, or bona fide contracts for personal employment entered into with the registrant or its depositor in the ordinary course of business. This instruction is intended to focus disclosures on underwriting costs, as opposed to costs for legal or auditing services or other ancillary matters, and will parallel similar instructions in Part C of these same forms regarding disclosures for principal underwriters.826 Also as proposed, because we are amending Item 5 of current Form N–6 to include the disclosures on commissions to dealers currently required by current Item 20 in the SAI, we also are removing this disclosure from current Item 20 (which we are re￾designating as Item 25).827 d. Calculation of Performance Data (Item 29 of Form N–3, Item 24 of Form N–4) Largely as proposed, we are amending Item 26 of current Form N–3 and Item 21 of current Form N–4 (which we are re-designating as Items 29 and 24, respectively), to remove the instruction specifically permitting the registrant to furnish separate yield quotations for individual and group contracts.828 Because the amended General Instructions state that individual and group contracts are not essentially identical, we would not expect to see both types of contracts presented in a single prospectus.829 One commenter asked whether this item is still relevant or needs to be adjusted to reflect features such as optional benefits, which were not commonly used when these disclosure requirements were drafted.830 Accordingly, we are adding instructions to require registrants to disclose, if applicable, that the performance information may not reflect all contract charges, and that performance would be lower if these charges were included.831 e. Adjustment to Disclosure Thresholds (Items 28 and 31 of Form N–3, Items 23 and 26 of Form N–4, Items 25 and 28 of Form N–6) Our variable contract registration forms currently include various dollar thresholds that date back to their initial adoption. In the SAI, for example, information need not be given about any service required to be disclosed pursuant to current Item 25 of Form N– 3, current Item 20 of Form N–4, and current Item 20 of Form N–6, for which total payments of less than $5,000 were made during each of the last three fiscal years.832 In addition, financial statements of the insurance company required to be included in the registration
statement need not be more current than as of the end of the most recent fiscal year of the insurance company unless certain balance sheets

833See Instructions 3(ii) and (iii) to Item 28 of current Form N–3; Instructions 3(ii) and (iii) to Item 23 of current Form N–4; Instructions 3(ii) and (iii) to Item 24 of current Form N–6. 834See Instruction 3 to Item 28 of amended Form N–3; Instruction 2 to Item 23 of amended Form N– 4; Instruction 2 to Item 25 of amended Form N–6. 835See Instructions 3(b) and (c) to Item 31(b) of amended Form N–3; Instructions 3(b) and (c) to Item 26 of amended Form N–4; Instructions 3(b) and (c) to Item 28 of amended Form N–6. 836 Indexing the $5,000 thresholds for inflation results in revised thresholds of $11,950, and indexing the $1,000,000 thresholds for inflation results in revised thresholds of $2,390,009. Calculations are based on the Bureau of Labor Statistics consumer price index average for all urban consumers (CPI–U) between January 1985 and August 2018. See CPI Inflation Calculator, Bureau of Labor Statistics, available at https:// www.bls.gov/data/inflation_calculator.htm. 837See Item 22 of amended Form N–3. The amendments to this item will reflect the presentation of Item 16 of Form N–1A. 838Section 8 of the Investment Company Act requires a fund to disclose in its registration statement, among other things, the fund’s policies with respect to borrowing money, issuing senior securities, underwriting securities issued by other persons, investing in real estate or commodities, and making loans. Section 8 also requires a fund to disclose in the registration statement its policies on concentration and portfolio turnover, and any other policies that the fund deems fundamental or that may not be changed without shareholder approval. When the Commission proposed amendments to Form N–1A in 1997, it noted that, although they are not required to do so, some funds disclose in the prospectus their policies with respect to the practices identified under Section 8. See Proposed New Disclosure Option for Open-End Management Investment Companies, Investment Company Act Release No. 22529 (Feb. 27, 1997) [62 FR 10943 (Mar. 10, 1997)]. To provide a clearer directive to disclose this information in the SAI, the Commission proposed (and later adopted) amendments to specifically require disclosure about these policies in the SAI. See Form N–1A Adopting Release, supra note 799. This amended Form N–1A requirement forms the basis for the amendments to paragraph (b) of amended Item 22 of Form N–3 described herein. 839See Investment Company Reporting Modernization, Investment Company Act Release No. 32936 (Dec. 8, 2017) [82 FR 58731 (Dec. 14, 2017)] (delaying the rescission of Form N–Q and the filing of Form N–PORT). 840See paragraph (e) of Item 22 of amended Form N–3 (requiring the registrant to describe any ongoing arrangements to make available information about the registrant’s portfolio securities to any person, except if certain conditions are met including certain disclosures about those portfolio securities being made available and remaining available until no
earlier than the registrant’s filing on Form N–PORT). Other items of amended Form N–3 reflect similar amendments. See Instruction 4.b to Item 31(a) of amended Form N–3 (requiring the SAI to state that the registrant’s portfolio holdings are filed on Form N–PORT and to explain how those reports on Form N–PORT may be obtained). 841See Item 22(e) of amended Form N–3 (requiring prospectus disclosure of imposition of liquidity fees, temporary suspension of registrant redemptions, and financial support provided to money market funds or money market accounts). 842See rule 2a–7 under the Investment Company Act (requiring a money market fund to prominently post this same information on its website); Form N– CR (requiring a money market fund to report this same information to the Commission); see also Item 16(g) of Form N–1A (requiring disclosure of certain material events for money market funds). Portfolio companies registered on Form N–1A and offered by registrants on Forms N–4 and N–6 are currently required to include these disclosures in their SAIs. 843See Money Market Reform; Amendments to Form PF, Investment Company Act Release No. 31166 (July 23, 2014) [79 FR 47736 (Aug. 14, 2014)], at text accompanying and following n.1258. of the sponsor show a combined capital and surplus (if a stock company) or an unassigned surplus (if a mutual company), of less than $1,000,000.833 As
