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    \470\ Proposed Item 9(c) of Form N-3; proposed Item 8(c) of Form
N-4; proposed Item 8(c) of Form N-6.
    \471\ See Instruction 3(d) to proposed Item 3 of Forms N-3, N-4,
and N-6.
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    We are also proposing to modify the instruction to the current
subparagraph in each form relating to contract or registrant changes to
require disclosure of the substitution of one portfolio company for
another pursuant to section 26(c) of the Investment Company Act.\472\
This amendment is intended to formalize the Commission's long-standing
position that investors should be put on notice of the possibility that
an insurer may substitute one portfolio company for another portfolio
company.\473\
---------------------------------------------------------------------------

    \472\ See Instruction to proposed Item 9(d) of Form N-3;
Instruction to proposed Item 8(d) of Form N-4; Instruction to
proposed Item 8(d) of Form N-6.
    \473\ See Changes in Investment Company Act Made by 1970
Amendments Act, Investment Company Act Release No. 6506 [36 FR 9130
(May 5, 1971)] (depositors of UITs should notify investors of the
possibility that underlying securities may be substituted).
---------------------------------------------------------------------------

    We are also proposing to eliminate current subparagraph (d) in
Forms N-3 and N-4, which requires a description of how investor
inquiries may be made. This item would duplicate information that would
be required to appear on the back cover page of the prospectus pursuant
to proposed Item 1(b)(1).
    Finally, with respect to Forms N-3 and N-4, we are proposing to
relocate disclosures regarding limitations on classes of purchasers
from the cover page of the prospectus \474\ to the item requiring the
general description of contracts.\475\ This proposed revision mirrors
Item 6(e) of current Form N-6, would help streamline cover page
disclosure, and would permit registrants to describe this limitation
more fully than if it had to appear on the cover page (which would
necessarily entail space constraints).\476\
---------------------------------------------------------------------------

    \474\ Item 1(a)(iv) of current Forms N-3 and N-4.
    \475\ Proposed Item 9(e) of Form N-3; proposed Item 8(e) of Form
N-4.
    \476\ See Item 6(e) of current Form N-6. Like Form N-6, Form N-
1A also requires disclosure of limitations on the purchasers to whom
the Contracts are offered further back in the prospectus, and not on
the cover page. See Items 6 and 11 of Form N-1A.
---------------------------------------------------------------------------

    We request comment on the proposed form amendments relating to the
general description of the contracts, and specifically on the following
issues:

     Should we require the prospectus to include a
description of the obligations under the contract that the insurer's
general account funds? Should the proposed requirement be modified
in any way?
     Should we require disclosure of the substitution of one
portfolio company for another pursuant to section 26(c) of the
Investment Company Act? If not, why not? How should such disclosure
be provided to investors?
     Should we make any other changes to the form regarding
required prospectus disclosures describing the contract?
i. Annuity Period (Item 10 of Form N-3, Item 9 of Form N-4)
    We propose to amend Item 9 of current Form N-3 and Item 8 of
current Form N-4 (which we would re-designate as Items 10 and 9,
respectively) to include a new requirement that a registrant state, if
applicable, that the investor will not be able to withdraw any contract
value amounts after the annuity commencement date.\477\ While the
proposed ``Overview'' section of the prospectus would contain similar
information,\478\ the new item requirement would provide investors with
more complete disclosure about a key aspect of annuitization that we
believe investors often misunderstand in the context of a more detailed
discussion about the annuity benefits under the contract.
---------------------------------------------------------------------------

    \477\ Proposed Item 10(g) of Form N-3; proposed Item 9(g) of
Form N-4.
    \478\ Proposed Item 2(c)(2) of Forms N-3 and N-4.
---------------------------------------------------------------------------

    We request comment generally on the proposed form amendments
relating to the annuity period, and specifically on the following
issues:

     Should we require the prospectus to include a statement
that the investor will not be able to withdraw any contract value
amounts after the annuity commencement date? Should the proposed
requirement be modified in any way?
     Should we make any other changes to the form regarding
required prospectus disclosures relating to the annuity period
(e.g., to specifically require a registrant to state directly, as
applicable, that all contract benefits terminate upon
annuitization)?
j. Standard Death Benefit (Item 11 of Form N-3, Item 10 of Forms N-4
and N-6)
    We propose to amend Item 10 of current Form N-3, Item 9 of current
Form N-4, and Item 8 of current Form N-6 (which we would re-designate
as Items 11, 10, and 10, respectively) to clarify that the current
disclosures required by the item would only apply to the standard death
benefit under the contract.\479\ Registrants would include prospectus
disclosure about optional death benefits (as well as standard and
optional living benefits) pursuant to the proposed new Item 12 to Form
N-3, and proposed new Item 11 to Forms N-4 and N-6, as discussed below.
---------------------------------------------------------------------------

    \479\ Proposed Item 11 of Form N-3; proposed Item 10 of Forms N-
4 and N-6.
---------------------------------------------------------------------------

    To assist variable annuity investors in better understanding the
operation of the standard death benefit, we are also proposing to amend
Forms N-3 and N-4 to specifically require registrants to summarize the
operation of the standard death benefit.\480\ As discussed above, these
disclosures would also be required in any variable annuity initial
summary prospectus, and would serve as the counterpart to similar
disclosures that would be included in variable life initial summary
prospectuses.\481\
---------------------------------------------------------------------------

    \480\ Proposed Item 11(a) of Form N-3; proposed Item 10(a) of
Form N-4. When describing the standard death benefit, registrants
would discuss the amount of the benefit and how the benefit amount
may vary, the circumstances under which the value of the benefit may
increase or be reduced (including the impact of withdrawals), and
how the benefit may be terminated.
    \481\ See proposed rule 498A(b)(5)(iii); see also supra section
II.A.1.c.ii(c).
---------------------------------------------------------------------------

    We request comment generally on the proposed form amendments
relating to the standard death benefit, and specifically on the
following issues:

     Should we require other disclosures regarding the
operation of the standard death benefit? Should we make any other
changes to the form regarding required prospectus disclosures
relating to the standard death benefit?
     As proposed, optional death benefit disclosures would
be provided with disclosures of other optional benefits available
under the contract. Instead, should we permit or require optional
death benefits disclosures to accompany standard death benefit
disclosures?
k. Other Benefits Available Under the Contract (Item 12 of Form N-3,
Item 11 of Forms N-4 and N-6)
    We propose to add a new item to each registration form that would
require a registrant to discuss any standard living benefits, as well
as all optional benefits (e.g., death benefit, accumulation benefit,
withdrawal benefit, long-term care benefit, etc.) available under the
contract.\482\ Optional benefits and standard living benefits are now a
significant aspect of most variable annuity contracts (as well as most
variable life insurance contracts). While we understand that insurers
generally include disclosure about optional benefits and standard
living benefits in their prospectuses, these disclosures have no
standard content or presentation because there is no current form
requirement regarding optional benefits.
---------------------------------------------------------------------------

    \482\ Proposed Item 12 of Form N-3; proposed Item 11 of Forms N-
4 and N-6.
---------------------------------------------------------------------------

    As discussed above, subparagraph (a) of the proposed new item would
require a tabular summary overview of each benefit available under the
contract (other than the standard death benefit).\483\ This tabular
summary would also be required in any initial summary prospectus.\484\
---------------------------------------------------------------------------

    \483\ The summary table would include the name of each benefit,
its purpose, whether the benefit is standard or optional, associated
fees (as a stated percentage of contract value, benefit base, etc.),
and a brief description of limitations or restrictions. See supra
section II.A.1.c.ii(d).
    \484\ See proposed rule 498A(b)(5)(iv); see also supra section
II.A.1.c.ii(d).
---------------------------------------------------------------------------

    Subparagraphs (b) and (c) of the proposed new item would require
the statutory prospectus to include narrative disclosures that would
provide more detailed information regarding each of the benefits
presented in the tabular summary. As proposed, a registrant would be
required to include a brief description of each benefit (other than the
standard death benefit) offered under the contract,\485\ and a brief
description of any limitations, restrictions and risks associated with
each benefit.\486\
---------------------------------------------------------------------------

    \485\ This brief description would be required to include a
discussion of: (1) Whether the benefit is standard or elected; (2)
the operation of the benefit, including the amount of the benefit
and how the benefit amount may vary, the circumstances under which
the value of the benefit may increase or be reduced (including the
impact of withdrawals), and how the benefit may be terminated; (3)
fees and costs, if any, associated with the benefit; and (4) how the
benefit amount is calculated and payable, and the effect of choosing
a specific method of payment on calculation of the benefit. See
proposed Item 12(b) of Form N-3; proposed Item 11(b) of Forms N-4
and N-6.
    \486\ For example, this could include restrictions on which
portfolio companies may be selected, risk of reduction or
termination of benefit resulting from excess withdrawals, etc. See
proposed Item 12(c) of Form N-3; proposed Item 11(c) of Forms N-4
and N-6.
---------------------------------------------------------------------------

    Some benefits offered by a contract may have complicated terms that
do not readily lend themselves to being fully described in a tabular
summary. Therefore, the proposed narrative disclosures are intended to
complement the tabular summary presentation by allowing registrants to
discuss the benefits, as well as the limitations, risks, and
restrictions associated with each, in more detail without being
constrained by the limitations of a tabular presentation. The
requirement to discuss the limitations, risks, and restrictions
associated with each benefit would also help ensure that these aspects
of contract benefits--along with the value they could provide to
investors--are discussed in a standardized manner among contract
prospectuses.

    We also propose to include an instruction directing registrants in
responding to proposed subparagraphs (b) and (c) to provide one or more
examples illustrating the operation of each benefit in a clear,
concise, and understandable manner.\487\ This instruction is intended
to further assist investors in understanding the other benefits offered
under the contract.
---------------------------------------------------------------------------

    \487\ See Instruction to proposed Item 12 of Form N-3;
Instruction to proposed Item 11 of Forms N-4 and N-6.
---------------------------------------------------------------------------

    We request comment generally on the proposed new form requirements
relating to other benefits under the contract, and specifically on the
following issues:

     Would the disclosures by the proposed new item enhance
the ability of investors to understand any standard living benefit,
as well as additional options available under the contract?
     Should we require additional disclosures or otherwise
modify the proposed requirements? For example, while the proposed
new item would encompass optional death benefits, as well as
standard and optional living benefits, should our registration forms
require separate and more tailored disclosures for any of these
benefit categories?
     Should the required disclosures be presented in a
different manner? Should the statutory prospectus include both a
tabular summary overview as well as narrative disclosures? Should
any of the disclosures specifically required in the narrative
disclosure also be required in the tabular summary?
l. Purchases and Contract Value (Item 13 of Form N-3, Item 12 of Form
N-4)
    We propose to amend Item 11 of Form N-3 and Item 10 of current Form
N-4 (which we would re-designate as Items 13 and 12, respectively) to
re-structure the disclosure item and make other minor revisions that
would not substantively change current disclosure requirements.\488\ As
discussed above, variable annuity initial summary prospectuses would
include the proposed subparagraph (a) disclosures, which would require
registrants to briefly describe the procedures for purchasing a
contract, and would serve as the counterpart to similar disclosures
that would be included in variable life initial summary
prospectuses.\489\
---------------------------------------------------------------------------

