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.
---------------------------------------------------------------------------

    \848\ See supra note 807 and accompanying text.
    \849\ See Item 24 of amended Form N-3. The amendments to this
item will reflect the presentation of Item 19 of Form N-1A.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \850\ See paragraph (a)(3)(i) of Item 24 of amended Form N-3.
    \851\ See paragraph (e) of Item 24 of amended Form N-3.
    \852\ Amended 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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \853\ See Item 25 of amended Form N-3. The amendments to this
item will reflect the presentation of Item 20 of Form N-1A.
    \854\ See Instruction 2 to Item 25(b) of amended Form N-3
(discussing relocation expenses).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \855\ See Item 26 of amended Form N-3. The amendments to this
item will reflect the presentation of Item 21 of Form N-1A.
    \856\ See Item 26(a) of amended Form N-3.
    \857\ See Item 21(a) of Form N-1A.
    \858\ See 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.
---------------------------------------------------------------------------

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

relating to contract loans into the prospectus.\861\
---------------------------------------------------------------------------

    \859\ See supra note 801 and accompanying text.
    \860\ See supra note 710 and accompanying text; see also Item 20
of current Form N-6; Item 7 of amended Form N-6.
    \861\ The 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.
---------------------------------------------------------------------------

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.

[GRAPHIC] [TIFF OMITTED] TR01MY20.003

[GRAPHIC] [TIFF OMITTED] TR01MY20.004

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.
---------------------------------------------------------------------------

    \862\ See supra note 800.
---------------------------------------------------------------------------

Exhibits (Item 32 of Form N-3, Item 27 of Form N-4, Item 30 of Form N-
6) \863\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \864\ See 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.
    \866\ Item 32(k) of amended Form N-3; Item 27(i) of amended Form
N-4.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \867\ See FAST Act Adopting Release, supra note 501 (among other
things, revising instructions regarding exhibits to registration
statements). These rules became effective April 2 and May 2, 2019.
    \868\ See 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \869\ See VIP Working Group Comment Letter.
---------------------------------------------------------------------------

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).
---------------------------------------------------------------------------

    \870\ See Item 31 of current Form N-3; Item 26 of current Form
N-4.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \871\ See Item 33 of current Form N-3; Item 28 of current Form
N-4.
---------------------------------------------------------------------------

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

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.
---------------------------------------------------------------------------

    \872\ Section 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.
---------------------------------------------------------------------------

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).
---------------------------------------------------------------------------

    \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.
    \874\ See generally supra Section II.A.8.a.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \875\ See supra notes 864-866 and accompanying text.
    \876\ See, e.g., Lincoln Comment Letter; Brighthouse Comment
Letter; Transamerica Comment Letter.
    \877\ See supra Section II.A.8.a.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \878\ See supra Section II.C.3.c.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \879\ Instruction 1 to Item 35(c) of current Form N-3.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \880\ See 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.
    \881\ See 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.
    \882\ See 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.
    \883\ For a discussion of the calculation methodology, see supra
note 836.
---------------------------------------------------------------------------

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

(``Undertakings''). These requirements are outdated \885\ or redundant
with similar requirements under the amendments to Forms N-3 and N-
4.\886\
---------------------------------------------------------------------------

    \884\ See 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).
    \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.
    \886\ Because 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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \888\ See 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \889\ See Proposing Release, supra note 6, at Section II.D.5.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \890\ See Form N-1A Adopting Release, supra note 799
(eliminating similar guidelines from Form N-1A).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \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.
    \892\ See 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \893\ See Inline XBRL Adopting Release, supra note 892
(discussing the Commission's Inline XBRL Viewer).
---------------------------------------------------------------------------

    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

technical requirements in the EDGAR Filer Manual.
---------------------------------------------------------------------------

    \894\ Regulation 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \895\ See Comment Letter of XBRL US (Mar. 13, 2019) (``XBRL US
Comment Letter''); Better Markets Comment Letter; CFA Comment
Letter; and Chemas Comment Letter.
    \896\ See 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.'').
    \897\ See Better Markets Comment Letter; CFA Comment Letter;
Chemas Comment Letter.
    \898\ See CFA Comment Letter; Chemas Comment Letter.
    \899\ See CFA Comment Letter.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \900\ See VIP Working Group Comment Letter; Ameritas Comment
Letter; Anonymous Comment Letter III.
    \901\ See VIP Working Group Comment Letter; Anonymous Comment
Letter III; Ameritas Comment Letter.
    \902\ See 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.'').
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \903\ See CAI Comment Letter.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

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.
---------------------------------------------------------------------------

    \905\ See 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \906\ See supra note 734 and accompanying text.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \907\ See supra note 694 and accompanying text.
    \908\ See General Instruction C.3.(h)(i) of amended Form N-6
(referencing Item 10 (Death Benefits)).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \909\ See VIP Working Group Comment Letter; XBRL U.S. Comment
Letter; IRI Comment Letter I.
    \910\ See VIP Working Group Comment Letter.
    \911\ See 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).
    \913\ See IRI Comment Letter I.
    \914\ See 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.'').
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \915\ Taxonomies are available at https://www.sec.gov/structureddata/dera_taxonomies.
    \916\ See rule 405(c)(1) of Regulation S-T.
    \917\ See infra Section II.G.
---------------------------------------------------------------------------

    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:
---------------------------------------------------------------------------

    \918\ See Inline XBRL Adopting Release, supra note 892.
---------------------------------------------------------------------------

     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,

paragraph (b)(1)(vi) of rule 485,\919\ Interactive Data Files must be
filed either concurrently with the filing or in a subsequent amendment
that is filed on or before the date that the post-effective amendment
that contains the related information becomes effective; \920\
---------------------------------------------------------------------------

    \919\ To help facilitate efficiencies in the variable contract
post-effective amendment filing process, we will permit variable
contracts to submit Interactive Data Files concurrently with these
post-effective amendments because post-effective amendments filed
pursuant to these paragraphs of rule 485 generally are not subject
to further revision.
    \920\ General Instruction C.3.(h)(i)(B) of Forms N-3, N-4, and
N-6; cf. General Instruction C.3.(g)(i)(B) of Form N-1A.
---------------------------------------------------------------------------

     For initial registration statements and post-effective
amendments filed other than 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, paragraph (b)(1)(vi) of rule 485, Interactive Data Files must be
filed in a subsequent amendment on or before the date the registration
statement or post-effective amendment that contains the related
information becomes effective; \921\ and
---------------------------------------------------------------------------

    \921\ General Instruction C.3.(h)(i)(A) to Forms N-3, N-4, and
N-6; cf. General Instruction C.3.(g)(i)(A) of Form N-1A.
---------------------------------------------------------------------------

     For any form of prospectus filed pursuant to rule 497(c)
or (e), Interactive Data Files must be submitted concurrently with the
filing.\922\
---------------------------------------------------------------------------

    \922\ General Instruction C.3.(h)(ii) to Forms N-3, N-4, and N-
6; cf. General Instruction C.3.(g)(ii) of Form N-1A.
---------------------------------------------------------------------------

    We believe this approach will facilitate the timely availability of
important information in a structured format for investors, their
investment professionals, and other data users yielding substantial
benefits. For data aggregators responding to investor demand for the
data, the availability of the required disclosures using the Inline
XBRL format concurrent with filing or before the date of effectiveness
will allow them to quickly process and share the data and related
analysis with investors. We received no comments regarding this
proposed approach.
    Identification of Classes. As proposed, the Interactive Data File
will be required to be submitted in such a manner that will permit the
information for each contract (and, for any information that does not
relate to all of the classes in a filing, each class of the contract)
to be separately identified.\923\ We received no comments regarding
this aspect of the proposal.
---------------------------------------------------------------------------

    \923\ General Instruction C.3.(h)(iii) to Forms N-3, N-4, and N-
6.
---------------------------------------------------------------------------