part of our efforts to update the
registration forms, and as proposed, we are increasing these thresholds to $15,000 834 and $2,500,000,835 respectively, to account for the effects of inflation since 1985, the year of inception for Forms N–3 and N–4.836 f. Additional Amendments to Form N–3 As proposed, we are adopting additional amendments to Form N–3 that are generally intended to update and enhance disclosures related to investment options by requiring similar disclosures required for open-end management companies registered on Form N–1A. The revisions generally reflect the updated presentation and disclosure requirements of the parallel item in Form N–1A and harmonize the disclosure requirements across registration statements for different products. Investment Objectives and Risks (Item 22 of Form N–3) As proposed, we are making certain amendments to Item 19 of Form N–3, which we are re-designating as Item
22.837 Amended Item 22 contains a new
instruction clarifying that if the registrant offers more than one investment option, the required disclosures should be made for each investment option. Paragraph (a) of amended Item 22 requires the registrant to describe any investment strategies that are not principal strategies, as well as the risks of those strategies. These disclosures complement the prospectus disclosures of principal investment strategies that will be required by amended Item 19. As proposed, paragraph (b) of amended Item 22 requires the discussion of all policies regarding: (1) Issuing senior securities; (2) borrowing money, including the purpose for which the proceeds will be used; (3) underwriting securities of other issuers; (4) concentrating investments in a particular industry or group of industries; (5) purchasing or selling real estate or commodities; (6) making loans; and (7) any other policy that the registrant deems fundamental or that may not be changed without shareholder approval, including, if applicable, the registrant’s investment objectives. In contrast, Item 19 of current Form N–3 generally requires the disclosure of: (1) Fundamental policies not described in the prospectus regarding those same topics, as well as short sales, purchases on margin, and writing of put and call options, and any other policy the registrant deems fundamental; and (2) any significant but non-fundamental investment policies not described in the prospectus and which can be changed without the approval of the majority of votes available to eligible voters. We believe that the amended disclosure requirements better correspond with the requirements of Section 8 of the Investment Company Act than the current Form N–3 item requirements, since they more specifically reflect the disclosure that Section 8 mandates.838 As proposed, paragraph (c) of amended Item 22 requires registrants to disclose the types of investments that a registrant may make while assuming a temporary defensive position. We believe that investors should be informed about investment positions that an investment option can take from time to time that are inconsistent with the investment option’s central investment focus. Paragraph (e) of amended Form N–3 reflects amendments adopted by the Commission in 2017 that will become effective on May 1, 2020.839 These amendments remove references to Form N–Q and replace them with references to Form N–PORT.840 As proposed, paragraph (f) of amended Item 22 requires certain disclosures regarding material events by registrants or investment options that hold themselves out as ‘‘money market funds’’ or ‘‘money market accounts’’ pursuant to rule 2a–7 under the Investment Company Act.841 That rule requires these same disclosures to appear on a fund’s website, and for information about money market fund material events to be reported to the Commission on Form N–CR.842 We believe that, to the extent investors may not be familiar with researching filings on EDGAR (or other equivalent
platform), including these disclosures in a registrant’s SAI (which investors may receive in hard copy through the U.S. Postal Service or may access on a registrant’s website, as well as accessing on EDGAR or other equivalent platform) may make this information more readily available to these investors.843 The

844Amended paragraphs (b), (d), and (e) will require disclosure regarding certain investment policies, portfolio turnover, and disclosure of portfolio holdings, respectively. 845See Item 23 of amended Form N–3. The amendments to this item reflect the presentation of Item 17 of Form N–1A. 846See paragraphs (b)(1) and (d) of Item 23 of amended Form N–3. 847See paragraph (e) of Item 23 of amended Form N–3. These codes of ethics will continue to be filed as exhibits to Part C of the registrant’s registration statement. See Item 32(q) of amended Form N–3. 848See supra note 807 and accompanying text. 849See Item 24 of amended Form N–3. The amendments to this item will reflect the presentation of Item 19 of Form N–1A. 850See paragraph (a)(3)(i) of Item 24 of amended Form N–3. 851See paragraph (e) of Item 24 of amended Form N–3. 852Amended Form N–3 requires a registrant to disclose the relationship between amounts paid to the distributor and the expenses that the registrant incurs; the amount of any unreimbursed expenses incurred under the 12b–1 plan in a previous year and carried over to future years; and whether the registrant participates in any joint distribution activities with another investment company and, if so, whether fees paid under the plan may be used to finance the distribution of the shares of another investment company and the method of allocating distribution costs (e.g., relative net asset size, number of shareholder accounts). See paragraphs (f)(2) through (4) of Item 24 of amended Form N– 3. 853See Item 25 of amended Form N–3. The amendments to this item will reflect the presentation of Item 20 of Form N–1A. 854See Instruction 2 to Item 25(b) of amended Form N–3 (discussing relocation expenses). 855See Item 26 of amended Form N–3. The amendments to this item will reflect the presentation of Item 21 of Form N–1A. 856See Item 26(a) of amended Form N–3. 