    \488\ Proposed Item 13 of Form N-3; proposed Item 12 of Form N-
4.
    \489\ See proposed rule 498A(b)(5)(v); see also supra section
II.A.1c.ii(e).
---------------------------------------------------------------------------

    We request comment generally on the proposed form requirements
relating to purchases under the contract, including whether we should
require any other disclosures with respect to purchases, or otherwise
modify existing requirements.
m. Surrenders and Withdrawals (Item 14 of Form N-3, Item 13 of Form N-
4, Item 12 of Form N-6)
    We propose to amend Item 12 of current Form N-3 and Item 11 of
current Form N-4 (which we would re-title and re-designate as Items 14
and 13, respectively) to reflect the more up-to-date requirements of
the parallel item of Form N-6 and standardize these disclosure
requirements across variable product registration forms.\490\
---------------------------------------------------------------------------

    \490\ See Item 9 of current Form N-6.
---------------------------------------------------------------------------

    Specifically, subparagraph (a) of the proposed item would
consolidate the current disclosure requirements regarding surrenders
and delays in effecting requests for surrender and provide a high-level
overview of how an investor can surrender (or partially surrender or
make withdrawals from) a contract, including any limits on the ability
to surrender, how the proceeds are calculated, and when they are
payable.\491\ As discussed above, the initial summary prospectus would
include the proposed subparagraph (a) disclosures.\492\
---------------------------------------------------------------------------

    \491\ Proposed Item 14(a) of Form N-3; proposed Item 13(a) of
Form N-4.
     We are proposing to eliminate Item 12(b) of current Form N-3
and Item 11(b) of current Form N-4 (requirement to disclose any
restrictions on redemption that may apply if the registrant offers
the contracts in connection with the ``Texas Optional Retirement
Program'') and Item 12(c) of current Form N-3 and Item 11(c) of
current Form N-4 (requirement to briefly describe whether a request
for redemption may not be honored for a period of time after an
investor makes a purchase payment). We believe that these
requirements are generally encompassed by the proposed requirements
(discussed in the following paragraph) to disclose any limits on the
ability to surrender, including any limits on the availability of
partial surrenders and withdrawals.
    \492\ See proposed rule 498A(b)(5)(vii); see also supra section
II.A.1.c.ii(g).
---------------------------------------------------------------------------

    Subparagraphs (b) through (d) would require additional information
related to the operation of partial surrenders and withdrawals under
the contract, including: (1) Whether and under what circumstances they
are available; (2) how they will affect a contract's cash value, death
benefit(s), and/or any living benefits; and (3) how partial surrenders
and partial withdrawals will be allocated among the sub-accounts.\493\
---------------------------------------------------------------------------

    \493\ Proposed Item 14(b) through (d) of Form N-3; proposed Item
13(b) through (d) of Form N-4. These disclosure requirements would
conform to those that appear in the parallel provisions of current
Form N-6. See Item 9(b) through (d) of current Form N-6.
---------------------------------------------------------------------------

    Subparagraph (e) would require registrants to describe any
provision for involuntary redemptions and the reasons for such
provision.\494\ While Item 12(d) of current Form N-3 and Item 11(d) of
current Form N-4 specifically also require a description of any
provision for lapse, we are proposing to eliminate the requirement to
discuss lapse provisions because contract lapse is more relevant in the
context of variable life products.\495\
---------------------------------------------------------------------------

    \494\ Proposed Item 14(e) of Form N-3; proposed Item 13(e) of
Form N-4.
    \495\ See supra note 444 and accompanying text.
---------------------------------------------------------------------------

    Subparagraph (f), like Item 12(e) of current Form N-3 and Item
11(e) of current Form N-4, would require the disclosure of any
revocation rights. However, to provide additional information relating
to an investor's revocation rights, the proposed item would also
specifically require: (1) A description of how the amount refunded is
determined; (2) the method for crediting earnings to purchase payments
during the free look period; and (3) whether investment options are
limited during the free look period.\496\ We believe these disclosures
are particularly important because the free look is typically the only
time the investor may leave the contract for multiple years after
investing in the contract without paying significant surrender fees and
penalties.\497\
---------------------------------------------------------------------------

    \496\ These proposed disclosure requirements would conform to
those that appear in the parallel provisions of current Form N-6.
See Item 9(e) of current Form N-6.
    \497\ See supra paragraphs accompanying note 65.
---------------------------------------------------------------------------

    We request comment generally on the proposed form requirements
relating to surrenders and withdrawals, and specifically on the
following issues:

     Do commenters agree with our proposed approach of
generally modeling disclosures regarding surrenders and withdrawals
on similar disclosures required by Form N-6? Are there specific
disclosures in Form N-6 that would be inappropriate or less relevant
for N-3 and N-4 registrants? For example, although current Form N-3
and Form N-4 use the terms ``redemptions'' and ``partial
redemptions,'' proposed Form N-3 and proposed Form N-4 would use the
terms ``surrender'' and ``partial surrender.'' We understand these
terms are synonymous, although we have chosen the latter terms to
reflect the same terminology used in Form N-6. Is there any reason
why Form N-3 and Form N-4 should use different terminology other
than what is included in Form N-6? Alternatively, are there specific
disclosures that would be more appropriate or relevant for N-3 or N-
4 registrants but are not currently required by Form N-6?
     Would the proposed amendments help investors to better
understand the procedures and impact of surrenders and withdrawals,
including issues relating to partial surrenders and withdrawals,
sub-account allocation, involuntary redemption, and investors'
revocation rights under the contract?
     Should we require any other disclosures with respect to
surrenders and withdrawals, or otherwise modify existing
requirements? For example, should the proposed

requirements to disclose any limits on the ability to surrender,
including any limits on the availability of partial surrenders and
withdrawals, specifically include any of the disclosure requirements
that appear currently in Form N-3 and Form N-4, and that we believe
the proposed disclosure requirements encompass? \498\
---------------------------------------------------------------------------

    \498\ See supra note 491 and accompanying text.
---------------------------------------------------------------------------

n. Loans (Item 15 of Form N-3, Item 14 of Form N-4, Item 13 of Form N-
6)
    We are proposing to amend Form N-6 to consolidate required
prospectus and SAI disclosures relating to contract loans \499\ into a
single item in the prospectus.\500\ Given that investors would receive
summary information relating to loan provisions in the Overview section
of the statutory prospectus (and initial summary prospectus), we
believe that investors would benefit from having more complete
information on contract loans in a single location.
---------------------------------------------------------------------------

    \499\ See Items 10 and 23 of current Form N-6.
    \500\ Proposed Item 13 of Form N-6.
---------------------------------------------------------------------------

    Specifically, a registrant would be required to briefly describe:
(1) The availability of loans; (2) any limitations on that availability
(e.g., a prohibition on loans during the first contract year); (3)
interest provisions; (4) the effects of loans on contract value and
death benefits; (5) any other effects that a loan could have on the
contract (e.g., the effect of a contract loan in excess of contract
value); and (6) loan procedures.
    We understand that variable annuities, like variable life insurance
contracts, often offer investors the opportunity to borrow money
against the cash value of their contract, and that insurers and
intermediaries frequently promote this contract feature in their sales
of variable annuities. Therefore, we are also proposing to add new Item
15 to Form N-3 and new Item 14 to Form N-4, which would require similar
prospectus disclosure about the availability and terms of loans under
the contract.\501\
---------------------------------------------------------------------------

    \501\ Proposed Item 15 of Form N-3; proposed Item 14 of Form N-
4.
---------------------------------------------------------------------------

    We request comment generally on the proposed new form requirements
relating to loans under the contract, and specifically on the following
issues:

     Should we require the prospectus to include a
discussion of contract loan provisions? Would this disclosure be
more appropriate only in the context of variable life insurance
products?
     Will the information disclosed to investors pursuant to
the proposed new form item be helpful to investors in understanding
contract loan provisions, including any attendant risks? Should we
require disclosure of additional information related to loan
provisions, or otherwise modify the proposed requirements?
o. Taxes (Item 16 of Form N-3, Item 15 of Forms N-4 and N-6)
    We propose to amend Item 13 of current Form N-3 and Item 12 of
current Form N-4 (which we would re-designate as Items 16 and 15,
respectively) to reflect the more up-to-date presentation and
disclosure requirements of the parallel provisions of Form N-6.\502\ As
amended, registrants would continue to (a) describe the material tax
consequences to the investor and beneficiary of buying, holding,
exchanging, or exercising rights under the contract, (b) identify the
types of qualified plans for which the contract is intended to be used,
and (c) describe the effect, if any, of taxation on the determination
of cash values or sub-account values.\503\
---------------------------------------------------------------------------

    \502\ See Item 12 of current Form N-6.
    \503\ Proposed Item 16 of Form N-3; proposed Item 15 of Form N-
4.
---------------------------------------------------------------------------

    However, the amendments would specifically limit required
disclosures to ``material'' tax consequences. While the instructions to
subparagraph (a) of Item 13 of current Form N-3 and Item 12 of current
Form N-4 provide that the ``disclosure need not include detailed
description of applicable law,'' we are proposing to eliminate this
instruction in light of the proposed language limiting disclosures to
``material'' consequences.
    We do not expect any of the proposed amendments to this item to
significantly alter current disclosure obligations. We request comment
generally on these amendments.
p. Legal Proceedings (Item 17 of Form N-3, Item 16 of Forms N-4 and N-
6)
    We propose to amend Item 14 of current Form N-3 and Item 13 of
current Form N-4 (which we would re-designate as Items 17 and 16,
respectively) to reflect the more up-to-date presentation and
disclosure requirements of the parallel provisions of Form N-6.\504\
---------------------------------------------------------------------------

    \504\ See Item 13 of current Form N-6.
---------------------------------------------------------------------------

    As currently required by Form N-6, the proposed amendments would
newly require registrants to: (1) Provide a description of the factual
basis alleged to underlie the proceeding, and the relief sought, and
(2) in addition to describing proceedings that a governmental authority
has instituted, include information about proceedings ``known to be
contemplated'' by governmental authorities.\505\ The proposed
amendments would also eliminate the requirement to discuss pending
legal proceedings against any subsidiary of the registrant to mirror
Form N-6's (and Form N-1A's) parallel provision and provide consistency
across forms, which we believe is particularly appropriate in the
context of separate account registrants, which are unlikely to have
subsidiaries.\506\
---------------------------------------------------------------------------

    \505\ Proposed Item 17 of Form N-3; proposed Item 16 of Form N-
4.
    \506\ Id.; see also Item 13 of current Form N-6; Item 10(a)(3)
of Form N-1A.
---------------------------------------------------------------------------

    These amendments are not expected to significantly alter current
disclosure obligations. We request comment generally on these
amendments.
q. Financial Statements (Item 18 of Form N-3, Item 17 of Forms N-4 and
N-6)
    We propose to add new Item 18 of Form N-3 and new Item 17 to Form
N-4, which would require a statement, under a separate caption, of
where any required financial statements of the registrant and the
depositor may be found if they are not included in the prospectus.\507\
A registrant would also briefly explain how investors may obtain any
financial statements not provided in the SAI.\508\ These proposed
disclosure requirements would conform with a similar requirement
included in Item 14 of current Form N-6.
---------------------------------------------------------------------------