    Consequence of failure to submit required Interactive Data File.
Similar to the framework for mutual funds and ETFs, we are adopting, as
proposed, amendments to rule 485 under the Securities Act to provide
that if a registrant does not submit a required Interactive Data File,
the registrant's ability to file post-effective amendments to its
registration statement under subparagraph (b) of the rule will be
automatically suspended until the required Interactive Data File is
submitted.\924\ We received no comments on this aspect of the proposal.
---------------------------------------------------------------------------

    \924\ Rule 485(c)(3).
---------------------------------------------------------------------------

    Availability of hardship exemptions. The Commission proposed that
under the final rules registrants may request temporary and continuing
hardship exemptions for the inability to timely file electronically the
Interactive Data File.\925\ One commenter expressed support for this
aspect of the proposal,\926\ and we are adopting this provision as
proposed.
---------------------------------------------------------------------------

    \925\ See 17 CFR 232.201 (rule 201 of Regulation S-T) (temporary
hardship exemption) and 17 CFR 232.202 (rule 202 of Regulation S-T)
(continuing hardship exemption).
    \926\ See Chemas Comment Letter.
---------------------------------------------------------------------------

E. Discontinued Variable Contracts

    Today, many variable contracts no longer offered to the public
operate in a manner consistent with certain staff no-action letters and
provide alternative disclosures to investors in lieu of filing post-
effective amendments to update a registration statement and providing
updated prospectuses to existing investors (these discontinued
contracts are referred to as ``Alternative Disclosure Contracts''). The
staff letters will be withdrawn. In addition, the Commission is taking
the position that, if an issuer of an Alternative Disclosure 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 not adopting any form of going-forward relief for
discontinued contracts at this time, although we will continue to
consider whether any form of going-forward relief for discontinued
contracts might be appropriate. We welcome input as described below in
Section II.E.4.
1. Background
    An insurance company may choose to stop offering a variable
contract to new investors while continuing to accept additional
payments from existing investors. Each additional purchase payment
under a variable contract, or reallocation of contract value from one
sub-account to another, is considered a ``sale'' under Section 5 of the
Securities Act requiring delivery of a current prospectus, and variable
contract issuers generally maintain current prospectuses for their
products through the filing of annual post-effective amendments to the
registration statements and, as necessary, supplementing or
``stickering'' the contract prospectus or SAI.\927\
---------------------------------------------------------------------------

    \927\ See Forms N-3 and N-4 Adopting Release, supra note 29, at
n.14 and accompanying text.
---------------------------------------------------------------------------

    As the number of contracts outstanding declines over time, the
proportion of fixed costs per contract and other burdens associated
with maintaining a current registration statement and mailing
prospectuses increase over a diminishing asset base. Unlike other types
of registered investment companies that can liquidate or merge with
another investment company when assets are reduced to such a level that
continuing the investment company is not viable, an insurance company
is unable to liquidate or otherwise terminate a variable contract. We
understand that an insurance company may sometimes seek to encourage
investors to exchange into new contracts or make buyout offers, but it
cannot unilaterally terminate an investor's contract.
a. Staff No-Action Letters
    Beginning in 1977, the staff of the Division of Investment
Management issued a series of no-action letters stating that the staff
would not recommend enforcement action if issuers did not update the
variable contract registration statement and deliver updated
prospectuses to existing investors, so long as certain conditions were
met, including distributing alternative disclosures to investors (each,
a ``Staff Letter,'' and collectively, the ``Staff Letters'').\928\ The
last Staff Letter was issued in 1995.\929\
---------------------------------------------------------------------------

    \928\ See, e.g., Great-West Life and Annuity Insurance Company,
SEC Staff No-Action Letter (pub. avail. Oct. 23, 1990) (``1990
Letter''); MML Bay State Life Ins. Co., SEC Staff No-Action Letter
(pub. avail. Apr. 12, 1990); Transamerica Occidental Life Insurance
Co., SEC Staff No-Action Letter (pub. avail. Mar. 16, 1990);
Connecticut Mutual Life Insurance Company, SEC Staff No-Action
Letter (pub. avail. Mar. 7, 1990).
     The staff declined to extend its no-action position to variable
annuities funded by managed separate accounts. See Provident
National Assurance Company, SEC Staff No-Action Letter (pub. avail.
June 2, 1987); Great-West Life Assurance Company, SEC Staff No-
Action Letter (pub. avail. June 4, 1987).
    \929\ See Metropolitan Life Insurance Co., SEC Staff No-Action
Letter (pub. avail. Apr. 26, 1995) (``Metropolitan Letter'').

---------------------------------------------------------------------------

    The Staff Letters generally were limited to Securities Act
registration statements for contracts that are no longer offered to new
purchasers and that have fewer than 5,000 investors (or participants in
the case of group contracts).\930\ The Staff Letters also identified a
set of circumstances in which the staff would not recommend enforcement
action once the registration statement is no longer updated: \931\
---------------------------------------------------------------------------

    \930\ In the 1990 Letter, the staff stated that it would no
longer respond to no-action requests ``in this area unless they
raise novel issues or involve more than 5,000 variable annuity or
variable life insurance contracts.'' There are four Staff Letters
concerning contracts where the number of contract owners exceeded
5,000. See Metropolitan Letter (42,910 contract owners); Monarch
Life Insurance Co., SEC Staff No-Action Letter (pub. avail. June 9,
1992) (``Monarch Letter'') (5,900 contract owners); New York Life
Insurance and Annuity Corp., SEC Staff No-Action Letter (pub. avail.
Nov. 15, 1989) (13,713 contract owners); Security Benefit Life
Insurance Company, SEC Staff No-Action Letter (pub. avail. July 2,
1987) (28,019 contract owners).
    \931\ Some of the circumstances identified in which the staff
would not recommend enforcement action varied slightly across the
Staff Letters over time, specifically with respect to the delivery
and availability of the insurance company's audited financial
statements. The circumstances discussed below reflect those
identified in the most recent Staff Letters.
---------------------------------------------------------------------------

     There are no material changes made to the contract;
     New contracts are not offered to the public, and the
registrant does not contemplate such an offering in the future; \932\
---------------------------------------------------------------------------

    \932\ The Staff Letters do not address existing investors making
additional purchase payments.
---------------------------------------------------------------------------

     Investors are provided the following disclosures:
    [cir] The portfolio companies' current prospectuses (or summary
prospectuses) and any updates thereto, annual and semi-annual reports,
proxy materials, and any other periodic reports or other shareholder
materials for the portfolio companies;
    [cir] Confirmations of transactions in accordance with 17 CFR
240.10b-10 (rule 10b-10 under the Exchange Act);
    [cir] Within 120 days after the close of the fiscal year, updated
audited financial statements of the registrant, and in the case of
variable life insurance contracts, the depositor's updated audited
financial statements; \933\ and
---------------------------------------------------------------------------

    \933\ With respect to variable annuities, the depositor's
updated audited financial statements would be available upon
request. See, e.g., Metropolitan Letter; Monarch Letter.
---------------------------------------------------------------------------

    [cir] At least once a year, a statement of the number of units and
values in each investor's account (collectively, the ``Alternative
Disclosures'').
     The registrant files periodic reports with the Commission
pursuant to Section 30 of the Investment Company Act (i.e., reports on
Form N-CEN).\934\
---------------------------------------------------------------------------

    \934\ The Staff Letters specifically identified a registrant's
filing of reports on Form N-SAR as one of the set of applicable
circumstances. Form N-SAR was recently rescinded and succeeded by
Form N-CEN. See Investment Company Reporting Modernization,
Investment Company Act Release No. 32314 (Oct. 13, 2016) [81 FR
81870 (Nov. 18, 2016)] (``Investment Company Reporting Modernization
Adopting Release''), at n.744 and accompanying text.
---------------------------------------------------------------------------

b. Liability
    As of August 2019, we estimate that the Alternative Disclosures
that the Staff Letters describe are being provided for more than half
of variable contract Securities Act registration statements: \935\
---------------------------------------------------------------------------