857See Item 21(a) of Form N–1A. 858See Instruction to Item 26(e) of amended Form N–3. We believe this aspect of the current instruction is not necessary, as disclosure in response to a registration form’s requirements generally relates to the class or series for which securities are being registered. 859See supra note 801 and accompanying text. 860See supra note 710 and accompanying text; see also Item 20 of current Form N–6; Item 7 of amended Form N–6. remaining paragraphs of amended Item 22 restate existing disclosure requirements to reflect the updated presentation and disclosure requirements of the parallel item in Form N–1A.844 Management of the Registrant (Item 23 of Form N–3) As proposed, we are making certain amendments to Item 20 of Form N–3, which we are re-designating as Item 23, to restate existing disclosure requirements to reflect the updated presentation and disclosure requirements of the parallel item in Form N–1A.845 Except as discussed below, these changes are not intended to significantly alter current disclosure obligations. The amendments: (1) Require disclosure of
the responsibilities of the board of directors with respect to the registrant’s management and any arrangements that result in breakpoints in, or elimination of, sales loads for directors and other affiliated persons of the registrant; 846 and (2) remove the current requirement to state that codes of ethics adopted by the registrant, its investment adviser, and principal underwriter can be viewed and copied at the Commission’s Public Reference Room, because the Public Reference Room no longer maintains paper copies of filings on Form N–3.847 Investment Advisory and Other Services (Item 24 of Form N–3) As proposed, in addition to the amendments to Item 21 of Form N–3 (which we are re-designating as Item 24) that we discuss above, which conforms certain aspects of this item to the disclosure requirements of Form N–6,848 we are also making amendments to restate existing disclosure requirements to reflect the updated presentation and disclosure requirements of the parallel item in Form N–1A.849 Except as discussed below, these changes are not intended to significantly alter current disclosure obligations. As proposed, we are amending the current requirement to disclose the total dollar amount that the registrant or the insurance company paid under the investment advisory contract for the last three fiscal years to also require disclosure of amounts paid to ‘‘to the adviser (aggregated with amounts paid to affiliated advisers, if any), and any advisers who are not affiliated persons of the adviser.’’ 850 As proposed, we are also requiring a registrant to disclose any front-end sales load reallowed to dealers as a percentage of the registrant’s units.851 Finally, and as proposed, we are requiring additional disclosures regarding plans adopted under rule 12b–1 under the Investment Company Act.852 Industry practices regarding the use of ‘‘12b–1 plans’’ have evolved since Form N–3 was adopted in 1985, and the new disclosures are intended to enhance the information provided to investors by requiring information similar to that required by Form N–1A. Portfolio Managers (Item 25 of Form N– 3) As proposed, we are making certain amendments to Item 22 of Form N–3, which we are re-designating as Item
25.853 We are amending the current
requirement to describe the compensation of each portfolio manager by including relocation expenses among the list of items that may be excluded from compensation disclosures, provided that those items do not discriminate in scope, terms, or operation in favor of the portfolio manager and are available generally to all salaried employees.854 Otherwise, these changes rephrase certain disclosure requirements to conform to current presentation requirements in Form N–1A but are not intended to significantly alter current disclosure obligations. Brokerage Allocation and Other Practices (Item 26 of Form N–3) As proposed, we are making certain amendments to Item 23 of Form N–3, which we are re-designating as Item
26.855 As proposed, the amendments
will amend the current requirement to describe how transactions in portfolio securities are effected, by newly including markdowns on principal transactions among the items that must be discussed in a general statement about brokerage commissions and markups.856 This will mirror the parallel requirement of Form N–1A 857 and will provide additional relevant information regarding the ways portfolio security transactions involving negative, as well as positive, spreads could impact the separate account and its investors. As proposed, the amendments also slightly alter the instruction regarding the identification of securities issued by the registrant’s regular broker or dealer and which the registrant has acquired by deleting the statement that if the registrant has issued more than one class or series of stock, information must be disclosed for the class or series that has securities that are being registered on Form N–3.858 Otherwise, these changes rephrase certain disclosure requirements to conform to current presentation requirements in Form N–1A but are not intended to significantly alter current disclosure obligations. g. Additional Amendments to Form N– 6 Together with the cover page amendments described above,859 we are making two additional amendments to
Part B of Form N–6. First, as discussed
above, and as proposed, we are relocating the disclosure on commissions paid to dealers from the SAI to the prospectus.860 Second, as discussed above, and as proposed, we are eliminating current Item 23 (Loans) and consolidating required disclosures

859See supra note 801 and accompanying text. relating to contract loans into the prospectus.861
4. Part C (Other Information)
Table 6 shows how our amendments
will amend the item requirements of
Part C of our variable contract
registration forms. These amendments are largely intended to update the disclosure requirements and provide greater consistency among variable contract registration forms. As proposed, we are eliminating certain disclosure items in light of recent regulatory developments and our goal of reducing duplicative disclosure requirements. Although commenters did not raise broad objections to our proposed amendments, commenters raised concerns with and/or requested clarification on various items, as discussed in more detail below. To the extent we received no comments on certain items, we are adopting them as proposed, as discussed further below.