    \507\ Proposed Item 18 of Form N-3; proposed Item 17 of Form N-
4.
    \508\ Id.
---------------------------------------------------------------------------

    The form's proposed General Instructions would provide that
registrants are free to include in the prospectus financial statements
required to be in the SAI, and may also include in the SAI financial
statements that may be placed in Part C.\509\ The proposed new item is
intended to assist investors in finding and obtaining any financial
statements that have been moved at the registrant's discretion from the
location where they would otherwise be provided in the registration
statement.\510\
---------------------------------------------------------------------------

    \509\ See proposed General Instruction C.3.(b) to Forms N-3, N-
4, and N-6.
    \510\ A similar requirement to this proposed new item appears in
paragraph (c) of Item 4 of current Form N-3 and paragraph (b) of
current Form N-4. As discussed below, we propose to move the
majority of the disclosure that current Item 4 of each of these
forms would require to the contract SAI. See infra notes 545 through
554 and accompanying text (discussion of Accumulation Unit Value
tables).
---------------------------------------------------------------------------

    We request comment generally on the proposal to include new Item 18
of Form N-3 and new Item 17 of Form N-4, and specifically on the
following issues:

     To what extent do registrants currently make available
the financial statements of the registrant and depositor in
locations other than the prospectus and/or SAI, as our

registration forms currently permit? What are the advantages or
disadvantages of providing flexibility to registrants as to the
location of the registrant's and depositor's financial statements?
     Would the proposed item in the prospectus regarding the
availability of financial statements assist investors in locating
those materials?
r. Appendix: Portfolio Companies/Investment Options Available Under the
Contract (Item 19 of Form N-3, Item 18 of Forms N-4 and N-6)
    We propose to add a new disclosure item to each registration form
(proposed Item 19 of Form N-3, and proposed Item 18 of Forms N-4 and N-
6), which would require registrants to include as an appendix to the
prospectus a table summarizing information about the portfolio
companies available under the contract. This table would appear under
the heading ``Portfolio Companies Available Under the Contract'' and
would consolidate certain summary information about each portfolio
company into a concise, easy-to-read tabular presentation, as discussed
in more detail above.\511\ This would replace certain other disclosure
requirements, on the prospectus cover page \512\ and elsewhere in the
prospectus,\513\ relating to the contract's portfolio companies or
investment options.
---------------------------------------------------------------------------

    \511\ See supra discussion at note 192 and accompanying and
following text.
    \512\ See Item 1(a)(v) of current Form N-3 (requiring outside
cover page to identify the type of separate account or a brief
statement of the registrant's investment objectives); Item
1(a)(viii) of current Form N-4 (requiring the outside cover page of
the prospectus to include the names of portfolio companies).
    \513\ See Item 5(c) and (d) of current Form N-3 (requiring
registrants to concisely describe the investment objectives and
policies of the registrant, and providing instructions for
disclosure regarding the registrant's investment policies); Item
5(c) of current Form N-4 (requiring registrants to briefly describe
each portfolio company, including its name, its type or a brief
statement concerning its investment objectives, and its investment
adviser); Item 4(c) of current Form N-6 (requiring registrants to
briefly describe the registrant's sub-accounts and each portfolio
company, including its name, its type or a brief statement
concerning its investment objectives, and its investment adviser and
any sub-adviser).
---------------------------------------------------------------------------

    The appendix would provide a tabular summary overview of portfolio
companies available under the contract that is designed to improve the
ability of investors to understand, evaluate, and compare those
portfolio companies. If the availability of one or more portfolio
companies varies by benefit offered under the contract, registrants
would be required to include as another appendix a separate table
indicating which portfolio companies were available under each of those
benefits.\514\ These same disclosures would also appear in the initial
summary prospectuses and updating summary prospectus,\515\ except for
variations due to the more limited scope of the initial summary
prospectus (which would only describe one contract) in contrast to the
updating summary prospectus and statutory prospectus (which could
describe more than one contract).\516\
---------------------------------------------------------------------------

    \514\ See supra note 195 and accompanying and following text. A
reference in this section to ``appendix'' includes any additional
appendix (to the extent a registrant would be required to include
one).
    \515\ See proposed rule 498A(b)(5)(ix); proposed rule
498A(c)(6)(iv); see also supra sections II.A.1.c.ii(i),
II.A.2.c.ii(c).
    \516\ As discussed above, an initial summary prospectus could
only describe a single contract that the registrant currently offers
for sale, whereas the updating summary prospectus and statutory
prospectus could describe multiple contracts under the conditions of
the proposed General Instructions to Forms N-3, N-4, and N-6. See
supra sections II.A.1.b, II.A.2.b.
---------------------------------------------------------------------------

    Because we understand that certain variable contracts registered on
Form N-3 have very few investment options (and sometimes have only one
investment option), we recognize that the proposed appendix could have
limited utility for certain Form N-3 registrants and their investors.
For this reason, for variable contracts registered on Form N-3, we
propose that registrants could omit the appendix and instead provide
the more detailed disclosures about the investment options offered
under the contract that proposed Item 20 of Form N-3 would
require.\517\ For Form N-3 registrants, the appendix would be required
to appear in a statutory prospectus only if the appendix were included
in a summary prospectus.\518\
---------------------------------------------------------------------------

    \517\ See Instruction 1(a) to proposed Item 19 of Form N-3; see
also proposed rule 498A(b)(5)(ix), (c)(6)(iv) (the appendix also
could be omitted from the summary prospectus); infra paragraphs
following note 525 (discussing proposed Item 20 of Form N-3).
    \518\ See Instruction 1(a) to proposed Item 19 of Form N-3; see
also supra text following note 192 and accompanying note 241.
---------------------------------------------------------------------------

    The same legends that precede the appendix in the summary
prospectus would generally also precede the appendix in the statutory
prospectus.\519\ Under proposed Form N-3, the legend that would precede
the appendix would be required to state, in part, as follows:
``Performance reflects contract fees and expenses that are paid by each
investor'' (in contrast, the parallel legend that Forms N-4 and N-6
would require would state that performance does not reflect contract
fees and expenses that are paid by each investor). This difference is
intended to reflect the fact that insurance charges are inherently
reflected in the performance of investment options for contracts
registered on Form N-3, since those investment options are offered as
part of the variable contract. The performance of portfolio companies
offered under contracts registered on Forms N-4 and N-6 does not
reflect insurance charges, because those portfolio companies are
separately registered as entities distinct from the variable contract.
Additionally, only registrants on Forms N-4 and N-6 that chose to rely
upon proposed rule 498A(j) to satisfy their portfolio company
prospectus delivery obligations would be required to include in the
appendix an internet address to a landing page, toll-free telephone
number, and email address that investors could use to obtain or request
portfolio company statutory and summary prospectuses.\520\
---------------------------------------------------------------------------

    \519\ See supra section II.A.1.c.ii(i). The sole exception
involves registrants on Form N-3 that use a summary prospectus that
includes the disclosures required by proposed Item 19. In this case,
the portion of the legend in the summary prospectus explaining how
more information about the investment options may be obtained would
not be required to be included in the statutory prospectus. See note
520 and accompanying text.
    \520\ See Instruction 1(b) to proposed Item 18 of Forms N-4 and
N-6 (``Registrants not relying upon rule 498A(j) under the
Securities Act [17 CFR 230.498A(j)] with respect to the Portfolio
Companies that are offered under the Contract may, but are not
required to, provide the next-to-last sentence of the first
paragraph of the introductory legend to the table regarding online
availability of the prospectuses.'').
    Registrants on Form N-3 that use a summary prospectus that
includes the disclosures required by proposed Item 19 of Form N-3
would be required to include in that appendix an introductory legend
explaining how more information about the investment options may be
obtained. See proposed rule 498A(b)(5)(ix) and supra notes 196-199
(discussing legend in initial summary prospectus); proposed rule
498A(c)(6)(iv) and note 240 (discussing legend in updating summary
prospectus). However, that legend would not be required to be
included in the statutory prospectus, because the statutory
prospectus would already include those disclosures pursuant to
proposed Item 20 (which requires more detailed disclosure regarding
each of the investment options available under the contract). See
Instruction 1(a) to proposed Item 19 of Form N-3; proposed Item 20
of Form N-3.
---------------------------------------------------------------------------

    We request comment generally on the proposed appendix requirement,
and specifically on the following issues:

     Should we require these disclosures to be included in
the statutory prospectus? Are the content requirements for this
proposed item appropriate for inclusion in the statutory prospectus?
     Our proposal would generally require registrants to
include the same information in the proposed appendix regarding
portfolio companies in the statutory prospectus and in the initial
summary prospectus and updating summary prospectus.\521\ Should any
of the appendix requirements for the summary prospectus be different
for the appendix

included in the statutory prospectus? If so, how? For example,
should registrants that choose not to use a summary prospectus be
permitted not to include disclosures about how investors can find
portfolio company prospectuses online or obtain them at no cost upon
request? Should the statutory prospectus require more comprehensive
disclosures for investors who wish to obtain additional details
beyond what would be disclosed in the summary prospectus? If so,
what additional information should be disclosed?
---------------------------------------------------------------------------

    \521\ See generally supra sections II.A.1.c.ii(i),
II.A.2.c.ii(c).
---------------------------------------------------------------------------

     Will the proposed tabular presentation required for
portfolio company-related disclosures in the prospectus be more
user-friendly for investors than the current disclosure
requirements? Is the specific information required to be disclosed
about portfolio companies likely to be more relevant and useful to
investors than the current disclosure requirements? If not, why not?
Are there alternatives we should consider?
     Under our proposal, registrants on Form N-3 would have
the option of omitting the proposed appendix and instead providing
the more detailed disclosures about the investment options offered
under the contract that proposed Item 20 of Form N-3 would require
(and would be required to include the appendix in the statutory
prospectus only if the appendix also appears in the summary
prospectus). In order to increase comparability between registration
statements, should we require this appendix for all registration
statements on Form N-3?
s. Additional Amendments to Form N-3
    We are also proposing additional amendments to Form N-3 that are
generally intended to update and enhance disclosures related to
investment options by requiring similar disclosures required for open-
end management companies registered on Form N-1A.
Management (Item 7 of Form N-3)
    We are proposing to revise Item 6 of current Form N-3 (which we
would re-designate as Item 7) to increase consistency among forms used
to register management investment companies.\522\ Except as described
below, we do not intend these proposed amendments to significantly
alter current disclosure obligations.
---------------------------------------------------------------------------

    \522\ See, e.g., Items 5 and 10 of Form N-1A.
---------------------------------------------------------------------------

    Among other things, the proposed amendments would require
disclosure of the compensation paid to each investment adviser of the
registrant.\523\ Form N-3 currently includes three fiscal years of such
disclosures in the SAI, where they would remain under our proposal, but
our proposal would also include such disclosures for the most recent
fiscal year in the prospectus to highlight this information for
investors and to update this aspect of Form N-3 to parallel Form N-
1A.\524\ The proposed amendments would also move certain information
from the prospectus to the SAI, including responsibilities of the board
of managers, disclosure regarding persons providing administrative or
business affairs services, and information regarding brokerage
allocations.\525\ We believe this information is more appropriate for
disclosure in the SAI, and is consistent with how such information is
presented in Form N-1A.
---------------------------------------------------------------------------