    \935\ Our understanding is based on staff review of filings with
the Commission and discussions with industry participants.
[GRAPHIC] [TIFF OMITTED] TR01MY20.005

    Providing the Alternative Disclosures, in lieu of updates to an
issuer's registration statement, may have the effect of potentially
limiting issuers' liability under certain provisions of Sections 11 and
12(a)(2) of the Securities Act, which require a registration statement
or prospectus to contain whatever information may be necessary or
appropriate to avoid material misstatements or omissions.\936\ In
addition, Section 34(b) of the Investment Company Act also imposes
liability for misstatements in a registration statement; however,
unlike Sections 11 and 12(a)(2), there is no private right of action
available to aggrieved investors.\937\ Although these Alternative
Disclosures may not be subject to liability under Sections 11 or 12 of
the Securities Act, or Section 34(b) of the Investment Company Act,
they are subject to provisions prohibiting material misstatements in
the offer or sale of a security.\938\
---------------------------------------------------------------------------

    \936\ See supra discussion at notes 505 (discussing Section
12(a)(2) liability) and 524 (discussing Section 11 liability).
    \937\ See Bellikoff v. Eaton Vance Corp., 481 F.3d 110 (2d Cir.
2007).
    \938\ See, e.g., Section 17(a) of the Securities Act; Section
10(b) and 17 CFR 240.10b-5 (rule 10b-5 under the Exchange Act).
There may also be additional remedies for investors, for example,
under state insurance law, state securities law, and contract law.
---------------------------------------------------------------------------

c. Approaches to Framework for Discontinued Contracts
    In proposing the new variable contract summary prospectus
disclosure

framework, the Commission acknowledged the industry practice of
providing Alternative Disclosures (which are significantly different
from the requirements of both the current prospectus and the new
summary prospectus regimes) under specific circumstances that the Staff
Letters identify. The Commission proposed to take the position that if
certain issuers currently operating under the Staff Letters do not file
post-effective amendments to update a variable contract registration
statement and do not provide updated prospectuses to existing
investors, under certain circumstances, this would not provide a basis
for Commission enforcement action so long as investors continue to
receive the Alternative Disclosures.
    The Commission proposed to apply this position only to Alternative
Disclosure Contracts operating in the manner that the Staff Letters
describe as of the effective date of any final summary prospectus
rules. The Commission proposed that all other variable contract issuers
would be required to file post-effective amendments to update their
registration statements and provide updated prospectuses under current
regulatory requirements, and could avail themselves of the summary
prospectus framework as adopted. Additionally, the Commission requested
comment on two alternative approaches for discontinued contracts,
including two methods of implementation that would apply these
approaches to either contracts discontinued after the effective date of
any final summary prospectus rules or all discontinued contracts
(including Alternative Disclosure Contracts).\939\
---------------------------------------------------------------------------

    \939\ The Commission stated that it was considering two
alternative approaches for discontinued contracts, ``Approach 1,''
which would codify existing practices under the Staff Letters with
certain modifications, as well as ``Approach 2,'' which would permit
registration statements to be updated using forward incorporation by
reference. The Commission also stated that each of these approaches
could be implemented using either ``Method One,'' which would apply
only on a going-forward basis, or ``Method Two,'' which would apply
to all discontinued contracts. See Proposing Release, Section II.C.
---------------------------------------------------------------------------

2. Comments Received on Proposal
    While one commenter stated that all investors should receive the
same disclosures through a summary prospectus regardless of whether or
not the variable contract is discontinued,\940\ other commenters
supported the general framework for discontinued contracts under the
Staff Letters,\941\ with a number citing the many decades that insurers
have structured their operations consistent with the Staff
Letters.\942\ These commenters stated that the framework allowed
insurers to reduce the disproportionate costs associated with updating
the registration statement and delivering updated prospectuses for
discontinued contracts over a diminishing asset base.\943\ Some of
these commenters also stated that the framework has enabled insurers to
continually innovate and introduce new products for investors.\944\ In
addition, some of these commenters stated that the framework has helped
to moderate fees and charges for variable contracts.\945\
---------------------------------------------------------------------------

    \940\ See Better Markets Comment Letter.
    \941\ See CAI Comment Letter; Brighthouse Comment Letter;
Transamerica Comment Letter; ACLI Comment Letter; Lincoln Comment
Letter; Ameritas Comment Letter; IRI Comment Letter I.
    \942\ See CAI Comment Letter; Brighthouse Comment Letter; ACLI
Comment Letter.
    \943\ See CAI Comment Letter; Brighthouse Comment Letter;
Transamerica Comment Letter; ACLI Comment Letter; Lincoln Comment
Letter; Ameritas Comment Letter; IRI Comment Letter I.
    \944\ See CAI Comment Letter; Brighthouse Comment Letter;
Transamerica. One commenter indicated that in the absence of this
relief, ``insurers generally will be more hesitant to innovate and
offer new products,'' which may ``dampen competition in the variable
contract market, limit investor choice, and stall innovation in the
retirement income market where innovation is sorely needed.'' See
CAI Comment Letter.
    \945\ See CAI Comment Letter; Brighthouse Comment Letter.
---------------------------------------------------------------------------

    Commenters stressed the importance of grandfathering Alternative
Disclosure Contracts, as proposed.\946\ These commenters urged, at a
minimum, that we provide some form of grandfathering for registrants
currently operating in a manner consistent with the Staff Letters due
to the difficulties involved in updating those registration statements.
One commenter urged that any grandfathering be codified by rule rather
than through a Commission position to provide more assurance to these
registrants.\947\
---------------------------------------------------------------------------

    \946\ See, e.g., Transamerica Comment Letter (``failing to
permit grandfathering . . . would cause significant disruption to
our variable product business''); Brighthouse Comment Letter (``un-
Great-Westing'' contracts ``would present a tremendous initial
resource strain . . . to `revive' registration statements, many of
which have not been sold or updated in decades''); ACLI Comment
Letter (the costs of eliminating relief ``would greatly outweigh the
very marginal benefits of such an action'').
    \947\ See IRI Comment Letter II.
---------------------------------------------------------------------------

    Commenters emphasized that some of these contract prospectuses have
not been updated for many years, and in some cases several decades, and
that preparing new registration statements and prospectuses would
involve significant costs and burdens.\948\ One commenter stated that
the maintenance costs of discontinued contracts would be high, and that
the cost for obtaining auditor opinions alone would be
significant.\949\ Other commenters stated it may be impossible to
prepare new disclosure documents for Alternative Disclosure Contracts
that have operated in a manner consistent with the Staff Letters for
many years. For example, one commenter stated that certain Alternative
Disclosure Contracts have operated in a manner consistent with the
Staff Letters for several decades and have never filed on EDGAR.\950\
---------------------------------------------------------------------------

    \948\ See, e.g., CAI Comment Letter; Brighthouse Comment Letter.
    \949\ See Ameritas Comment Letter.
    \950\ See CAI Comment Letter.
---------------------------------------------------------------------------

    We also received a number of comments on the importance of some
form of going-forward relief for contracts that are discontinued after
the date that the Staff Letters are withdrawn.\951\ These commenters
generally noted the benefits experienced by insurers operating in a
manner consistent with the Staff Letters discussed above (i.e.,
reduction in costs experienced over a diminishing asset base, increased
product innovation, and moderation in product costs). Commenters also
submitted views on the two alternative approaches for discontinued
contracts, including the two possible methods of implementation. We
discuss these comments below in Section II.E.4.
---------------------------------------------------------------------------

    \951\ See CAI Comment Letter; ACLI Comment Letter; Transamerica
Comment Letter; IRI Comment Letter I; IRI Comment Letter II.
---------------------------------------------------------------------------