ER01MY20.003</GPH>

860See supra note 710 and accompanying text; see also Item 20 of current Form N–6; Item 7 of amended Form N–6. 861The disclosures required by current Item 23 will be consolidated with current Item 10 into a single amended Item 13. See supra paragraphs accompanying and immediately following note 765. 862See supra note 800. 863 In 2019, the Commission adopted amendments to its registration forms, including Forms N–3, N–4, and N–6, to require hyperlinks to most exhibits required to be filed with the registration statement. See FAST Act Adopting Release, supra note 501. 864See Item 29(a) of current Form N–3; Item 24(a) of current Form N–4. 865 Item 27(h) of amended Form N–4. 868See Instructions 1–4 to Item 32(r) of amended Form N–3, Item 27(o) of amended Form N–4, and Item 30(r) of amended Form N–6. 869See VIP Working Group Comment Letter. 870See Item 31 of current Form N–3; Item 26 of current Form N–4. 871See Item 33 of current Form N–3; Item 28 of current Form N–4. a. Amendments Conforming Part C Items of Form N–3 and N–4 to Presentation in Form N–6 As proposed, we are amending certain items of Part C of Form N–4 to reflect the more up-to-date presentation of corresponding items in Form N–6, and re-designating their numbering as shown in Table 6 above. To the extent that these amended items incorporate only minor wording changes,862 they are indicated as ‘‘unchanged items’’ in
Table 6. Otherwise, each of these
amended items is discussed in more detail below. Exhibits (Item 32 of Form N–3, Item 27 of Form N–4, Item 30 of Form N–6) 863 As proposed, we are amending the Exhibits item: (1) For Forms N–3 and N– 4, to eliminate the requirement to list the financial statements filed as part of the registration statement; 864 (2) for Form N–4, to require the filing of participation agreements; 865 and (3) for Forms N–3 and N–4, to require the filing of administrative contracts.866 Pursuant to amendments adopted by the Commission in 2019,867 this Item also includes instructions regarding redaction or omission of schedules or information, as well as linking to exhibits filed with the registration statement or incorporated by reference.868 One commenter suggested that many of the exhibits are not particularly useful, but did not identify specific exhibits or provide further explanation.869 Although the lack of specificity makes it difficult for us to consider this comment further, we continue to believe that the list of required exhibits should include the material documents relating to the creation, administration, and offering of the contracts. Persons Controlled by or Under Common Control With the Depositor or Registrant (Item 34 of Form N–3, Item 29 of Form N–4, Item 32 of Form N–6) As proposed, we are amending Forms N–3 and N–4 to no longer require registrants to disclose the principal business of any persons controlled by or under common control with the depositor or registrant.870 We believe that the revised item provides sufficient information for investors to assess the effects of control arrangements affecting the registrant (which effects are based largely on the percentage of voting securities owned by controlling persons, or other bases of control, as required to be disclosed under the item). Indemnification (Item 35 of Form N–3, Item 30 of Form N–4, Item 33 of Form N–6) For Forms N–3 and N–4, as proposed, we are amending the item relating to indemnification to eliminate the instruction specifying that, in responding to the item’s requirements, a registrant should note the requirements of Securities Act rules 461 and 484, and
Section 17 of the Investment Company
Act.871 We do not believe that specifically noting these legal requirements is necessary to remind registrants of the existence of separate legal requirements, since the forms are not intended to be a comprehensive source of all disclosure obligations relevant to registrants. Eliminating this item will also conform this aspect of Forms N–3 and N–4 to other registration statement forms and reflect the more streamlined presentation used in Form N–6. Fee Representation (Item 40 of Form N– 3, Item 34 of Form N–4) As proposed, we are adding new Item 40 to Form N–3 and new Item 34 to Form N–4, which require registrants to provide a representation of the insurance company or depositor that the fees and charges deducted under the contracts, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company or depositor. The new disclosure item mirrors Item 33 of current Form N–6 (which we are re￾designating as Item 37). Because Section ER01MY20.004</GPH>

872Section 26(f)(2)(A) of the Investment Company Act provides that it shall be unlawful for any unit investment trust that is a registered separate account funding variable insurance contracts to sell any such contract unless the registration statement for the contract represents that the fees and charges deducted under the contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. Section 27(i)(2) of the Investment Company Act makes Section 26(f) of the Investment Company Act applicable to Form N–3 registrants. 873 Item 32(r) of amended Form N–3; Item 27(o) of amended Form N–4; Item 30(r) of amended Form N–6. To avoid confusion on the part of investors who might accidentally discover the form of a summary prospectus and mistake it for an effective prospectus, registrants must add a legend clearly identifying the document as a form of summary prospectus that the registrant intends to use on or after the effective date of the registration statement. See Instruction 5 to Item 32(r) of amended Form N– 3; Item 27(o) of amended Form N–4; Item 30(r) of amended Form N–6. 874See generally supra Section II.A.8.a. 875See supra notes 864–866 and accompanying text. 876See, e.g., Lincoln Comment Letter; Brighthouse Comment Letter; Transamerica Comment Letter. 877See supra Section II.A.8.a. 878See supra Section II.C.3.c. 879 Instruction 1 to Item 35(c) of current Form N– 3. 880See Instruction 3 to Item 35(c) of current Form N–3; Instruction 3 to Item 29(c) of current Form N– 4; Instruction 3 to Item 30(c) of current Form N– 6. 881See Instruction 2 to Item 37 of current Form N–3; Instruction 2 to Item 31 of current Form N– 4; Instruction 2 to Item 32 of current Form N–6. 882See Instruction 3 to amended Item 37 and Instruction 2 to amended Item 39 of Form N–3; Instruction 3 to amended Item 31 and Instruction 2 to amended Item 33 of Form N–4; Instruction 3 to amended Item 34 and Instruction 2 to amended Item 36 of Form N–6. 883For a discussion of the calculation methodology, see supra note 836. 884See Item F.13 of Form N–CEN (requiring disclosure of the number of individual contracts that are in force at the end of the reporting period). 26(f) of the Investment Company Act requires that the representation be made in the registration statement,872 this new item merely requests the representation required by Section 26(f) and does not impose any new obligations on a Form N–3 or Form N–4 registrant. b. Amendments Requiring Filing of Preliminary Form of Summary Prospectus For each form, and as proposed, we are amending the ‘‘Exhibits’’ disclosure item to require a registrant to file a preliminary ‘‘form of’’ any initial summary prospectus that the registrant intends to use on or after the effective date of the registration statement as an exhibit.873 As discussed above, and as proposed, registrants will only be required to file the form of initial summary