    \523\ Registrants would disclose the aggregate fee paid to each
investment adviser for the most recent fiscal year as a percentage
of net assets or, if the adviser's fee is not based on a percentage
of net assets, a description of the basis of the adviser's
compensation. See proposed Item 7(a)(1)(i) and (ii) of Form N-3.
    \524\ Compare Item 21(a)(iii) of Form N-3 (requiring total
compensation paid to the adviser under the investment advisory
contract for the last three fiscal years) with proposed Item
25(a)(3) of Form N-3 (same); see also Item 10 of Form N-1A.
    \525\ These disclosure requirements would be moved,
respectively, to: Proposed Item 24(b)(1) (``Management of the
Registrant''); proposed Item 25(g) (``Investment Advisory and Other
Services''); and proposed Item 27 (``Brokerage Allocation and Other
Practices'').
---------------------------------------------------------------------------

Additional Information About Investment Options Available Under the
Contract (Item 20 of Form N-3)
    We are proposing a new item that would provide more detailed
information about each of the investment options available under the
contract.
    New paragraphs (a) and (b) would restate existing disclosure
requirements contained in paragraphs (c), (d), and (e) of current Item
5 regarding investment strategies and risks to reflect the updated
presentation and disclosure requirements of the parallel provisions of
Form N-1A. These paragraphs would re-focus these disclosure
requirements to require more granular disclosure related to each
investment option as opposed to broader disclosure regarding
registrants.
    Specifically, among other things, the proposed amendments would
require disclosure of whether the investment option may take temporary
defensive positions that are inconsistent with the investment option's
principal investment strategies in attempting to respond to adverse
market, economic, political, or other conditions. We believe that
investors should be informed about investment positions that an
investment option can take from time to time that are inconsistent with
the investment option's central investment focus.
    The proposed amendments also would require the registrant to
disclose, for each investment option, whether it may engage in active
and frequent trading of portfolio securities and, if so, the
consequences of increased portfolio turnover to investors and the
investment option's performance. Increased portfolio turnover can
result in increased transaction costs that are ultimately borne by
investors. Collectively, these proposed amendments are intended to
clarify and enhance the disclosure requirements relating to investment
options' strategies and risks, and to increase consistency and thereby
promote comparability among forms used to register management
investment companies.\526\
---------------------------------------------------------------------------

    \526\ See, e.g., Item 9 of current Form N-1A.
---------------------------------------------------------------------------

    New paragraph (c) would require registrants with annual returns for
at least one calendar year to provide, for each investment option:

     A bar chart showing the investment option's annual
total returns for each of the last 10 calendar years (or for the
life of the investment option, if less than 10 years), as well as
the investment option's highest and lowest return for a quarter
during the period displayed in the chart;
     A table showing the investment option's average annual
total returns (with and without taxes on distributions and
redemptions) for 1-, 5-, and 10-year calendar periods ending on the
date of the most recently completed calendar year (or for the life
of the investment option, if shorter), as well as the returns of an
appropriate broad-based securities market index for those same
periods; and
     Certain explanatory statements, such as how the
information in the chart and table illustrates the variability of
the investment option's returns, the investment option's past
performance is not necessarily an indication of how the investment
option will perform in the future, and, if applicable, how updated
performance information may be obtained.

    The disclosures that new paragraph (c) would require are modeled
after the risk/return bar chart and table that Form N-1A currently
requires and are intended to supplement the disclosures currently
required by Form N-3 regarding accumulation unit income and capital
changes \527\ by providing investors and potential investors with more
information about the performance of the investment options offered
under the contract.\528\ In particular, the bar chart would illustrate
the variability of the investment options' returns and give investors
an idea of the attendant risks of each investment option. Likewise, the

accompanying table would help investors evaluate an investment option's
risks and returns relative to the market.
---------------------------------------------------------------------------

    \527\ See infra section II.D.3.d.
    \528\ See, e.g., Item 4(b)(2) of Form N-1A; see also
Registration Form Used by Open-End Management Investment Companies,
Investment Company Act Release No. 23064 (Mar. 13, 1998) [98 FR
13968 (Mar. 23, 1998)] (``Form N-1A Adopting Release'') at text
accompanying and following n.51 (discussing the risk/return bar
chart/table requirement).
---------------------------------------------------------------------------

    We request comment generally on the proposed amendments to the Part
A requirements of Form N-3, and specifically on the following issues:

     Should we, as proposed, adopt amendments to certain
current items in Form N-3 Part A as described in this section? To
the extent that we have proposed amending these items to generally
mirror the presentation of parallel items in Form N-1A, is this
appropriate in the context of variable annuities whose separate
accounts are registered on Form N-3? Do commenters recommend any
additional amendments to any of the current Form N-3 Part A items?
     Proposed Item 7 (``Management'') would revise current
disclosure requirements to move certain disclosures from the
prospectus to the SAI, while other disclosures would appear in the
prospectus that currently only appear in the SAI. Are these proposed
amendments appropriate, and are there other disclosures that
currently appear in Part A of Form N-3 that would be better suited
for disclosure in the SAI? On the other hand, are there other
disclosures that currently appear in the SAI that would better
suited for disclosure in the prospectus?
     In the case of registrants that offer more than one
investment option under the contract, should the disclosures
contemplated by proposed Item 20 (``Additional Information About
Investment Options Available Under the Contract''), as proposed, be
presented for each investment option? If not, how should those
disclosures be presented? Should any of these proposed disclosures
be modified in any way? Are there additional investment option-
related disclosures that may be relevant to contract investors and
that we should require to appear in the prospectus?
3. Part B (Information Required in a Statement of Additional
Information)
    Table 6 shows how our proposal would amend the item requirements of
Part B of our variable contract registration forms. Except as described
below, our proposed amendments to Part B of Forms N-3 and N-4 would
generally conform to the language of the related Part B disclosure
items in current Form N-6.

                        Table 6--Proposed Amendments to Part B of Forms N-3, N-4, and N-6
----------------------------------------------------------------------------------------------------------------
                                                      Form N-3: Proposed  Form N-4: Proposed  Form N-6: Proposed
        Item description           Proposed item No.       treatment           treatment           treatment
----------------------------------------------------------------------------------------------------------------
Cover Page and Table of Contents   Form N-3:  Revised...........  Revised...........  Revised.
 (in Forms N-3 and N-4,            Item 21
 currently two separate items:     (currently Items
 ``Cover Page'' and ``Table of     16, 17).
 Contents'').                      Form N-4:
                                   Item 19
                                   (currently Items
                                   15, 16).
                                   Form N-6:
                                   Item 19
                                   (currently Item
                                   15).
General Information and History.   Form N-3:  Revised...........  Revised...........  Unchanged.
                                   Item 22
                                   (currently Item
                                   18).
                                   Form N-4:
                                   Item 20
                                   (currently Item
                                   17).
                                   Form N-6:
                                   Item 20
                                   (currently Item
                                   16).
Services (in Form N-3,             Form N-3:  Revised...........  Revised...........  Unchanged.
 ``Investment Advisory and Other   Item 25
 Services'').                      (currently Item
                                   21).
                                   Form N-4:
                                   Item 21
                                   (currently Item
                                   18).
                                   Form N-6:
                                   Item 21
                                   (currently Item
                                   17).
Investment Objectives and Risks    Form N-3:  Revised...........  N/A...............  N/A.
 (in Form N-3, currently           Item 23
 ``Investment Objectives and       (currently Item
 Policies'').                      19).
Management of the Registrant (in   Form N-3:  Revised...........  N/A...............  N/A.
 Form N-3, currently               Item 24
 ``Management'').                  (currently Item
                                   20).
Portfolio Managers..............   Form N-3:  Revised...........  N/A...............  N/A.
                                   Item 26
                                   (currently Item
                                   22).
Brokerage Allocation and Other     Form N-3:  Revised...........  N/A...............  N/A.
 Practices (in Form N-3,           Item 27
 currently ``Brokerage             (currently Item
 Allocation'').                    23).
Purchase of Securities Being       Form N-3:  Unchanged.........  Unchanged.........  N/A.
 Offered.                          Item 28
                                   (currently Item
                                   24).
                                   Form N-4:
                                   Item 22
                                   (currently Item
                                   19).
Premiums........................   Form N-6:  N/A...............  N/A...............  Unchanged.
                                   Item 22
                                   (currently Item
                                   18).
Additional Information About       Form N-6:  N/A...............  N/A...............  Unchanged.
 Operation of Contracts and        Item 23
 Registrant.                       (currently Item
                                   19).
Underwriters....................   Form N-3:  Revised...........  Revised...........  Revised.
                                   Item 29
                                   (currently Item
                                   25).
                                   Form N-4:
                                   Item 23
                                   (currently Item
                                   20).
                                   Form N-6:
                                   Item 24
                                   (currently Item
                                   20).
Additional Information About       Form N-6:  N/A...............  N/A...............  Unchanged.
 Charges.                          Item 25
                                   (currently Item
                                   21).

Lapse and Reinstatement.........   Form N-6:  N/A...............  N/A...............  Unchanged.
                                   Item 26
                                   (currently Item
                                   22).
Loans...........................   Form N-6:  N/A...............  N/A...............  Revised and
                                   Item 13                                                     consolidated in
                                   (currently Items                                            prospectus
                                   10 and 23).                                                 (currently, there
                                                                                are prospectus
                                                                                and SAI items).
Calculation of Performance Data.   Form N-3:  Revised...........  Revised...........  N/A.
                                   Item 30
                                   (currently Item
                                   26).
                                   Form N-4:
                                   Item 24
                                   (currently Item
                                   21).
Annuity Payments................   Form N-3:  Unchanged.........  Unchanged.........  N/A.
                                   Item 31
                                   (currently Item
                                   27).
                                   Form N-4:
                                   Item 25
                                   (currently Item
                                   22).
Financial Statements............   Form N-3:  Revised...........  Revised...........  Revised.
                                   Item 32
                                   (currently Item
                                   28).
                                   Form N-4:
                                   Item 26
                                   (currently Item
                                   23).
                                   Form N-6:
                                   Item 27
                                   (currently Item
                                   24).
Condensed Financial Information.   Form N-3:  Revised and moved   Revised and moved   N/A.
                                   Item 33             to SAI.             to SAI.
                                   (currently Item
                                   4).
                                   Form N-4:
                                   Item 27
                                   (currently Item
                                   4).
Illustrations...................   Form N-6:  N/A...............  N/A...............  Unchanged.
                                   Item 28
                                   (currently Item
                                   25).
----------------------------------------------------------------------------------------------------------------

a. Amendments Conforming Part B Items of Forms N-3 and N-4 to
Presentation in Form N-6
    We propose to amend certain items of Part B of Forms N-3 and N-4 to
reflect the more up-to-date presentation of corresponding items in Form
N-6, and to re-designate their numbering as shown in Table 6 above. To
the extent that these amended items incorporate only minor wording
changes,\529\ they are indicated as ``unchanged items'' in Table 6.
Otherwise, each of these amended items is discussed in more detail
below.