3. Commission Position on Existing Contracts Whose Issuers Provide
Alternative Disclosures to Investors
a. Commission Position
    We are taking the position that if an issuer of an Alternative
Disclosure 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 certain modernized
alternative disclosures, under the Commission position described below.
For the reasons discussed below, we have determined to not codify this
approach. Rather, we are providing notice of the Commission's position
with respect to the circumstances under which certain actions will not
provide a basis for enforcement action.
    We generally believe that all variable contract issuers should
provide investors the same information and be

subject to the same liability standards. We are only taking this
Commission position to recognize the unique circumstances facing
certain variable contracts currently operating in a manner consistent
with the Staff Letters. The Commission's position is an exercise of its
discretion and is designed primarily to assist the phase-out of these
discontinued contracts. We believe that the need for this position will
likely be temporary since the number of these contracts will diminish
gradually over time. Accordingly, under the Commission position these
issuers may continue to operate much as they do today, while also
providing them the flexibility to provide more modern disclosure to
investors.
    Eligible contracts. We are taking the position that if an issuer of
an existing discontinued contract that is discontinued as of July 1,
2020 that provides Alternative Disclosures does not file post-effective
amendments to update a variable contract registration statement and
does not provide updated prospectuses to existing investors (each, an
``Eligible Contract''), this would not provide a basis for enforcement
action if:
     Registration statement. It has a Securities Act
registration statement with fewer than 5,000 investors, as of July 1,
2020.
     No material changes. There are no material changes made to
the contract.
     No new contracts offered to the public. New contracts are
not offered to the public, and the registrant does not contemplate such
an offering in the future.
     Alternative disclosures. Investors are provided each of
the following disclosures:
    [cir] Portfolio company disclosures. The portfolio companies'
current prospectuses (or summary prospectuses) and any updates thereto,
annual and semi-annual reports, proxy materials, and any other periodic
reports or other shareholder materials for the portfolio companies.
    [cir] Financial statements. Within 120 days after the close of the
fiscal year, updated audited financial statements of the registrant,
and in the case of variable life insurance contracts, the depositor's
updated audited financial statements. In the case of variable annuity
contracts, the depositor's updated audited financial statements are
available upon request.\952\
---------------------------------------------------------------------------

    \952\ See, e.g., Metropolitan Letter; Monarch Letter.
---------------------------------------------------------------------------

    [cir] Transaction confirmations. Confirmations of transactions in
accordance with rule 10b-10 under the Exchange Act.
    [cir] Statement of units and values. At least once a year, a
statement of the number of units and values in each investor's account.
     Option to provide modernized alternative disclosures. In
lieu of providing the portfolio company prospectuses (or summary
prospectuses) and any updates thereto and financial statements
described in the first two sub-bullets in the list of alternative
disclosures immediately above, a registrant may instead provide
investors with the following:
    [cir] Notice document. The issuer annually provides investors with,
and files with the Commission, a notice document containing the same
information as that required in an updating summary prospectus
(``Notice Document'').\953\
---------------------------------------------------------------------------

    \953\ The Notice Document must contain the same information as
required in the updating summary prospectus under rule 498A and be
filed with the Commission each year. Registrants are not required to
use the Inline XBRL format for the submission of the Notice
Document.
---------------------------------------------------------------------------

    [cir] Portfolio company prospectuses. An issuer may elect to post a
portfolio company's current summary prospectus, statutory prospectus,
SAI, and most recent shareholder reports online in lieu of mailing the
portfolio company's prospectuses (or summary prospectuses) and any
updates thereto to investors, provided that:
    [cir] A summary prospectus is used for the portfolio company (if
the portfolio company is registered on Form N-1A); and
    [cir] The materials for the portfolio company are publicly
accessible, free of charge, at the website address specified on the
cover page or beginning of the Notice Document, and delivered (in paper
or electronic format) upon request.
    [cir] Financial statements. The financial statements that would be
delivered to investors as part of the alternative disclosures described
above are instead made publicly accessible, free of charge, at the
website address specified on the cover page or beginning of the Notice
Document, and delivered (in paper or electronic format) upon request.
     Filings. The registrant makes the following filings with
the Commission:
    [cir] Reports on Form N-CEN. The registrant files periodic reports
with the Commission pursuant to Section 30 of the Investment Company
Act (i.e., reports on Form N-CEN).
    [cir] Financial statements. Within 120 days after the close of the
registrant's fiscal year, the registrant files with the Commission its
updated audited financial statements, and in the case of variable life
insurance contracts, the depositor's updated audited financial
statements.\954\
---------------------------------------------------------------------------

    \954\ The filing of financial statements with the Commission has
not been a condition of the Staff Letters. Most of the Staff Letters
predate EDGAR's adoption in 1993. EDGAR will be modified to create a
new submission type under which registrants may file the 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.
---------------------------------------------------------------------------

    [cir] Notice Document. A copy of any Notice Document sent to
investors.\955\
---------------------------------------------------------------------------

    \955\ EDGAR will be modified to create a new submission type
under which registrants may file Notice Documents. 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.
---------------------------------------------------------------------------

    In addition, if an issuer's Securities Act registration statement
includes multiple contracts, the Commission position applies only if
all of the contracts covered by the registration statement are
consistent with the above. For purposes of the 5,000 investor
threshold, the number includes investors in all contracts covered by
the registration statement in the aggregate. This is consistent with
the scope of the Staff Letters.
    Table 7 below summarizes the disclosures that may be provided to
investors in Alternative Disclosure Contracts, as compared with those
of the new summary prospectus framework under rule 498A, for certain
documents to either be: (1) Delivered to all investors; (2) made
available online; or (3) delivered to those investors who so request.

   Table 7--Documents Available to Alternative Disclosure Contract Investors Compared With Summary Prospectus
                                                    Framework
----------------------------------------------------------------------------------------------------------------
                                                                                Summary prospectus
                                       Alternative disclosures   Modernized alternative    framework under rule
                                                                      disclosures                  498A
----------------------------------------------------------------------------------------------------------------
Contract Statutory Prospectus........                        N/A *                       Required to be
                                                                                available online and
                                                                                delivered (in paper or
                                                                                electronic format)
                                                                                upon request.
Contract SAI.........................                         N/A                        Required to be
                                                                                available online and
                                                                                delivered (in paper or
                                                                                electronic format)
                                                                                upon request.
Contract Part C Information..........                         N/A                        Filed with registration
                                                                                statement (available
                                                                                on EDGAR).
Initial Summary Prospectus...........                         N/A                        Delivered to all new
                                                                                investors.
----------------------------------------------------------------------------------------------------------------
Updating Summary Prospectus or         N/A....................  Delivered to all existing investors.
 Comparable Notice Document.
Financial Statements * *.............  Delivered to all         Required to be available online and delivered
                                        investors, and also      (in paper or electronic format) upon request,
                                        available on EDGAR.      and also available on EDGAR * * *
Portfolio Company Prospectuses.......  Delivered to all         Delivered to investors, or, if the new option
                                        investors.               under rule 498A(j) to satisfy portfolio company
                                                                 prospectus delivery is relied[dash]upon,
                                                                 required to be available online and delivered
                                                                 (in paper or electronic format) upon request.
Portfolio Company Shareholder Reports  Delivered to all         Delivered to all investors, and, if the new
 * * * *.                               investors.               option under rule 498A(j) to satisfy portfolio
                                                                 company prospectus delivery is
                                                                 relied[dash]upon, required to be available
                                                                 online and delivered (in paper or electronic
                                                                 format) upon request.
----------------------------------------------------------------------------------------------------------------
Portfolio Company Proxy Materials....                         Delivered to all investors.
Transaction Confirmations............                         Delivered to all investors.
Statement of Units and Values........                         Delivered to all investors.
----------------------------------------------------------------------------------------------------------------
* While the contract prospectus (and SAI and Part C information) would have been filed with the Commission
  earlier in the contract's life cycle, under the Commission position these documents need not be updated
  annually, and registrants would not need to make these documents available to investors either online or in
  paper format.
** These include updated audited financial statements of the registrant, and in the case of variable life
  insurance contracts, the depositor's updated audited financial statements. See supra note 933 and accompanying
  text.
*** The financial statements are part of the contract SAI, and rule 498A requires a registrant relying on the
  rule to make the SAI available online. See rule 498A(h)(1); Item 25 of Form N-4; Item 27 of Form N-6. Issuers
  providing modernized alternative disclosures under the Commission position will file financial statements
  separately on EDGAR.
**** Delivery of portfolio company shareholder reports may be made pursuant to rule 30e-3, which provides 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.