prospectus in any initial registration statement filing, or in any pre-effective amendment or post￾effective amendment filed in accordance with paragraph (a) of rule 485.874 In a change from the proposal, we are not requiring the filing of the updating summary prospectus because its contents should either be derivative of information provided in the statutory prospectus (e.g., the Key Information
Table and the Appendix: Portfolio
Companies/Investment Options Available Under the Contract) or readily discernible from comparison with the prior filing (e.g., by examining redline tags in the updating summary prospectus filing). This requirement is intended to permit the staff to review a summary prospectus in the form and manner in which a registrant would provide it to investors, prior to the registration statement’s effective date. These amendments to the ‘‘Exhibits’’ item of each form accompany the other amendments that we propose to the ‘‘Exhibits’’ item of Forms N–3 and N–4 to conform to the parallel disclosure requirements in Form N–6.875 Several commenters requested that the Commission permit registrants to file as an exhibit a ‘‘form of’’ summary prospectus that could be filed for multiple contracts that are substantially similar to or meaningfully representative of each other.876 As discussed above, we will permit this practice under certain circumstances.877
c. Principal Underwriters (Item 37 of
Form N–3, Item 31 of Form N–4, Item 34 of Form N–6) For Form N–3, as proposed, we are adding an instruction stating that information need not be provided about bona fide contracts with the registrant or its insurance company for outside legal or auditing services, or bona fide contracts for personal employment entered into with the registrant or its depositor in the ordinary course of business. Likewise, for Forms N–4 and N–6, as proposed, we are adding a similar instruction stating that information need not be given about the service of mailing proxies or periodic reports of the registrant. Collectively, these instructions are intended to focus disclosures on underwriting costs, as opposed to costs for legal or auditing services or other ancillary matters, and parallel similar instructions in Part B of these same forms regarding disclosures for underwriters.878 Also, for Form N–3, as proposed, we are amending the instruction to subparagraph (c) of Item 35 of current Form N–3 to eliminate the portion of the first instruction requiring to include as ‘‘other compensation’’ any compensation received by an underwriter for keeping the registrant’s securities in the hands of the public.879 The category of ‘‘other compensation’’ is intended to encompass compensation that is not otherwise enumerated in one of the other categories. We believe deletion of this instruction will help streamline the form and remove any suggestion that this category is limited only to disclosure of compensation received for keeping the registrant’s securities in the hands of the public. d. Adjustment to Disclosure Thresholds (Items 37 and 39 of Form N–3, Items 31 and 33 of Form N–4, Items 34 and 36 of Form N–6) As proposed, in addition to amending certain updated disclosure thresholds in the SAI, we are similarly increasing certain disclosure thresholds in Part C. For example, when providing information required regarding commissions and other compensation received, directly or indirectly, from the registrant during the registrant’s last fiscal year by each principal underwriter, a registrant currently may exclude information about any service for which total payments of less than $5,000 were made during each of the registrant’s last three fiscal years.880 In addition, when providing a summary of certain contracts under which management-related services are provided to the registrant, a registrant currently need not provide information about any service for which total payments of less than $5,000 were made during each of the last three fiscal years.881 As part of our efforts to update the registration forms, and as proposed, we are increasing these thresholds to $15,000 882 to reflect the effects of inflation since 1985.883 e. Amendments Eliminating Current
Part C Disclosure Requirements
As proposed, to reduce overlapping regulatory requirements, we are eliminating Item 32 of current Form N– 3 and Item 27 of current Form N–4 (‘‘Number of Contractowners’’), because registrants are separately required to disclose the number of contractowners in the registrant’s filings on Form N– CEN.884 Unlike registration statements on Forms N–3 and N–4, reports on Form N–CEN are filed with the Commission in a structured data format that permits the Commission and its staff to more easily collect, aggregate, and analyze the reported information. As proposed, we are also eliminating Item 38 of current Form N–3 and Item 32 of Form N–4

885 Item 38(c) of current Form N–3 and Item 32(b) of current Form N–4 require an undertaking to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request an SAI, or (2) a post card or similar written communication affixed to or included in the prospectus that the applicant can remove to send for an SAI. Because we understand that investors typically use the internet or—for investors who do not use the internet, telephonic means—to request an SAI, we believe that this undertaking is outdated. 886Because the Commission’s view is that issuers of variable insurance contracts are required by
Section 10(a)(3) of the Securities Act to maintain a
current prospectus for so long as payments may be accepted under the contracts, regardless of whether new policies are being sold, the undertakings to file post-effective amendments required by Items 38(a) and (b) of current Form N–3 and Item 32(a) of current Form N–4 simply restate an issuer’s obligation under the Securities Act. See Form N– 6 Proposing Release, supra note 688, at text following n.83 Compare Item 38(d) of current Form N–3 and Item 32(c) of current Form N–3 (requiring undertaking to deliver any SAI and any required financial statements promptly upon written or oral request) with Item 1(b) of amended Forms N–3 and N–4 (requiring registrants to state that the SAI is available, without charge, upon request and further requiring registrants to send the SAI within three business days of receipt of the request, by first-class mail or other means designed to ensure equally prompt delivery) and Item 17 of amended Form N– 3 and Item 16 of amended Form N–4 (requiring registrants to explain how financial statements may be found or obtained). 887 Item 34(c) of amended Form N–6. This change conforms Form N–6 with the comparable item of Form N–4. See Item 29(c) of current Form N–4. 888See Forms N–3 and N–4 Adopting Release, supra note 29, at text following n.51 (stating that publication of the Guidelines was not intended to elevate their status beyond that of staff guidance). 889See Proposing Release, supra note 6, at
Section II.D.5.