    \529\ For example, edits to use defined terms where appropriate,
to use synonyms for consistency across forms (e.g., ``State the name
. . .'' instead of ``Give the name . . .''), and to add titles to
sub-paragraphs for clarity and consistency across forms (and to help
the reader navigate the form).

     Cover Page (Item 21 of Form N-3, Item 19 of Forms N-4
and N-6). We are proposing to amend the outside front cover page
requirements for each registration form to include the name of the
contract and classes to which the contract relates.\530\ We are also
proposing to amend Forms N-3 and N-4 to: (1) Require a statement
whether and from where information is incorporated by reference;
\531\ (2) remove the current required statement that the SAI should
be read with the prospectus; \532\ and (3) consolidate the current
item requiring a table of contents into the item specifying cover
page disclosures.\533\
---------------------------------------------------------------------------

    \530\ Proposed Item 21(a)(3) of Form N-3; proposed Item 19(a)(3)
of Form N-4; proposed Item 19(a)(3) of Form N-6.
    \531\ Proposed Item 21(a)(4)(iii) of Form N-3; proposed Item
19(a)(4)(iii) of Form N-4.
    \532\ Item 16(a)(iii)(B) of current Form N-3; Item 15(a)(iii)(B)
of current Form N-4.
    \533\ Proposed Item 21(b) of Form N-3; proposed Item 19(b) of
Form N-4.
---------------------------------------------------------------------------

     General Information and History (Item 22 of Form N-3,
Item 20 of Forms N-4 and N-6). We are proposing to amend Item 18 of
current Form N-3 and Item 17 of current Form N-4 (which we would re-
designate as Items 22 and 20, respectively) to require: (1) The date
and form of organization of the depositor, the name of the state or
other jurisdiction in which the depositor is organized, and a
description of the general nature of the depositor's business; and
(2) the date and form of organization of the registrant and the
registrant's classification pursuant to Section 4 of the Investment
Company Act.\534\
---------------------------------------------------------------------------

    \534\ Proposed Item 22 of Form N-3; proposed Item 20 of Form N-
4.
---------------------------------------------------------------------------

     Services (Item 25 of Form N-3,\535\ Item 21 of Forms N-
4 and N-6). We are proposing to amend Item 21 of current Form N-3
and Item 18 of current Form N-4 (which we would re-designate as
Items 25 and 21, respectively) to require registrants to, unless
disclosed elsewhere, identify and state the principal business
address of any person who provides significant administrative or
business affairs management services for the registrant (e.g., an
``administrator,'' ``sub-administrator,'' ``servicing agent''),
describe the services provided, and the compensation paid for the
services.\536\
---------------------------------------------------------------------------

    \535\ In Form N-3, the title of this disclosure item is
``Investment Advisory and Other Services.'' In addition to the
amendments we propose to conform this disclosure item with the
parallel item in Form N-6, we also propose additional amendments to
this disclosure item, as discussed below, that would reflect the
presentation of Item 19 in Form N-1A. See infra section II.D.3.e.
    \536\ Proposed Item 25(g) of Form N-3; proposed Item 21(c) of
Form N-4.
---------------------------------------------------------------------------

     Financial Statements (Item 32 of Form N-3, Item 26 of
Form N-4, Item 27 of Form N-6). We are proposing to amend Item 28 of
current Form N-3 and Item 23 of current Form N-4 (which we would re-
designate as Items 32 and 26, respectively) to: (1) Clarify that the
depositor's financial statements must be prepared in accordance with
generally accepted accounting principles (``GAAP'') if the depositor
prepares financial information in accordance with GAAP for use by
the depositor's parent in any report under sections 13(a) and 15(d)
of the Exchange Act or registration statement filed under the
Securities Act; \537\ (2) specify how an investor may request
certain additional financial information about the depositor that is
omitted from the SAI and is included in Part C of the registration
statement; \538\ and (3) clarify how current the depositor's
financial statements must be when the anticipated effective date of
the registration statement

falls within 90 days after the depositor's fiscal year-end.\539\
---------------------------------------------------------------------------

    \537\ Instruction 1 to proposed Item 32(b) of Form N-3;
Instruction 1 to proposed Item 26(b) of Form N-4. This instruction
would be consistent with prior guidance we have provided in the
context of registration statements on Form N-6, namely that
statutory financial statements could be used in those limited
circumstances when GAAP financial statements are not otherwise
required to be prepared for either the depositor or its parent. See
Separate Accounts Offering Variable Life Release, supra note 54, at
n.58 and accompanying and following text.
    \538\ Instruction 2 to proposed Item 32(b) of Form N-3;
Instruction 2 to proposed Item 26(b) of Form N-4.
    \539\ Instruction 3 to proposed Item 32(b) of Form N-3;
Instruction 3 to proposed Item 26(b) of Form N-4.
---------------------------------------------------------------------------

b. Underwriters (Item 29 of Form N-3, Item 23 of Form N-4, Item 24 of
Form N-6)
    We are proposing to amend Item 25 of current Form N-3 and Item 20
of current Form N-4 (which we would re-designate as Items 29 and 23,
respectively) to specifically require identification of all principal
underwriters of the registrant (other than the depositor), their
principal business addresses, and the source of any affiliation.\540\
---------------------------------------------------------------------------

    \540\ Proposed Item 29(a) of Form N-3; proposed Item 23(a) of
Form N-4. Item 25(a) of current Form N-3 and Item 20(a) of current
Form N-4 only require a registrant to state if the depositor or the
affiliate of the depositor is the principal underwriter of the
contract.
---------------------------------------------------------------------------

    We also propose to add an instruction to this item in Forms N-3, N-
4, and N-6 stating that information need not be provided about bona
fide contracts with the registrant or its insurance company for outside
legal or auditing services, or bona fide contracts for personal
employment entered into with the registrant or its depositor in the
ordinary course of business. This instruction is intended to focus
disclosures on underwriting costs, as opposed to costs for legal or
auditing services or other ancillary matters, and would parallel
similar instructions in Part C of these same forms regarding
disclosures for principal underwriters.\541\
---------------------------------------------------------------------------

    \541\ See infra text accompanying and preceding note 597. Forms
N-3, N-4, and N-6 also include in their disclosure requirements
regarding underwriters other similar instructions, such as
instructions stating that information need not be given about the
service of mailing proxies or periodic reports of the registrant.
---------------------------------------------------------------------------

    Also, because we propose to amend Item 5 of current Form N-6 to
include the disclosures on commissions to dealers currently required by
current Item 20 in the SAI, we also propose to remove this disclosure
from current Item 20 (which we would re-designate as Item 24).\542\
---------------------------------------------------------------------------

    \542\ See supra note 461 and accompanying text.
---------------------------------------------------------------------------

c. Calculation of Performance Data (Item 30 of Form N-3, Item 24 of
Form N-4)
    We are proposing to amend Item 26 of current Form N-3 and Item 21
of current Form N-4 (which we would re-designate as Items 30 and 24,
respectively), to remove the instruction specifically permitting the
registrant to furnish separate yield quotations for individual and
group contracts.\543\ Because the proposed General Instructions would
state that individual and group contracts are not essentially
identical, we would not expect to see both types of contracts presented
in a single prospectus.\544\
---------------------------------------------------------------------------

    \543\ Proposed Item 30 of Form N-3; proposed Item 24 of Form N-
4.
    \544\ See supra note 400 and accompanying text.
---------------------------------------------------------------------------

d. Accumulation Unit Value Disclosure (Item 33 of Form N-3, Item 27 of
Form N-4)
    We also propose to relocate the disclosures required by Item 4 of
current Forms N-3 and N-4 from the prospectus to the SAI,\545\ with
some modifications.\546\ Those items currently require a registrant to
disclose, for the last ten fiscal years and for each subaccount, the
accumulation unit value at the beginning and end of each period and the
number of accumulation units outstanding at the end of each period (the
``AUV tables'').\547\ For variable annuity contracts, the change in
accumulation unit value provides a measure of performance of the
registrant's sub-accounts.\548\
---------------------------------------------------------------------------

    \545\ Proposed Item 33 of Form N-3; proposed Item 27 of Form N-
4.
    \546\ Such modifications would include re-designating Item 4(c)
of current Form N-3 and Item 4(b) of current Form N-4 as Items 18
and 17, respectively (``Financial Statements''), and adding an
instruction to proposed Item 33 of Form N-3 and proposed Item 27 of
Form N-4 that defines ``class of accumulation units'' to mean ``any
variation that affects accumulation units, including variations
related to contract class, optional benefits, and sub-accounts.''
See supra section II.D.2.q (discussing proposed Item 18 of Form N-3
and proposed Item 17 of Form N-4); see also Instruction 1 to
proposed Item 33 of Form N-3; Instruction 1 to proposed Item 27 of
Form N-4.
    \547\ Item 4(a) of current Form N-3; Item 4(a) of current Form
N-4.
    \548\ When Form N-6 was proposed, it did not include AUV tables
``[b]ecause [due to] the individual nature of variable life
insurance charges, such as the cost of insurance, there does not
appear to be a comparable measure of performance that is applicable
to all holders of a particular variable life insurance policy.'' See
Form N-6 Proposing Release, supra note 445, at 17.
---------------------------------------------------------------------------

    When the AUV tables were adopted in 1985, the approach did not
anticipate the proliferation of variations in contract charges and
optional benefits that has resulted in numerous possible combinations
of contract charges.\549\ Since registrants commonly maintain a
separate class of accumulation units for each combination of separate
account charges, the AUV tables add considerable length (sometimes
hundreds of pages) to the contract prospectus, which may overwhelm
other important information.\550\ Because only one combination of
contract charges is relevant to any individual investor (depending on
the contract features they select), much of the required disclosure is
of limited value to most investors.\551\
---------------------------------------------------------------------------

    \549\ See Forms N-3 and N-4 Adopting Release, supra note 28.
    \550\ In response to these concerns, the staff issued a no-
action letter stating that the staff would not recommend enforcement
action if registrants were to depict in the prospectus only two
classes of unit values (one reflecting the highest possible
combination of contract charges, the other reflecting the lowest
possible combination of contract charges) shown for each available
portfolio company, so long as the SAI were to include the full
disclosure that current Item 4 would require. See Nationwide Life
Insurance Company, SEC Staff No-Action Letter (pub. avail. Mar. 16,
2001) (``Nationwide 2001 Letter''). If the Commission adopts the
proposed AUV table amendments, these final rules would effectively
moot the Nationwide 2001 Letter.
    \551\ In addition, while the AUV tables are designed to reflect
the performance of a subaccount after reflecting contract charges
that are based on separate account value, many contract charges
today are based on other values, such as a benefit base, which
cannot be reflected in AUV values. Instead, when these charges are
assessed, the number of accumulation units is reduced. As a result,
AUV tables may only reflect a portion of a contract's fees,
diminishing their usefulness to investors.
---------------------------------------------------------------------------

    To streamline the prospectus, we propose to relocate the AUV tables
from the prospectus to the SAI, where they are more appropriately
located with certain detailed information that traditionally appears in
the SAI. To reduce burdens on registrants, we propose to decrease the
time periods for which the required information must be presented from
10 years \552\ to five years.\553\ We also propose to include an
instruction permitting registrants to omit AUV tables altogether if
they provide each investor with an annual account statement that
discloses, with respect to each class of accumulation units the
investor holds, the actual performance of each subaccount during the
prior fiscal year.\554\ This option would reduce the length of the SAI
and provide investors with customized annual performance information
that reflects the impact of insurance-related costs.
---------------------------------------------------------------------------

    \552\ See Instruction 2 to Item 4 of current Forms N-3 and N-4.
    \553\ See Instruction 3 to proposed Item 33 of Form N-3;
Instruction 3 to proposed Item 27 of Form N-4. We are proposing five
years to be consistent with Item 13 of Form N-1A, which requires
funds to disclose five years of data for the Financial Highlights
section of the prospectus. Five years is also the typical timeframe
for disclosing information in response to other form items (e.g.,
Fee Table expense example (Item 3 of current Form N-3 and current
Form N-4); insurer name change and suspension of sales (Item 18 of
current Form N-3 and Item 17 of current Form N-4)).
    \554\ See Instruction 7 to proposed Item 33 of Form N-3;
Instruction 6 to proposed Item 27 of Form N-4. For accounts held
less than one year, the annual account statement would disclose the
actual performance of each sub-account for the length of time the
investor has owned the sub-account.