b. Notice Document
    As we stated above with regards to the updating summary
prospectus,\956\ we believe that investors would benefit from a brief
summary of the changes to their contracts along with certain
information that we consider most relevant to investors when
considering additional investment decisions. Thus, the Notice Document
will include all the same information as an updating summary prospectus
under rule 498A, and will therefore include, among other things, a
brief description of certain changes to the contract that occurred
during the previous year, as well as a Key Information Table and
Appendix of portfolio companies or investment options.\957\ We believe
these disclosures will provide more useful information to investors in
Alternative Disclosure Contracts than the financial statements they
currently receive. Investors could continue to receive financial
statements upon request or access them on EDGAR.
---------------------------------------------------------------------------

    \956\ See supra Section II.A.2.
    \957\ The Notice Document would not be deemed a prospectus under
Section 2(a)(10) of the Securities Act, and therefore it would be
not subject to liability under Section 12(a)(2) of the Securities
Act. See Section 12(a)(2) of the Securities Act; see also discussion
supra note 505. The Notice Document would, however, be subject to
the general antifraud provisions of the federal securities laws.
See, e.g., Section 17(a) of the Securities Act; Section 10(b) of the
Exchange Act; Section 34(b) of the Investment Company Act.
---------------------------------------------------------------------------

c. Option To Provide Modernized Alternative Disclosures
    Some commenters suggested that we grandfather Alternative
Disclosure Contracts while also facilitating registrants providing
enhanced disclosures to investors. For example, one commenter suggested
that we permit registrants operating in a manner consistent with the
Staff Letters to deliver audited financial statements only upon
request, and to permit them to rely on the new method of delivering
portfolio company prospectuses by providing investors the information
required in the Appendix and posting the portfolio company prospectuses
and other materials online.\958\
---------------------------------------------------------------------------

    \958\ See, e.g., CAI Comment Letter.
---------------------------------------------------------------------------

    We believe that investors will benefit from these modernized
alternative disclosures for the same reasons that investors in active
contracts will benefit when issuers utilize the summary prospectus
regime available under rule 498A. For example, we believe that
delivering a Notice Document similar to an updating summary prospectus
will provide more usable and relevant information to investors than the
financial statements of the registrant and/or depositor. In particular,
we believe that providing key information relating to the contract's
terms, benefits, and risks in a concise and reader-friendly
presentation, will improve investor understanding of variable
contracts.
    Additionally, because issuers could experience cost savings by
providing the modernized alternative disclosures, we expect many
registrants may adopt this approach. However, we are also

cognizant that many variable contracts have registration statements
that have not been updated in many years, or decades, and it may be
significantly burdensome for these issuers to provide a notice document
with the same information as the updating summary prospectus. For this
reason, we are providing issuers the flexibility to provide either set
of alternative disclosures.
d. Other Considerations for Alternative Disclosure Contracts
    Loss of Status as Eligible Contract. The Commission position will
not be relevant to any discontinued contract if at any point in the
future, the discontinued contract does not meet the criteria for being
an Eligible Contract described above. Therefore, a contract that, for
example, is subject to material changes, offered to new investors, or
contemplated to be offered to new investors in the future, would no
longer be considered an Eligible Contract for purposes of the
Commission position.
    A number of commenters suggested that we take the position that
Alternative Disclosure Contracts will not lose their status in the
event of a material change to the contract.\959\ One commenter asserted
that not providing this relief would disadvantage insurers that make
material changes, including those beneficial to investors, and may
inhibit common corporate transactions involving such contracts.\960\
Another commenter suggested we provide a narrow range of conditions
that would allow those contracts that lost their status to regain
it.\961\
---------------------------------------------------------------------------

    \959\ See CAI Comment Letter; Lincoln Comment Letter; and
Brighthouse Comment Letter.
    \960\ See CAI Comment Letter.
    \961\ See Transamerica Comment Letter.
---------------------------------------------------------------------------

    As discussed above, we generally believe that all variable contract
issuers should provide investors the same information and be subject to
the same liability standards. Considering a contract to continue to be
an Eligible Contract in instances where the contract does not meet the
criteria for being an Eligible Contract would not be consistent with
these objectives. However, certain corporate transactions (such as
insurance company or separate account merger) where a contract was an
Eligible Contract prior to the transaction and there are no other
material changes to the contract will be considered on a case-by-case
basis.
    Transition Date for Eligible Contracts under Commission Position.
The Commission proposed that the position with respect to Alternative
Disclosure Contracts and/or any final rules associated with
discontinued contracts would start as of the effective date of rule
498A. We requested comment on whether the Commission should adopt a
transition period after that time for its position with respect to
Alternative Disclosure Contracts if a summary prospectus framework is
adopted.
    Several commenters urged that we grandfather not as of the
effective date of the final rule, as proposed, but as of the May 1
following the effective date, or if the effective date was less than 6
months prior to that May 1, then as of the subsequent May 1.\962\ One
commenter asserted that using May 1 as a cut-off date would avoid
ambiguity over whether a contract that could operate in a manner
consistent with the Staff Letters has actually operated as such, since
May 1 coincides with the annual update of the registration
statement.\963\ The same commenter also believed that a transition
would provide insurers with meaningful time to react to any Commission
action and develop business plans accordingly.\964\
---------------------------------------------------------------------------

    \962\ See CAI Comment Letter. See also Transamerica Comment
Letter (proposing a cut-off date of May 1 following the
effectiveness of the rule) and Lincoln Comment Letter (proposing the
same unless the effective date falls between January 1 and April 30,
in which case the cut-off should occur the following May 1).
    \963\ See CAI Comment Letter.
    \964\ Id. See also Lincoln Comment Letter.
---------------------------------------------------------------------------

    We decline to provide a transition period for Alternative
Disclosure Contracts beyond July 1, 2020. As discussed below, the
effective date of the rule and form amendments is also July 1,
2020.\965\ We believe that having the same date for the end of the
transition period for Alternative Disclosure Contracts and the start of
the summary prospectus framework will provide more regulatory
consistency and certainty than a regime where dates differ. In
addition, we believe that the July 1, 2020 date addresses concerns as
to ambiguity and sufficient time for insurers to develop business plans
in response to the adoption of the Commission position. Insurers by
that date will have already made a determination whether a contract
could operate in a manner consistent with the Staff Letters as part of
their 2020 annual update of their registration statements. As to all
other contracts, insurers will have a period of time to modify their
business plans to reflect the new framework prior to their 2021 annual
registration statement updates.
---------------------------------------------------------------------------

    \965\ See infra Section II.G.
---------------------------------------------------------------------------

4. Commission Declines To Adopt Going-Forward Relief
    We are declining to adopt any form of going-forward relief for
discontinued contracts at this time. A number of commenters urged the
Commission to provide some form of going-forward relief for these
contracts in the event the Staff Letters are withdrawn.\966\
---------------------------------------------------------------------------

    \966\ See, e.g., CAI Comment Letter; Lincoln Comment Letter;
Ameritas Comment Letter; Transamerica Comment Letter; Brighthouse
Comment Letter; ACLI Comment Letter.
---------------------------------------------------------------------------

    We received considerable support from commenters for Approach
1,\967\ which would adopt final rules reflecting practices under the
Staff Letters with certain modifications.\968\ For example, one
commenter noted that Approach 1 would facilitate the disclosure of
useful information to investors,\969\ while another noted its
substantial similarity to the approach available under the Staff
Letters meant it would be less disruptive to its variable contract
business than other alternatives.\970\
---------------------------------------------------------------------------

    \967\ See note 939 supra for a description of the alternative
approaches.
    \968\ See, e.g., CAI Comment Letter; Transamerica Comment
Letter; ACLI Comment Letter; IRI Comment Letter I.
    \969\ See ACLI Comment Letter.
    \970\ See Transamerica Comment Letter.
---------------------------------------------------------------------------