890See Form N–1A Adopting Release, supra note 799 (eliminating similar guidelines from Form N– 1A). 891 General Instruction 3.C.(h) of amended Forms N–3, N–4, and N–6; amendments to rules 485 and 497 under the Securities Act; amendments to rules 11 and 405 of Regulation S–T. 892See Inline XBRL Filing of Tagged Data, Investment Company Act Release No. 33139 (June 29, 2018) [83 FR 40846 (Aug. 16, 2018)] (‘‘Inline XBRL Adopting Release’’). We believe the public’s access to the specified disclosures will be facilitated by making the data available in a format with which many market participants will already be familiar as a result of reviewing and analyzing other disclosures in Inline XBRL. 893See Inline XBRL Adopting Release, supra note 892 (discussing the Commission’s Inline XBRL Viewer). 894Regulation S–T defines the term ‘‘Interactive Data File’’ to mean the machine-readable computer code that presents information in XBRL electronic format pursuant to rule 405 of Regulation S–T and as specified by the EDGAR Filer Manual. See rule 11 of Regulation S–T; rule 405 of Regulation S–T. The EDGAR Filer Manual sets forth the technical formatting requirements for the presentation and submission of electronic filings through the EDGAR system. (‘‘Undertakings’’). These requirements are outdated 885 or redundant with similar requirements under the amendments to Forms N–3 and N–4.886 f. Additional Amendments to Form N– 6 As proposed, we are amending the third column of the table required by Item 30 of current Form N–6 (‘‘Principal Underwriters,’’ which we are re￾designating as Item 34) to reflect compensation received from the registrant on all redemptions, rather than the more narrow requirement to disclose only compensation from events occasioning the deduction of a deferred sales load.887 Because compensation may be paid upon redemptions not defined as deferred sales loads, we believe this change will clarify for investors the amount of redemption compensation received from the registrant.
5. Guidelines
The guidelines to current Forms N–3 and N–4 (the ‘‘Guidelines’’) were prepared by the Division of Investment Management when the Commission adopted the forms in 1985.888 The Guidelines, which generally restate certain Division positions that may affect fund disclosure, were intended to assist funds in preparing and filing their registration statements. Although certain Guidelines have been revised and new ones added in connection with the adoption of various rules, the Guidelines collectively have not been reviewed since 1985. As discussed in the Proposing Release, the Guidelines have become outdated and less useful, and have generally been superseded by other resources that are more frequently updated and accessible to the public.889 As with other registration forms that have more recently been amended to eliminate the guidelines for those forms,890 the Commission proposed to rescind the Guidelines to Forms N–3 and N–4 but requested comment on whether all or parts of the Guidelines should be retained (either as form items or instructions, or addressed as Commission guidance). We received no comments on our proposed elimination of the Guidelines, and are rescinding them as proposed. D. Inline XBRL We are adopting, generally as proposed, the requirement to use the Inline XBRL format for the submission of certain required disclosures in the variable contract statutory prospectus.891 Inline XBRL is a specification of the XBRL format that allows filers to embed XBRL data directly into an HTML document, eliminating any need to submit a copy of the tagged information in a machine￾readable document separate from the human-readable document. Information structured using the Inline XBRL format is both human-readable and machine￾readable for purposes of validation, aggregation, and analysis. This is the same format required for operating companies, mutual funds, and ETFs.892 The amendments harness Inline XBRL technology to enhance the ability of an investor to analyze and compare variable contracts (directly and through his or her investment professional). That technology also assists the investor by facilitating the analysis of variable contracts by Commission staff, as well as data aggregators, financial analysts, and other data users who often provide information to an investor. This aspect of the amendments is in keeping with our ongoing efforts to implement reporting and disclosure reforms that take advantage of the benefits of advanced technology to modernize the investment company reporting regime and to, among other things, help investors and other market participants better assess different products. For filers, Inline XBRL can enhance the efficiency of review, yield savings in time and cost of preparing machine￾readable data, and potentially enhance the quality of the data over other machine-readable standards as certain errors will be easier to identify and correct because the data is also human￾readable. For investors and other data users,
requiring information to be tagged in a structured format could facilitate analysis and comparison of variable contracts. In addition, making the data available in Inline XBRL should enhance the usability and ease of accessibility to the disclosures because users will not have to access two different documents (one machine￾readable and one human-readable) for the same data, and users can leverage the enhanced search and filtering capabilities of the Commission’s Inline XBRL Viewer.893 Given the complexity of variable contracts, tagging certain sections within the statutory prospectus in Inline XBRL format could provide greater transparency regarding the products’ features and risks. Variable contract registrants will be required to embed a part of the Interactive Data File 894 within an HTML document using Inline XBRL and to include the rest in an exhibit to that document. The portion filed as an exhibit to the filing contains contextual information about the XBRL tags embedded in the filing. The information as tagged will continue to be required to satisfy all other requirements of rule 405 under Regulation S–T, including the

895See Comment Letter of XBRL US (Mar. 13,
2019) (‘‘XBRL US Comment Letter’’); Better Markets
Comment Letter; CFA Comment Letter; and Chemas Comment Letter. 896See XBRL US Comment Letter; see also CAI Comment Letter (supporting the use of Inline XBRL for contracts currently offered for sale, noting that structured disclosures ‘‘would allow investors and their investment professionals (as well as data aggregators, financial analysts, and other data users) to efficiently analyze and compare available information about available contracts.’’). 897See Better Markets Comment Letter; CFA Comment Letter; Chemas Comment Letter. 898See CFA Comment Letter; Chemas Comment Letter. 899See CFA Comment Letter. 900See VIP Working Group Comment Letter; Ameritas Comment Letter; Anonymous Comment Letter III. 901See VIP Working Group Comment Letter; Anonymous Comment Letter III; Ameritas Comment Letter. 902See VIP Working Group Comment Letter (also suggesting that tagging may not be necessary ‘‘as a data mining tool should be able to pull the data without tagging.’’). 903See CAI Comment Letter. 904 Discontinued contracts that are ‘‘Eligible Contracts’’ as defined below in Section II.E.3 are not subject to the Inline XBRL requirement. See infra
Section II.E.