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

e. Adjustment to Disclosure Thresholds (Items 29 and 32 of Form N-3,
Items 23 and 26 of Form N-4, Items 24 and 27 of Form N-6)
    Our variable contract registration forms currently include various
dollar thresholds that date back to their initial adoption. In the SAI,
for example, information need not be given about any service required
to be disclosed pursuant to current Item 25 of Form N-3, current Item
20 of Form N-4, and current Item 20 of Form N-6, for which total
payments of less than $5,000 were made during each of the last three
fiscal years.\555\ In addition, financial statements of the insurance
company required to be included in the registration statement need not
be more current than as of the end of the most recent fiscal year of
the insurance company unless certain balance sheets of the sponsor
would show a combined capital and surplus (if a stock company) or an
unassigned surplus (if a mutual company), of less than $1,000,000.\556\
As part of our efforts to update the registration forms, we are
proposing to increase these thresholds to $15,000 \557\ and
$2,500,000,\558\ respectively, to account for the effects of inflation
since 1985, the year of inception for Forms N-3 and N-4.\559\
---------------------------------------------------------------------------

    \555\ See Instruction 2 to Item 25 of current Form N-3;
Instruction 2 to Item 20 of current Form N-4; Instruction 2 to Item
20 of current Form N-6.
    \556\ See Instructions 3(ii) and (iii) to Item 28 of current
Form N-3; Instructions 3(ii) and (iii) to Item 23 of current Form N-
4; Instructions 3(ii) and (iii) to Item 24 of current Form N-6.
    \557\ See Instruction 2 to proposed Item 29 of Form N-3;
Instruction 2 to proposed Item 23 of Form N-4; Instruction 2 to
proposed Item 24 of Form N-6.
    \558\ See Instructions 3(ii) and (iii) to proposed Item 32 of
Form N-3; Instructions 3(ii) and (iii) to proposed Item 26 of Form
N-4; Instructions 3(ii) and (iii) to proposed Item 27 of current
Form N-6.
    \559\ Indexing the $5,000 thresholds for inflation would result
in revised thresholds of $11,950, and indexing the $1,000,000
thresholds for inflation would result in revised thresholds of
$2,390,009. Calculations are based on the Bureau of Labor Statistics
consumer price index average for all urban consumers (CPI-U) between
January 1985 and August 2018. See CPI Inflation Calculator, Bureau
of Labor Statistics, available at https://www.bls.gov/data/inflation_calculator.htm.
---------------------------------------------------------------------------

f. Additional Amendments to Form N-3
    We are also proposing additional amendments to Form N-3 that are
generally intended to update and enhance disclosures related to
investment options by requiring similar disclosures required for open-
end management companies registered on Form N-1A. The revisions
generally reflect the updated presentation and disclosure requirements
of the parallel item in Form N-1A and would harmonize the disclosure
requirements across registration statements for different products.
Investment Objectives and Risks (Item 23 of Form N-3)
    We are proposing to make certain amendments to Item 19 of Form N-3,
which we would re-designate as Item 23.\560\ Proposed Item 23 would
contain a new instruction clarifying that if the registrant offers more
than one investment option, the required disclosures should be made for
each investment option. Paragraph (a) of proposed Item 23 would newly
require the registrant to describe any investment strategies that are
not principal strategies, as well as the risks of those strategies.
These disclosures would complement the prospectus disclosures of
principal investment strategies that would be required by proposed Item
20.
---------------------------------------------------------------------------

    \560\ See proposed Item 23 of Form N-3. The proposed amendments
to this item would reflect the presentation of Item 16 of Form N-1A.
---------------------------------------------------------------------------

    Paragraph (b) of proposed Item 23 would require the discussion of
all policies regarding: (1) Issuing senior securities; (2) borrowing
money, including the purpose for which the proceeds will be used; (3)
underwriting securities of other issuers; (4) concentrating investments
in a particular industry or group of industries; (5) purchasing or
selling real estate or commodities; (6) making loans; and (7) any other
policy that the registrant deems fundamental or that may not be changed
without shareholder approval, including, if applicable, the
registrant's investment objectives. In contrast, Item 19 of current
Form N-3 generally requires the disclosure of: (1) Fundamental policies
not described in the prospectus regarding those same topics, as well as
short sales, purchases on margin, and writing of put and call options,
and any other policy the registrant deems fundamental; and (2) any
significant but non-fundamental investment policies not described in
the prospectus and which can be changed without the approval of the
majority of votes available to eligible voters. We believe that the
proposed amendments better correspond with the requirements of section
8 of the Investment Company Act than the current Form N-3 item
requirements, since they more specifically reflect the disclosure that
section 8 mandates.\561\
---------------------------------------------------------------------------

    \561\ Section 8 of the Investment Company Act requires a fund to
disclose in its registration statement the fund's policies with
respect to borrowing money, issuing senior securities, underwriting
securities issued by other persons, investing in real estate or
commodities, and making loans. Section 8 also requires a fund to
disclose in the registration statement its policies on concentration
and portfolio turnover, and any other policies that the fund deems
fundamental or that may not be changed without shareholder approval.
    When the Commission proposed amendments to Form N-1A in 1997, it
noted that, although they are not required to do so, some funds
disclose in the prospectus their policies with respect to the
practices identified under section 8. See Proposed New Disclosure
Option for Open-End Management Investment Companies, Investment
Company Act Release No. 22529 (Feb. 27, 1997) [62 FR 10943 (Mar. 10,
1997)]. To provide a clearer directive to disclose this information
in the SAI, the Commission proposed (and later adopted) amendments
to specifically require disclosure about these policies in the SAI.
See Form N-1A Adopting Release, supra note 528. This amended Form N-
1A requirement forms the basis for the amendments to paragraph (b)
of proposed Item 23 of Form N-3 described herein.
---------------------------------------------------------------------------

    Paragraph (c) of proposed Item 23 would newly require registrants
to disclose the types of investments that a registrant may make while
assuming a temporary defensive position. We believe that investors
should be informed about investment positions that an investment option
can take from time to time that are inconsistent with the investment
option's central investment focus.
    Paragraph (f) of proposed Item 23 would newly require certain
disclosures regarding material events by registrants or investment
options that hold themselves out as ``money market funds'' or ``money
market accounts'' pursuant to rule 2a-7 under the Investment Company
Act.\562\ That rule requires these same disclosures to appear on a
fund's website, and for information about money market fund material
events to be reported to the Commission on Form N-CR.\563\ We believe
that, to the extent investors may not be familiar with researching
filings on EDGAR (or other equivalent platform), including these
disclosures in a registrant's SAI (which investors may receive in hard
copy through the U.S. Postal Service or may access on a registrant's
website, as well as accessing on EDGAR or other equivalent platform)
may make this information more readily available to these
investors.\564\ The

remaining paragraphs of proposed Item 23 would restate existing
disclosure requirements to reflect the updated presentation and
disclosure requirements of the parallel item in Form N-1A.\565\
---------------------------------------------------------------------------

    \562\ See proposed Item 23(e) of Form N-3 (requiring prospectus
disclosure of imposition of liquidity fees, temporary suspension of
registrant redemptions, and financial support provided to money
market funds or money market accounts).
    \563\ See rule 2a-7 under the Investment Company Act (requiring
a money market fund to prominently post this same information on its
website); Form N-CR (requiring a money market fund to report this
same information to the Commission); see also Item 16(g) of Form N-
1A (requiring disclosure of certain material events for money market
funds). Portfolio companies registered on Form N-1A and offered by
registrants on Forms N-4 and N-6 are currently required to include
these disclosures in their SAIs.
    \564\ See Money Market Reform; Amendments to Form PF, Investment
Company Act Release No. 31166 (July 23, 2014) [79 FR 47736 (Aug. 14,
2014)], at text accompanying and following n.1258.
    \565\ Proposed paragraphs (b), (d), and (e) would require
disclosure regarding certain investment policies, portfolio
turnover, and disclosure of portfolio holdings, respectively.
---------------------------------------------------------------------------

Management of the Registrant (Item 24 of Form N-3)
    We are proposing to make certain amendments to Item 20 of Form N-3,
which we would re-designate as Item 24, to restate existing disclosure
requirements to reflect the updated presentation and disclosure
requirements of the parallel item in Form N-1A.\566\ Except as
discussed below, these changes are not intended to significantly alter
current disclosure obligations.
---------------------------------------------------------------------------

    \566\ See proposed Item 24 of Form N-3. The proposed amendments
to this item would reflect the presentation of Item 17 of Form N-1A.
---------------------------------------------------------------------------

    The proposed amendments would: (1) Newly require disclosure of the
responsibilities of the board of directors with respect to the
registrant's management and any arrangements that result in breakpoints
in, or elimination of, sales loads for directors and other affiliated
persons of the registrant; \567\ and (2) remove the current requirement
to state that codes of ethics adopted by the registrant, its investment
adviser, and principal underwriter can be viewed and copied at the
Commission's Public Reference Room, because the Public Reference Room
no longer maintains paper copies of filings on Form N-3.\568\
---------------------------------------------------------------------------

    \567\ See paragraphs (b)(1) and (d) of proposed Item 24 of Form
N-3.
    \568\ See paragraph (e) of proposed Item 24 of Form N-3. These
codes of ethics would continue to be filed as exhibits to Part C of
the registrant's registration statement. See proposed Item 34(q) of
Form N-3.
---------------------------------------------------------------------------

Investment Advisory and Other Services (Item 25 of Form N-3)
    In addition to the amendments to Item 21 of Form N-3 (which we
would re-designate as Item 25) that we discuss above, which would
conform certain aspects of this item to the disclosure requirements of
Form N-6,\569\ we are also proposing amendments to restate existing
disclosure requirements to reflect the updated presentation and
disclosure requirements of the parallel item in Form N-1A.\570\ Except
as discussed below, these changes are not intended to significantly
alter current disclosure obligations.
---------------------------------------------------------------------------