    While we considered these comments, we note that Approach 1 would
not require registrants to maintain a current registration statement
and therefore the liability provisions available under the federal
securities laws would not apply to Approach 1 to the same extent as
under the current variable contract prospectus delivery regime and
under the summary prospectus regime for registrants that choose to rely
on rule 498A. We believe it is important for investors to retain these
liability protections and decline to adopt a form of going-forward
relief at this time.
    We received one comment supporting Approach 2,\971\ which would
permit registration statements for discontinued contracts to be updated
by forward incorporation by reference. Another commenter stated it
could support Approach 2 as preferable to having no form of going-
forward relief at all, but had concerns regarding the costs to maintain
an updated registration statement and post updated statutory
prospectuses and SAIs online.\972\ This commenter also believed the
incremental increases in investor protection may not justify the
additional burdens on issuers. Another commenter cited increased
regulatory and

administrative burdens on issuers under Approach 2.
---------------------------------------------------------------------------

    \971\ See VIP Working Group Comment Letter.
    \972\ See CAI Comment Letter.
---------------------------------------------------------------------------

    After considering these comments, we are also declining to adopt
going-forward relief under Approach 2. We believe that the Commission
and its staff would benefit from further study and data regarding the
potential cost savings and other burden reductions under this approach.
We welcome input from the public as we undertake this further study. In
particular, the Commission and its staff would benefit from input on
topics including (1) the internal and external costs and other burdens
associated with maintaining a registration statement under the summary
prospectus framework versus those associated with providing the
Alternative Disclosures or the modernized alternative disclosures under
the Commission position (particularly any specific items that parties
believe create inordinate burdens), and, if interested parties would
recommend any alternative approach that may reduce those burdens
relative to the adopted summary prospectus framework, (2)
recommendations as to the set of proposed rules and general framework
that implement the recommendation and an analysis of how the
recommendation would retain investor protections. We encourage
interested parties to share their views by contacting staff in the
Division of Investment Management.

F. Technical and Conforming Amendments to Other Aspects of the
Regulatory Framework for Variable Contracts

Conforming Amendments To Reflect Rule 498A, the Commission Position and
Amended Registration Forms
    We are adopting, as proposed, conforming amendments to various
cross-references in our rules to reflect rule 498A, and the amendments
to Forms N-3, N-4, and N-6. These cross-references are reflected in our
amendments to: Rules 159A, 431, 482, 485, 497, and 498 under the
Securities Act; rules 11 and 405 of Regulation S-T; and rule 14a-16
under the Exchange Act. We are also adopting an amendment to rule 496
under the Securities Act acknowledging the Commission position
regarding certain discontinued contracts, as discussed in Section II.E.
Rescission of Form N-1
    We are rescinding, as proposed, Form N-1 under the Securities Act
and the Investment Company Act. We received no comments on this aspect
of the proposal. In 1984, the Commission prescribed Form N-1 as the
registration form to be used by open-end management investment
companies that are separate accounts of insurance companies for
registering under the Investment Company Act and for registering their
securities under the Securities Act.\973\ In 1985, Form N-3 superseded
Form N-1 for open-end management investment companies that are separate
accounts of insurance companies issuing variable annuity
contracts.\974\ As a result, only an open-end management investment
company that is a separate account of an insurance company offering
variable life insurance contracts would use Form N-1.\975\ Today, it
appears that all separate accounts issuing variable life insurance
contracts are organized as unit investment trusts. For that reason, we
do not believe any registrants continue to use Form N-1 and we are
therefore rescinding the form.\976\
---------------------------------------------------------------------------

    \973\ Form N-1 Amendments, Investment Company Act Release No.
14084 (Aug. 7, 1984) [49 FR 32058 (Aug. 10, 1984)].
    \974\ Forms N-3 and N-4 Adopting Release, supra note 29, at text
accompanying n.51.
    \975\ When Form N-3 was adopted, separate accounts funding
variable annuity contracts were permitted to continue to use Form N-
1 if they no longer offered the contracts to new purchasers. Forms
N-3 and N-4 Adopting Release, supra note 29, at text accompanying
n.51. The Commission is not aware of any such variable annuity
registrants that continue to use Form N-1.
    \976\ Based on a review of EDGAR filings, it appears that Form
N-1 has not been used in more than 20 years. See Proposing Release,
supra note 6, at n.629.
---------------------------------------------------------------------------

Technical Amendments to, and Rescission of, Certain Rules and Forms
Governing Variable Life Insurance Contracts and Variable Annuity
Contracts
    We are adopting, generally as proposed, certain technical
amendments to rules relating to variable life insurance contracts. As
noted in the Proposing Release, the detailed regulation of sales loads
and other fees and charges required by Sections 26 and 27 of the
Investment Company Act no longer applies to variable insurance
contracts as a consequence of the amendments to those sections enacted
by the National Securities Market Improvement Act of 1996
(``NSMIA'').\977\ In lieu of these detailed provisions, NSMIA
instituted a requirement that all charges on variable insurance
contracts, including sales charges, be reasonable ``in the aggregate.''
\978\
---------------------------------------------------------------------------

    \977\ See Proposing Release, supra note 6, at Section II.F; see
also National Securities Market Improvement Act of 1996 (Pub. L.
104-290, 110 Stat. 3416 (1996).
    \978\ See Section 26(f)(2) of the Act (requiring that all such
fees and charges ``in the aggregate [be] reasonable in relation to
the services rendered, the expenses expected to be incurred and the
risks assumed by the insurance company . . .'').
---------------------------------------------------------------------------

    The amendments we adopt in this document remove the rate regulatory
provisions in rules 6e-2 and 6e-3 (former rule 6e-3(T)) under the
Investment Company Act relating to variable life insurance contracts,
and make conforming changes to other related rules and forms.\979\ In
addition, these amendments remove certain minimum capital requirements
from Commission rules that insurers must satisfy for those insurers'
separate accounts to qualify for exemptions from the capital
requirements of Section 14(a) of the Investment Company Act.\980\ The
minimum capital requirements in those rules (i.e., that an insurer have
a minimum combined capital and surplus, if a stock company, or an
unassigned surplus, if a mutual company, of not less than $1,000,000)
are no longer necessary because NSMIA amended Section 26 of the
Investment Company Act to require that any insurer serving as a
variable life or variable annuity separate account depositor have at
least that level of combined capital and surplus or unassigned surplus,
as applicable.\981\
---------------------------------------------------------------------------

    \979\ These rules include rules 0-1, 6c-7, 6c-8, 26a-1, and 27i-
1 (former rule 27c-1) under the Investment Company Act. As part of
these technical amendments, we are also rescinding rules 26a-2, 27a-
1, 27a-2, 27a-3, 27d-2, 27g-1, and 27h-1 under the Investment
Company Act, and Forms N-27I-1 and N-27I-2 under the Investment
Company Act. Former rule 27c-1, relating to the redeemability of
variable contracts, has been renamed as rule 27i-1, since as a
result of NSMIA, the redeemability requirement addressed in the rule
is now described in Section 27(i) of the Investment Company Act.
Additionally, the proposal inadvertently omitted the elimination of
the provision in rule 11a-2 under the Investment Company Act that
specifies a numerical limit on the aggregate of deferred sales loads
applicable to the exchanged and acquired contracts involved in an
exchange. Therefore, for consistency with the other conforming
amendments that were proposed, we are also rescinding paragraph
(d)(2) of rule 11a-2. Finally, we are also amending rule 0-1 to
correct an outdated reference to 17 CFR 270.22d-3 (rule 22d-3),
which has since been renamed as 17 CFR 270.22d-2 (rule 22d-2).
    \980\ The provisions affected are (1) renumbered paragraphs
(b)(5) and (b)(14)(v) of rule 6e-2; (2) renumbered paragraphs (b)(6)
and (b)(15)(iv) of renamed rule 6e-3; and (3) rule 14a-2(a).
    \981\ See Section 26(f)(2)(B) of the Investment Company Act.
---------------------------------------------------------------------------