technical requirements in the EDGAR Filer Manual. Comments regarding our proposal to require variable contract filings to be tagged using Inline XBRL were mixed. Some commenters supported the proposed Inline XBRL requirements.895 One commenter stated that making information about variable annuities available in a structured, machine￾readable format would benefit investors by making the information more transparent and comparable.896 Several commenters believed the proposed requirement would enable data aggregators, financial analysts, and other data users to offer services that would empower variable contract investors to make comparisons and better investment decisions.897 Two commenters stated that the Inline XBRL requirement would encourage competition in the variable contract marketplace, serving to protect investors and promote efficiency and, potentially, innovation.898 Another commenter stated that ‘‘requiring disclosures to be made in Inline XBRL has the potential to do more than the most innovative disclosure design changes to assist the many investors who lack the time and expertise to pore through disclosure documents to select the variable annuity and contract features that best meet their needs.’’ 899 By contrast, three commenters opposed requiring a variable contract registrant to tag its disclosures.900 These commenters questioned the utility of tagged variable contract data, stating that XBRL data filed by funds has been minimally used by investors, Commission staff, or data aggregators.901 One commenter concluded that because variable annuities are even more complicated and less standardized than mutual funds, Inline XBRL tagging of variable contract prospectuses ‘‘is simply not worth the cost.’’ 902 One commenter supported requiring structured data for current offerings, stating that Inline XBRL is primarily designed to help investors and other market participants compare investments for purposes of an initial investment decision, but opposed applying the requirements to insurance contracts no longer being sold as to do so would ‘‘impose unnecessary costs and burdens on insurers without providing any benefit to investors.’’ 903 We are adopting the Inline XBRL requirements for variable contracts as proposed, but in response to commenters, these requirements will only apply to contracts being sold to new investors. We believe that investors and other data users will benefit from information provided using the Inline XBRL format. In contrast to statements by some commenters that mutual fund XBRL disclosures are minimally used, staff have observed that the risk/return XBRL data are accessed on a regular basis by the public. Moreover, based on our experience with operating company and mutual fund XBRL data use, we expect that data aggregators likely will begin using structured data, once it is available, to provide information to variable contract investors, Commission staff, financial analysts, and other data users. Requiring the
use of the Inline XBRL format makes it easier and less costly for such entities to efficiently access and analyze variable contract data, because those entities will not have to spend time rekeying the filings to structure the data and correcting for data quality. And because variable contracts are primarily held by retail investors who often look to third-party information sites when evaluating their investment options, this data should help investors compare variable contracts, including their features, costs, and portfolio company options. We agree with commenters’ assertions that Inline XBRL will be primarily of use in connection with the initial investment decision, when investors can use tagged data to more readily compare key features of multiple variable contracts to find the variable contract that best meets their investment needs. We expect that Inline XBRL will be of more limited use to existing investors because variable contracts are intended to be long-term investments and variable contracts are priced and sold accordingly. For example, under some variable contracts, if an investor were to make a withdrawal in contract year 15 from his or her variable contract that has a 10-year surrender period (measured by each purchase payment), that withdrawal still could be assessed a surrender charge. In that case, the surrender charge would apply to any purchase payment made during the last ten years, even if the investor had submitted his or her initial purchase payment for the variable contract more than ten years ago. For these reasons, variable contract investors likely will have limited incentives to seek out alternative variable contracts following their initial investment. Existing investors may be offered a buyout of their contract by their issuing insurance company or offered to exchange their contract into a new contract that may have different fees, benefits, or other terms. However, in those cases, the investor is typically presented with a specific alternative that the investor can more easily compare to his or her existing contract—as opposed to the initial investment decision process when the investor potentially is selecting from among a number of variable contracts and could benefit from the ability to use tagged data. Accordingly, the requirement to structure the disclosure using the Inline XBRL format will apply to all contracts for which an insurance company is maintaining a current registration statement and that are being sold to new investors.904 Thus, for registration statements with multiple contracts, tagging will be required for contracts that are still being sold to new investors, but will not be required for contracts that are not being sold to new investors even if those contracts are still accepting purchase payments or premiums from existing investors. We believe that this balances the benefits of these amendments to investors with the costs and burdens that would be associated with tagging contracts that are
no longer being sold to new investors. While we believe the use of Inline XBRL will ultimately benefit investors and other data users, we recognize that many insurers will face burdens in transitioning to the Inline XBRL format and as a result, are adopting a delayed compliance date for this new requirement, as discussed below in
Section II.G of this release.