    \569\ See supra note 536 and accompanying text.
    \570\ See proposed Item 25 of Form N-3. The proposed amendments
to this item would reflect the presentation of Item 19 of Form N-1A.
---------------------------------------------------------------------------

    We are proposing to amend 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.'' \571\ We are
also proposing to newly require a registrant to disclose any front-end
sales load reallowed to dealers as a percentage of the registrant's
shares.\572\ Finally, we are proposing to newly require additional
disclosures regarding plans adopted under rule 12b-1 under the
Investment Company Act.\573\ 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.
---------------------------------------------------------------------------

    \571\ See paragraph (a)(3)(i) of proposed Item 25 of Form N-3.
    \572\ See paragraph (e) of proposed Item 25 of Form N-3.
    \573\ Registrants would disclose the relationship between
amounts paid to the distributor and the expenses that it incurs; the
amount of any unreimbursed expenses incurred under the 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 proposed Item 25 of
Form N-3.
---------------------------------------------------------------------------

Portfolio Managers (Item 26 of Form N-3)
    We are proposing to make certain amendments to Item 22 of Form N-3,
which we would re-designate as Item 26.\574\ The proposed amendments
would amend 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.\575\ Otherwise, these changes would rephrase
certain disclosure requirements to conform to current presentation
requirements in Form N-1A but are not intended to significantly alter
current disclosure obligations.
---------------------------------------------------------------------------

    \574\ See proposed Item 26 of Form N-3. The proposed amendments
to this item would reflect the presentation of Item 20 of Form N-1A.
    \575\ See Instruction 2 to proposed Item 26(b) of Form N-3
(discussing relocation expenses).
---------------------------------------------------------------------------

Brokerage Allocation and Other Practices (Item 27 of Form N-3)
    We are proposing to make certain amendments to Item 23 of Form N-3,
which we would re-designate as Item 27.\576\ The proposed amendments
would 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.\577\ This
would mirror the parallel requirement of Form N-1A \578\ and could
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. The proposed
amendments would 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.\579\
Otherwise, these changes would rephrase certain disclosure requirements
to conform to current presentation requirements in Form N-1A but are
not intended to significantly alter current disclosure obligations.
---------------------------------------------------------------------------

    \576\ See proposed Item 27 of Form N-3. The proposed amendments
to this item would reflect the presentation of Item 21 of Form N-1A.
    \577\ See proposed Item 27(a) of Form N-3.
    \578\ See Item 21(a) of Form N-1A.
    \579\ See Instruction to proposed Item 27(e) of 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,\580\ we
are proposing two additional amendments to Part B of Form N-6. First,
as discussed above, we are proposing to relocate the disclosure on
commissions paid to dealers from the SAI to the prospectus.\581\
Second, as also discussed above, we are proposing to eliminate current
Item 23 (Loans) and consolidate

required disclosures relating to contract loans into the
prospectus.\582\
---------------------------------------------------------------------------

    \580\ See supra note 530 and accompanying text.
    \581\ See supra note 461 and accompanying text; see also Item 20
of current Form N-6; proposed Item 7 of Form N-6.
    \582\ The disclosures required by current Item 23 would be
consolidated with current Item 10 into a single proposed Item 13.
See supra paragraphs accompanying and immediately following note
500.
---------------------------------------------------------------------------

h. Request for Comment on Proposed SAI Amendments
    We request comment generally on the proposed amendments to the SAI
requirements contained in our variable contract registration forms, and
specifically on the following issues:

     Should we amend as proposed the items in Part B
discussed above? Should we amend any other items of Part B, or add
new items to Part B covering other disclosure items?
     Should we adjust the thresholds described above in
section II.D.3.e? If so, should we propose to adjust similar
thresholds in our registration statement forms for other types of
investment companies to comparable levels? Should they be adjusted
to a different level? Please explain the basis for any suggested
changes, including the reasons for whether they should be adjusted
using different factors or other considerations.
     Are the AUV tables useful to investors, and has the
usefulness of these tables evolved since Forms N-3 and N-4 were
first adopted? Is it appropriate to move the AUV tables from the
prospectus to the SAI, or would some other approach better serve
investors? For example, should we instead codify the approach set
forth in staff no-action relief described above? \583\ Should we
consider other modifications, such as eliminating the requirement to
provide AUVs corresponding to every pricing permutation that results
from offering multiple optional riders (which were not available
when the forms were first adopted), and instead require only
disclosure of variations that affects AUVs related to contract
(share) class and sub-accounts? Should we require the AUV tables to
reflect only five, and not 10, years of data? Should we, as
proposed, permit registrants to omit AUV tables altogether if they
provide each investor with an annual account statement that
discloses, with respect to each class of accumulation units the
investor holds, the actual performance of each subaccount during the
prior fiscal year? Or should we mandate that registrants provide
annual account statements to each investor? Alternatively, should we
eliminate altogether the requirement to include AUV tables in the
registration statement, or otherwise revise this requirement? If we
were to revise the requirement, should we also extend the revised
requirement to Form N-6, which does not currently require the
inclusion of AUV tables? \584\ Can or do investors receive
performance information that is similar to, or more useful than, the
data in the AUV tables?
---------------------------------------------------------------------------

    \583\ See supra note 550.
    \584\ The level of customization now available for variable
annuity contracts is somewhat comparable to the individual nature of
variable life insurance charges, which the Commission previously
stated did not appear to provide a comparable measure of performance
that is applicable to all holders of a particular variable life
insurance contract. See Form N-6 Proposing Release, supra note 445.
Consequently, Form N-6 does not require the inclusion of AUV tables.
---------------------------------------------------------------------------

     Should we, as proposed, amend Part B of Form N-3 to
require comparable disclosures required by Form N-1A? Should we
modify the proposed amendments in any way?
4. Part C (Other Information)
    Table 7 shows how our proposed amendments would 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. We are also proposing to eliminate certain
disclosure items in light of recent regulatory developments and our
goal of reducing duplicative disclosure requirements.

                        Table 7--Proposed Amendments to Part C of Forms N-3, N-4, and N-6
----------------------------------------------------------------------------------------------------------------
                                                      Form N-3: Proposed  Form N-4: Proposed  Form N-6: Proposed
        Item description           Proposed item No.       treatment           treatment           treatment
----------------------------------------------------------------------------------------------------------------
Exhibits (in Forms N-3 and N-4,    Form N-3:  Revised...........  Revised...........  Revised.
 currently ``Financial             Item 34
 Statements and Exhibits'').       (currently Item
                                   29).
                                   Form N-4:
                                   Item 28
                                   (currently Item
                                   24).
                                   Form N-6:
                                   Item 29
                                   (currently Item
                                   26).
                                 -------------------------------------------------------------------------------
In Form N-3: Directors and         Form N-3:  Unchanged.........  Unchanged.........  Unchanged.
 Officers of the Insurance         Item 35
 Company.                          (currently Item
                                   30).
                                   Form N-4:
                                   Item 29
                                   (currently Item
                                   25).
In Forms N-4 and N-6: Directors    Form N-6:
 and Officers of the Depositor.    Item 30
                                   (currently Item
                                   27).
----------------------------------------------------------------------------------------------------------------
In Form N-3: Persons Controlled    Form N-3:  Revised...........  Revised...........  Unchanged.
 by or Under Common Control with   Item 36
 the Insurance Company or          (currently Item
 Registrant.                       31).
                                   Form N-4:
                                   Item 30
                                   (currently Item
                                   26).
                                   Form N-6:
                                   Item 31
                                   (currently Item
                                   28).
In Forms N-4 and N-6: Persons
 Controlled by or Under Common
 Control with the Depositor or
 Registrant.
----------------------------------------------------------------------------------------------------------------
Number of Contractowners........  N/A (currently,     Eliminated........  Eliminated........  N/A.
                                   Item 32 in Form N-
                                   3 and Item 27 in
                                   Form N-4).
----------------------------------------------------------------------------------------------------------------

Indemnification.................   Form N-3:  Revised...........  Revised...........  Unchanged.
                                   Item 37
                                   (currently Item
                                   33).
                                   Form N-4:
                                   Item 31
                                   (currently Item
                                   28).
                                   Form N-6:
                                   Item 32
                                   (currently Item
                                   29).
----------------------------------------------------------------------------------------------------------------
Business and Other Connections     Form N-3:  Unchanged.........  N/A...............  N/A.
 of Investment Adviser.            Item 38
                                   (currently Item
                                   34).
----------------------------------------------------------------------------------------------------------------
Principal Underwriters..........   Form N-3:  Revised...........  Revised...........  Revised.
                                   Item 39
                                   (currently Item
                                   35).
                                   Form N-4:
                                   Item 32
                                   (currently Item
                                   29).
                                   Form N-6:
                                   Item 33
                                   (currently Item
                                   30).
                                   Form N-3:
                                   Item 40
                                   (currently Item
                                   36).
----------------------------------------------------------------------------------------------------------------
Location of Accounts and Records   Form N-4:  Unchanged.........  Unchanged.........  Unchanged.
                                   Item 33
                                   (currently Item
                                   30).
                                   Form N-6:
                                   Item 34
                                   (currently Item
                                   31).
----------------------------------------------------------------------------------------------------------------
Management Services.............   Form N-3:  Revised...........  Revised...........  Revised.
                                   Item 41
                                   (currently Item
                                   37).
                                   Form N-4:
                                   Item 34
                                   (currently Item
                                   31).
                                   Form N-6:
                                   Item 35
                                   (currently Item
                                   32).
----------------------------------------------------------------------------------------------------------------
Fee Representation..............   Form N-3:  New Item..........  New Item..........  Unchanged.
                                   Item 42.
                                   Form N-4:
                                   Item 35.
                                   Form N-6
                                   Item 36
                                   (currently Item
                                   33).
----------------------------------------------------------------------------------------------------------------
Undertakings....................  N/A (currently,     Eliminated........  Eliminated........  N/A.
                                   Item 38 in Form N-
                                   3 and Item 32 in
                                   Form N-4).
----------------------------------------------------------------------------------------------------------------

a. Amendments Conforming Part C Items of Form N-3 and N-4 to
Presentation in Form N-6
    We propose to amend certain items of Part C of proposed Form N-4 to
reflect the more up-to-date presentation of corresponding items in Form
N-6, and to re-designate their numbering as shown in Table 7 above. To
the extent that these amended items incorporate only minor wording
changes,\585\ they are indicated as ``unchanged items'' in Table 7.
Otherwise, each of these amended items is discussed in more detail
below.
---------------------------------------------------------------------------

    \585\ See supra note 529.