    We received three comments on these proposals \982\ and, with one
exception, the commenters supported the proposed amendments. One
commenter objected to removing numerical load limits that are currently
in place in two related rules, rules 6c-8 and 11a-2 under the
Investment Company Act.\983\ Rule 6c-8, among other things, provides an

exemption from the redeemability requirements for sales charges
deducted upon redemption or annuitization of all or a part of a
variable annuity owner's interest in a registered separate account, by
imposing a numerical limit on those charges.\984\ Rule 11a-2 allows a
separate account depositor to offer an exchange of variable annuity
contracts to an investor owning a variable annuity issued by an account
of the depositor without prior Commission review otherwise required by
Section 11 of the Investment Company Act, but imposes sales load limits
on both the acquired and exchanged contracts.\985\
---------------------------------------------------------------------------

    \982\ See VIP Working Group Comment Letter; CAI Comment Letter;
and IRI Comment Letter I.
    \983\ See VIP Working Group Comment Letter.
    \984\ See rule 6c-8(b)(1) (limiting the amount of sales load
deducted upon redemption, when added to any sales load previously
paid to nine percent of the purchase payments made to date).
    \985\ See rule 11a-2(c)(2) (limiting the amount of front-end
sales charges imposed on the exchanged and acquired contracts
together to no more than nine percent), and rule 11a-2(d)(2)
(limiting the sales charges imposed on the exchanged and acquired
contracts together that are deducted upon redemption to no more than
nine percent).
---------------------------------------------------------------------------

    This commenter asserted that NSMIA did not expressly touch on these
provisions and that the limits in these rules are necessary to prevent
excessive sales loads being imposed on the contracts.\986\ On this
point, we agree that the requirement in Section 27 that these
securities be redeemable was not removed by NSMIA, and rule 6c-8
includes the redeemability requirement of Section 27 as one of the
provisions from which the rule provides an exemption if the conditions
specified in the rule, including sales charge limitations, are
satisfied.
---------------------------------------------------------------------------

    \986\ See VIP Working Group Comment Letter.
---------------------------------------------------------------------------

    However, we decline to adopt the commenter's suggestion to retain
the numerical sales load limits in rules 6c-8 and 11a-2. In the
proposing releases for both rule 6c-8 and rule 11a-2, the Commission
made clear that each of the rule limitations on sales charges is
imposed as an ``analogue'' to the detailed rate regulation provisions
in Sections 26 and 27 of the Investment Company Act--provisions that
NSMIA subsequently made inapplicable to these contracts.\987\
Therefore, with the enactment of the ``reasonableness in the
aggregate'' standard for sales charges (considered together with all
other contract fees and charges),\988\ the numerical sales load limits
in rules 6c-8 and 11a-2 were rendered moot and we are removing such
limits as proposed.
---------------------------------------------------------------------------

    \987\ See Exemptive Relief For Separate Accounts to Impose A
Deferred Sales Load On Variable Annuity Contracts Participating in
Such Accounts and to Deduct from Such Contracts in Certain Instances
an Annual Fee for Administrative Services That is Not Prorated,
Investment Company Act Release No. 13048 (Feb. 28, 1983) [48 FR
9532, 9534 (Mar. 7, 1983)] (noting that the limitation on variable
annuity deferred sales loads in rule 6c-8 being proposed in the
release was ``analogous to the [numerical load limitation]
requirement in Section 27(a)(1)'' of the Investment Company Act).
See also Exchange Offers By Certain Registered Separate Accounts Or
Others The Terms of Which Do Not Require Prior Commission Approval,
Investment Company Act Release No. 12675 (Sept. 20, 1982) [47 FR
42374 (Sept. 27, 1982)] (noting that the front-end load limit in
paragraph (c)(2) of rule 11a-2 being proposed in the release was
``analogous to the [numerical load limitation] requirement in
Section 27(a)(1)'' of the Investment Company Act, and that the
numerical load limitation requirement on deferred sales loads in
paragraph (d)(2) of the rule was ``similar in theory to paragraph
(c)(2)'').
    \988\ Each registration statement for a variable contract must
contain the representation that the fees and charges deducted under
the contract satisfy this standard. See Section 26(f)(2)(A) of the
Investment Company Act. Form N-6 was adopted after NSMIA was enacted
and incorporates this requirement. See Form N-6, Item 36. Although
Forms N-3 and N-4 were adopted before NSMIA was enacted, registrants
have been providing the required fee representation, pursuant to a
staff statement published in 1996, together with the undertakings
required by Part C of each form. See Letter to Registrants from
Susan Nash, Assistant Director, Division of Investment Management,
SEC (Nov. 7, 1996). These forms are being amended to explicitly
incorporate the fee representation requirement. See supra note 872
and accompanying text.
---------------------------------------------------------------------------

    We are mindful of the regulatory concerns behind each of these
rules, which have remained following the enactment of NSMIA, but we do
not believe that it is necessary to retain specific numerical limits to
address those concerns. With respect to rule 6c-8, we acknowledge the
possibility that sales charges imposed upon redemption of variable
contracts could raise an issue as to whether such charges present an
undue burden on the contract's redeemability. In this regard, we affirm
the position taken by the Commission in adopting rule 6c-8 that the
rule provides no relief ``where the facts and circumstances indicate
the deduction [for a deferred sales load] is not intended to compensate
the issuer for [distribution] expenses.'' \989\ With respect to rule
11a-2, we note that the other protections contained in the rule against
the potential for abuse in variable annuity exchanges remain in place.
For example, the amended rule retains the provision that a separate
account depositor offering an exchange of variable annuity contracts
must give credit for any deferred sales loads paid on the original
variable annuity contract when calculating a deferred sales load on the
newly purchased variable annuity contract.\990\
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    \989\ See Exemptive Relief for Separate Accounts To Impose A
Deferred Sales Load And To Deduct in Certain Instances a Non-
Prorated Annual Fee for Administrative Services, Investment Company
Act Release No. 13406 (July 28, 1983) [48 FR 36097, 36098 (Aug. 9,
1983)], at 2. In addition, as noted above, these charges must
satisfy the ``reasonableness in the aggregate'' standard imposed on
all charges under a variable insurance contract by Section
26(f)(2)(A) of the Investment Company Act. Staff will continue
monitoring charges to guard against each of these concerns.
     Separately, one commenter requested that the redeemability
relief provided in rule 6c-8(d) for certain administrative charges
imposed on variable annuity contracts on withdrawal or surrender be
expanded to include relief for other charges, citing optional
benefits as an example of those charges. See CAI Comment Letter.
Because this request raises issues and considerations beyond the
scope of the technical amendments proposed in light of NSMIA, we
decline to adopt the requested amendments at this time.
    \990\ See amended rule 11a-2(d).
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Rescission of Rules 27e-1 and 27f-1 and Related Forms
    We are also rescinding, as proposed, rules 27e-1 and 27f-1 under
the Investment Company Act and related Forms N-27E-1 and N-27F-1. We
received no comments on this aspect of the proposal. These rules and
forms were promulgated to prescribe the form of notices required by
Sections 27(d) and (e) of the Investment Company Act relating to refund
and withdrawal rights of periodic payment plan certificate holders,
including those certificates not issued by insurance company separate
accounts. We are rescinding these rules and forms because since 2006,
Section 27(j) of the Investment Company Act has barred new certificate
issuances,\991\ and notice rights of holders of certificates issued
before then have expired.
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    \991\ Section 27(j) was enacted into law by the Military
Personnel Financial Services Protection Act (Pub. L. 109-290, 120
Stat. 127) (2006).
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Technical Amendments to Rule 8b-1
    We are also revising rule 8b-1 under the Investment Company Act to
remove references to 17 CFR 270.8b-32 (rule 8b-32 under the Investment
Company Act).\992\ Rule 8b-32 was recently rescinded in a separate
rulemaking pursuant to the Commission's implementation of the FAST
Act.\993\
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    \992\ See amended rule 8b-1.
    \993\ See FAST Act Adopting Release, supra note 501.
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G. Compliance Dates