Filings to be tagged. Like mutual funds and ETFs, registrants will be

905See General Instruction C.3.(h) to Forms N–3, N–4, and N–6; see also Items 2, 4, 5, 11, 18, 19 of amended Form N–3; Items 2, 4, 5, 10, and 17 of amended Form N–4; Items 2, 4, 5, 10, 11, and 18 of amended Form N–6. This information largely parallels similar information contained in the Form N–1A risk/return summary. See Item 2 of Form N– 1A (Risk/Return Summary: Investment Objectives/ Goals); Item 3 of Form N–1A (Risk/Return Summary: Fee Table); Item 4 of Form N–1A (Risk/ Return Summary: Investments, Risks and Performance). 906See supra note 734 and accompanying text. 907See supra note 694 and accompanying text. 908See General Instruction C.3.(h)(i) of amended Form N–6 (referencing Item 10 (Death Benefits)). 909See VIP Working Group Comment Letter; XBRL U.S. Comment Letter; IRI Comment Letter I. 910See VIP Working Group Comment Letter. 911See XBRL US Comment Letter. (‘‘[W]e developed a prototype Annuity Taxonomy (https:// xbrl.us/xbrl-taxonomy/2019-var/) which . . . is available for the Commission or any other interested parties to download.’’). 912 Id. (identifying 57 additional terms to be tagged in XBRL format). 913See IRI Comment Letter I. 914See VIP Working Group Comment Letter (stating that ‘‘if you do tag, you should make sure you capture the class ID/tickers for the underlying funds so mutual fund information can easily be cross-referenced.’’). 915Taxonomies are available at https:// www.sec.gov/structureddata/dera_taxonomies. 916See rule 405(c)(1) of Regulation S–T. 917See infra Section II.G. 918See Inline XBRL Adopting Release, supra note 892. required to submit to the Commission in Inline XBRL certain information discussed below in registration statements or post-effective amendments filed on Forms N–3, N–4, and N–6, and forms of prospectuses filed pursuant to rule 497(c) or rule 497(e) under the Securities Act that include information that varies from the registration statement. We received no comments on this aspect of the proposal. Information to be tagged. We are requiring, largely as proposed, that registrants tag the following statutory prospectus disclosure items using Inline XBRL: The Key Information Table; Fee
Table; Principal Risks of Investing in the
Contract; for Form N–6 registrants, Standard Death Benefits; [Other] Benefits Available Under the Contract; Portfolio Companies [Investment Options] Available Under the Contract; and for Form N–3 registrants, Additional Information About Investment Options Available Under the Contract.905 We believe that these items—which provide important information about a variable contract’s key features, costs, and risks— are most suited to being tagged in a structured format and will be of greatest utility for investors and other data users that seek structured data to analyze and compare variable contracts. We received no comments regarding the substantive disclosure items proposed to be tagged. As proposed, we are requiring registrants to tag the Key Information
Table, which provides a concise
summary of fees and expenses, risks, restrictions, taxes, and conflicts of interest. We are also requiring that registrants tag the Fee Table, which provides detailed information about the variable contract’s costs. We believe that tagging could facilitate analysis of the costs associated with variable contracts, and allow investors and their investment professionals to compare the costs of a particular contract with the costs of other variable contracts or other investment products, such as mutual funds. Registrants will also be required to tag the Principal Risks disclosures so investors and their investment professionals can analyze a contract’s risks alongside the contract’s features and benefits. As proposed, we are requiring registrants to tag [Other] Benefits Available Under the Contract because these product features may be easier to analyze and compare if information pertaining to those features is available in a structured data format. While the Commission did not propose to require registrants to tag standard death benefit information, as discussed above, the Benefits Available Under the Contract disclosure item for Form N–3 and N–4 registrants will now include standard, as well as optional, death benefits.906 As a result, Form N–3 and N–4 registrants will also be required to tag standard death benefit information. As proposed, standard death benefits for variable life insurance contracts will be described in response to a separate Form N–6 item limited to for Standard Death Benefits.907 To parallel the (standard and optional) death benefits tagging requirements for variable annuities, we are requiring variable life insurance registrants to tag the item for Standard Death Benefits.908 Because investors principally, if not exclusively, buy variable life insurance contracts for their death benefits, which often include a choice among two or three death benefit options, tagging this information will make it easier to compare the key features of these products. Finally, as proposed, we are requiring registrants to tag Investment Options Available Under the Contract, as this may allow investors and their investment professionals to more easily compare the mutual funds or other investment options that are offered by different variable contracts and assess whether a particular contract’s investment options meet the investor’s needs or goals. While we received no comments regarding the substantive disclosure items to be tagged, several commenters inquired about a taxonomy for variable contracts.909 One commenter expressed concern that ‘‘there is no taxonomy in existence [for variable contracts] and it would be exceptionally difficult to develop a taxonomy for these products with their bespoke features.’’ 910 Another commenter stated that to help illustrate how such standards can be built and used to improve the usability of variable annuity data, it had developed a prototype Annuity Taxonomy, to which it provided a link in its comment
letter.911 This commenter suggested that to facilitate product comparisons and aid investors in their investment decisions, we should consider requiring insurers to tag additional elements beyond those likely to fall within the scope of the disclosure items proposed to be tagged.912 A third commenter asked for guidance regarding whether a new XBRL taxonomy would be developed and circulated for comment, and if it the prototype Annuity Taxonomy developed by the other commenter might be an indicator of the actual taxonomy.913 One commenter, though not supporting an Inline XBRL requirement, observed that if tagging is mandated, we should require certain identifying information for the portfolio companies to be tagged to facilitate the cross-referencing of such information.914 As with other Commission XBRL taxonomies, staff will post a draft variable contracts XBRL taxonomy for public review and feedback.915 When available, filers will be required to use the most recent version of the variable contracts XBRL taxonomy as specified by the EDGAR Filer Manual.916 As discussed below, we are extending the proposed compliance period for the new Inline XBRL requirements, which will allow sufficient time for us to consider public comments on the draft taxonomy and subsequently adopt and publish a final taxonomy before variable contract registrants must comply with the new structured data reporting regime.917 Submission of Interactive Data File. As proposed, in a framework similar to that for mutual funds and ETFs under the recently adopted Inline XBRL regime,918 we are requiring variable contract registrants to submit Interactive Data Files as follows:

• For post-effective amendments filed
  pursuant to paragraph (b)(1)(i), (ii), (v), or (vii) of rule 485, and in the case of registrants on Forms N–4 or N–6,