     Exhibits (Item 34 of Form N-3, Item 28 of Form N-4,
Item 29 of Form N-6).\586\ We are proposing to amend 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; \587\ (2) for Form N-4, to require the filing of
participation agreements; \588\ and (3) for Forms N-3 and N-4, to
require the filing of administrative contracts.\589\
---------------------------------------------------------------------------

    \586\ As part of the 2017 FAST Act Proposal, the Commission
proposed 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 2017 FAST Act Proposal,
supra note 307.
    \587\ See Item 29(a) of current Form N-3; Item 24(a) of current
Form N-4.
    \588\ Proposed Item 28(h) of Form N-4.
    \589\ Proposed Item 34(k) of Form N-3; proposed Item 28(i) of
Form N-4.
---------------------------------------------------------------------------

     Persons Controlled by or Under Common Control with the
Depositor or Registrant (Item 36 of Form N-3, Item 30 of Form N-4,
Item 31 of Form N-6). We are proposing to amend 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.\590\ 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).
---------------------------------------------------------------------------

    \590\ See Item 31 of current Form N-3; Item 26 of current Form
N-4.
---------------------------------------------------------------------------

     Indemnification (Item 37 of Form N-3, Item 31 of Form
N-4, Item 32 of Form N-6). For Forms N-3 and N-4, we are proposing
to amend 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 rule 461 and 484, and section 17 of the Investment
Company Act.\591\ We do not believe that specifically noting these
legal requirements is necessary for an investor to understand the
general effects of agreements insuring or indemnifying underwriters
or affiliated persons of the registrant against liability, and
moreover, eliminating legal references from investor documents is
consistent with our plain English requirements.\592\
---------------------------------------------------------------------------

    \591\ See Item 33 of current Form N-3; Item 28 of current Form
N-4.
    \592\ See, e.g., rule 421(c) under the Securities Act (requiring
information required to be included in a prospectus to be clearly
understandable without referring to the particular form or general
rules and regulations).

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

     Fee Representation (Item 42 of Form N-3, Item 35 of
Form N-4). We also propose to add new Item 42 to Form N-3 and new
Item 35 to Form N-4, which would 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 would mirror Item 33
of current Form N-6 (which we propose to re-designate as Item 36).
Because section 26(f) of the Investment Company Act requires that
the representation be made in the registration statement,\593\ this
new item would merely request the representation required by section
26(f) and not impose any new obligations on a Form N-3 or Form N-4
registrant.
---------------------------------------------------------------------------

    \593\ 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, we are proposing to amend the ``Exhibits''
disclosure item to require a registrant to file a preliminary form of
any contract summary prospectus that the registrant intends to use on
or after the effective date of the registration statement as an
exhibit.\594\ As discussed above, we are proposing the new requirement
to file a preliminary form of a contract summary prospectus 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.\595\ These proposed amendments
to the ``Exhibits'' item of each form would 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.\596\
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    \594\ Proposed Item 34(r) of Form N-3; proposed Item 28(o) of
Form N-4; proposed Item 29(r) of Form N-6.
    \595\ An instruction would provide that registrants are required
to provide the preliminary summary prospectus exhibits only in
connection with the filing of an initial registration statement, or
in connection with a pre-effective amendment or a post-effective
amendment filed in accordance with paragraph (a) of rule 485 under
the Securities Act. See generally supra section II.A.7.a.
    \596\ See supra notes 587 through 589 and accompanying text.
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c. Principal Underwriters (Item 39 of Form N-3, Item 32 of Form N-4,
Item 33 of Form N-6).
    For Form N-3, we propose to add 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, we propose to add 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
underwritings costs, as opposed to costs for legal or auditing services
or other ancillary matters, and would parallel similar instructions in
Part B of these same forms regarding disclosures for underwriters.\597\
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    \597\ See supra section II.D.3.b.
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    Also, for Form N-3, we propose to amend 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.\598\ The
category of ``other compensation'' is intended to encompass
compensation that is not otherwise enumerated in one of the other
categories, and so we believe deletion of this instruction would 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.
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    \598\ Instruction 1 to Item 35(c) of current Form N-3.
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d. Adjustment to Disclosure Thresholds (Items 39 and 41 of Form N-3,
Items 32 and 34 of Form N-4, Items 33 and 35 of Form N-6)
    In addition to proposing certain updated disclosure thresholds in
the SAI, we are similarly proposing to increase 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.\599\ 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.\600\ As part of our efforts to update the
registration forms, we are proposing to increase these thresholds to
$15,000 \601\ to reflect the effects of inflation since 1985.\602\
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    \599\ 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.
    \600\ 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.
    \601\ See Instruction 3 to proposed Item 39 and Instruction 2 to
proposed Item 41 of Form N-3; Instruction 3 to proposed Item 32 and
Instruction 2 to proposed Item 34 of Form N-4; Instruction 3 to
proposed Item 33 and Instruction 2 to proposed Item 35 of Form N-6.
    \602\ For a discussion of the calculation methodology, see supra
note 559.
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e. Amendments Eliminating Current Part C Disclosure Requirements
    To reduce overlapping regulatory requirements, we propose to
eliminate Item 32 of current Form N-3 and Item 27 of current Form N-4
(``Number of Contractowners''), as we will obtain the information that
this item would require a registrant to disclose in a registrant's
filings on Form N-CEN.\603\ 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.
We also propose to eliminate Item 38 of current Form N-3 and Item 32 of
Form N-4 (``Undertakings''). These requirements are outdated \604\ or
redundant of similar requirements under the proposed amendments to
Forms N-3 and N-4.\605\
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    \603\ 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).
    \604\ 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.
    \605\ 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
445, 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
proposed Item 1(b) of 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 proposed Item 18 of
Form N-3 and proposed Item 17 of Form N-4 (requiring registrants to
explain how financial statements may be found or obtained).

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f. Additional Amendments to Form N-6
    We are proposing to amend the third column of the table required by
Item 30 of current Form N-6 (``Principal Underwriters,'' which we would
re-designate as Item 33) 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.\606\ Because compensation may be paid upon
redemptions not defined as deferred sales loads, we believe this
proposed change will clarify for investors the amount of redemption
compensation received from the registrant.
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    \606\ Proposed Item 33(c) of Form N-6. This proposed change
would conform Form N-6 with the comparable item of Form N-4. See
Item 29(c) of current Form N-4.
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g. Request for Comment on Proposed Part C Amendments
    We request comment generally on the proposed amendments to the Part
C requirements of our variable contract registration forms, and
specifically on the following issues:

     Should we amend as proposed the items in Part C
discussed above? Should we amend any other items of Part C, or add
new items to Part C covering other disclosure items?
     We request comment regarding the exhibits that would be
required to be filed as part of the registration statement. Should
we modify the proposed list of required exhibits? Should we require
any additional exhibits, or eliminate any currently required
exhibits? Should we revise the description of the exhibits that this
item would require? For example, with respect to reinsurance
contracts, should we specifically request guarantees and credit
support agreements from one insurance company to another (e.g., from
parent to subsidiary)? Are there any other changes we should make to
the required exhibit list?
     Should we require Form N-3 and Form N-4 registrants to
include the fee representations specified by the new item that
mirrors a parallel item in Form N-6? If we do not require this
disclosure in Form N-3 and Form N-4, should we remove the parallel
requirement in Form N-6?
     Should we adjust the thresholds described above in
section II.D.4.d? If so, should we propose to adjust similar
thresholds in our registration statement forms for other types of
investment companies to comparable levels? Should they be adjusted
to a different level? Please explain the basis for any suggested
changes, including the reasons for whether they should be adjusted
using different factors or other considerations.
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.\607\ 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.
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    \607\ See Forms N-3 and N-4 Adopting Release, supra note 28, at
text following n.51 (stating that publication of the Guidelines was
not intended to elevate their status beyond that of staff guidance).
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    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. Certain Division
positions in the Guidelines have become outdated.\608\ Other Guidelines
explain or restate legal requirements and may encourage generic
disclosure about registrant operations that may not assist investors in
evaluating and comparing registrants.\609\ More generally, we believe
the Guidelines have generally been superseded by other resources that
are more frequently updated and accessible to the public. For example,
registrants seeking additional guidance in preparing new or amended
registration statements may consult the Investment Company Registration
and Regulation Package, a Commission staff publication that is
available online.\610\
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    \608\ See, e.g., Form N-3 Guideline 31 (the reference to the
synopsis would no longer be necessary as revised Form N-3 would have
detailed instructions with respect to the Overview and Key
Information sections); Form N-3 Guideline 36 (the staff no longer
takes the position that if there is a variable annuitization option
that the variable option must be the default; a fixed option can be
the default so long as the default option is disclosed in the
prospectus at the time of purchase); see also Form N-4 Guideline 4
(mortality and expense risk charges no longer require exemptive
relief; also the reference to the Glass-Steagall Act is no longer
relevant); Form N-4 Guideline 12 (same as Form N-3 Guideline 36).
    \609\ See, e.g., Form N-3 Guideline 1 (rule 35d-1 under the
Investment Company Act makes the guidance redundant that the
registrant should invest least 65% of its assets in the type of
investment suggested by its name); see also Form N-4 Guideline 3
(restates the law regarding redemptions without providing new
guidance).
    \610\ See Investment Company Registration and Regulation Package
(Dec. 21, 2014), available at https://www.sec.gov/investment/fast-answers/divisionsinvestmentinvcoreg121504htm.html.
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    As with other registration forms that have more recently been
amended to eliminate the guidelines for those forms, we are proposing
to rescind the Guidelines to Forms N-3 and N-4.\611\ We request comment
on whether all or parts of the Guidelines should be retained (either as
form items or instructions, or addressed as Commission guidance).
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    \611\ See Form N-1A Adopting Release, supra note 528
(eliminating similar guidelines from Form N-1A).
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E. Inline XBRL

    We are proposing to require the use of the Inline XBRL format for
the submission of certain required disclosures in the variable contract
statutory prospectus. The proposed amendments are intended to harness
technology to allow investors (directly and through their investment
professionals), data aggregators, financial analysts, Commission staff,
and other data users to efficiently analyze and compare the available
information about variable contracts, as required by their particular
needs and circumstances. This aspect of our proposal 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.
    Information structured using the Inline XBRL format is both human-
readable and machine-readable for purposes of validation, aggregation,
and analysis. 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.
    In 2009, the Commission adopted rules requiring operating
companies, mutual funds, and ETFs to submit certain disclosures in the
XBRL format.\612\ More recently, the

Commission amended its rules to require operating companies, mutual
funds, and ETFs to submit the required information in Inline XBRL.\613\
Those amendments were intended to improve the data's usefulness,
timeliness, and quality, benefiting investors, other market
participants, and other data users and to decrease, over time, the cost
of preparing the data for submission to the Commission.\614\
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    \612\ In one rulemaking, the Commission required operating
companies to submit financial statements accompanying their
registration statements and periodic and current reports in XBRL.
See Interactive Data to Improve Financial Reporting, Release No. 33-
9002 (Jan. 30, 2009) [74 FR 6776], as corrected by Release No. 33-
9002A (Apr. 1, 2009) [74 FR 15666]. In a parallel rulemaking, the
Commission required mutual funds and ETFs to submit risk/return
summaries in XBRL. See Interactive Data for Mutual Fund Risk/Return
Summary, Investment Company Act Release No. 28617 (Feb. 11, 2009)
[74 FR 7748 (Feb. 19, 2009)].
    \613\ See Inline XBRL Filing of Tagged Data, Investment Company
Act Release No. 33139 (June 28, 2018) [83 FR 40846 (Aug. 16, 2018)]
(``Inline XBRL Adopting Release'').
    \614\ Id.
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    Reflecting the development in XBRL specifications and for
consistency with the format required for operating companies, mutual
funds, and ETFs, we are proposing amendments to our rules and forms