    To provide a transition period after the effective date of the
amendments to give registrants sufficient time to update their
prospectuses and to prepare new registration statements under the
amendments, the Commission is adopting the following compliance and
other dates:

July 1, 2020......................  A registrant can rely on rule 498A
                                     to satisfy its obligations to
                                     deliver a variable contract's
                                     statutory prospectus by delivering
                                     a summary prospectus if the
                                     registrant is also in compliance
                                     with the amendments to Forms
                                     N[dash]3, N[dash]4, or N[dash]6 (as
                                     applicable).
                                    The Staff Letters will be withdrawn
                                     and the Commission position for
                                     eligible discontinued contracts
                                     will take effect.
January 1, 2022...................  All initial registration statements
                                     on Forms N[dash]3, N[dash]4, and
                                     N[dash]6, and all
                                     post[dash]effective amendments that
                                     are annual updates to effective
                                     registration statements on these
                                     forms, must comply with the rule
                                     and form amendments.
January 1, 2023...................  Registrants must submit to the
                                     Commission certain specified
                                     disclosures in Inline XBRL.

Use of Summary Prospectus
    As proposed, a registrant could rely on rule 498A to satisfy its
obligations to deliver a variable contract's statutory prospectus
beginning on the effective date of the rule and form amendments (July
1, 2020) provided that the registrant is also in compliance with the
amendments to Forms N-3, N-4, or N-6 (as applicable). We believe that
this date will allow registrants to begin using summary prospectuses in
advance of the compliance date discussed below, and will provide the
Commission staff with sufficient time to prepare to review filings
under the new summary prospectus framework.
    One commenter recommended that like the optional shareholder report
delivery framework under rule 30e-3, there should be a two-year
transition period during which investors would be (1) notified of the
transition from delivery of statutory prospectuses to summary
prospectuses, and (2) able to choose whether they preferred to receive
summary prospectuses or statutory prospectuses.\994\ Another commenter
recommended that advance notice was unnecessary, given that the
updating summary prospectus would serve as effective notice that the
type of disclosure document that an investor expects to receive has
changed.\995\ The commenter further stated that the updating summary
prospectus would provide information about how the previously provided
documents may be obtained, and ``a level of information about the
variable contract that may itself be sufficient for most investors.''
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    \994\ See Donnelley Financial Comment Letter I.
    \995\ See CAI Comment Letter (noting that under rule 30e-3, ``if
a notice was not required, an investor would have no indication that
the method of delivery of the documents he or she expects to receive
is changing.'').
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    We decline to build these requirements into the final rule as we
believe that given the documents at issue (i.e., the prospectus as
opposed to the shareholder report) and the contents of the documents
permitted to be transmitted (i.e., a summary prospectus under rule 498A
versus a notice under rule 30e-3), the more appropriate analogous
framework is that of the mutual fund summary prospectus. Under that
framework as well as the variable product summary prospectus framework
we are adopting in this document, investors receive a summary
prospectus and can request a print or electronic copy of the current
statutory prospectus, but investors cannot elect to receive statutory
prospectuses instead of summary prospectuses.
Compliance With New Form Requirements
    All initial registration statements on Forms N-3, N-4, and N-6, and
all post-effective amendments that are annual updates to effective
registration statements on these forms, filed on or after January 1,
2022 are required to comply with the final rule and form
amendments.\996\ We believe that this period will give registrants
sufficient time to update their prospectuses and to prepare new
registration statements under the amendments.
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    \996\ As part of the proposal, the Commission proposed an 18-
month compliance period. See Proposing Release, supra note 6, at
Section II.G. One commenter supported this compliance period. See
CAI Comment Letter (``the 18-month compliance period for updating
variable product registration statements is necessary and
appropriate''). Another commenter, in recommending that the
Commission mandate use of the summary prospectus, recommended that
there be a rolling effective date based on the size of the company
starting 24 months after publication. See AARP Comment Letter.
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    Although post-effective amendments to existing registration
statements filed to comply with the amendments to Forms N-3, N-4, and
N-6 should be filed under Securities Act rule 485(a),\997\ in
appropriate circumstances, we will consider requests by registrants
with respect to existing variable contracts to file these post-
effective amendments pursuant to Securities Act rule
485(b)(1)(vii).\998\ Appropriate circumstances may include, for
example, situations where a registrant has previously filed under rule
485(a) post-effective amendments for a number of variable contracts
that implement the new requirements, and the staff determines not to
review additional such filings by the registrant in light of the
staff's experience with the previously filed amendments.
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    \997\ A post-effective amendment filed under rule 485(a) [17 CFR
230.485(a)] generally becomes effective either 60 days or 75 days
after filing, unless the effective date is accelerated by the
Commission. A post-effective amendment filed under rule 485(b) may
become effective immediately upon filing. A post-effective amendment
may be filed under rule 485(b) if it is filed for one or more
specified purposes, including to make nonmaterial changes to the
registration statement. A post-effective amendment filed for any
purpose not specified in rule 485(b) generally must be filed
pursuant to rule 485(a).
    \998\ Under rule 485(b)(1)(vii), the Commission may approve the
filing of a post-effective amendment to a registration statement
under rule 485(b) for a purpose other than those specifically
enumerated in the rule. The Commission's staff has been delegated
the authority to approve registrants' requests under rule
485(b)(1)(vii). 17 CFR 200.30-5(b-3)(1).
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Inline XBRL
    In a change from the proposal, we are requiring that registrants
must submit to the Commission certain specified disclosures in Inline
XBRL in specified filings made on or after January 1, 2023. This will
provide registrants an additional year after the January 1, 2022
compliance date when all initial registration statements and post-
effective amendments must comply with the final rule and form
amendments.
    The Commission proposed to require variable contract registrants to
submit to the Commission certain specified disclosures using the Inline
XBRL format within the same 18-month compliance period proposed for
compliance with the new form requirements. While one commenter urged us
to move forward expeditiously with the Inline XBRL requirement to
support informed investment decision-making,\999\ other commenters
requested that the Inline XBRL compliance date be extended beyond the
proposed 18-month compliance period to provide sufficient time to adapt
to the new Inline XBRL requirements.\1000\
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    \999\ See CFA Comment Letter.
    \1000\ See IRI Comment Letters I and II; XBRL US Comment Letter;
CAI Comment Letter.
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    One commenter recommended allowing at least another 12 months after
the 18-month compliance date for the new form requirements (or 30
months total) to give filers sufficient time to adapt to the new Inline
XBRL requirements and to enable the development of vendor systems and
client self-service tools that can generate Inline XBRL tagged
documents from the

document content.\1001\ Another commenter recommended extending the
Inline XBRL compliance period to 24 months.\1002\ This commenter stated
that insurers will face greater challenges in making the transition
than mutual funds because variable contract registrants have never
filed in XBRL and will need extra time to identify an XBRL preparation
solution and learn how to accurately tag their reported data. This
commenter also noted that, unlike mutual funds, some large insurers
currently use modules under EDGARLink to help prepare registration
statement filings on EDGAR,\1003\ and stated that because Type 1 and
type 2 modules are currently only supported by HTML format, while
filings using Inline XBRL require XHTML format, any future availability
of modules would require upgrades to EDGAR.\1004\
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    \1001\ See IRI Comment Letter I (noting that the phased-in
compliance period for tagging the mutual fund risk/return summary in
Inline XBRL allowed two years after the effective date of the
amendments for large fund groups, and three years for small fund
groups).
    \1002\ See XBRL US Comment Letter.
    \1003\ EDGARLink is an application that is used by electronic
filers to facilitate the preparation, validation, and transmission
of electronic format documents to EDGAR. EDGARLink works
interactively with EDGAR and is accessible on the Commission's
website. Modules are partial or complete documents that are intended