Coming in From the Cold: SEC Proposes Broad-Based Advertising for RILAs and MVAs

On May 19, the Securities and Exchange Commission proposed sweeping and impactful amendments to its registration and communications rules and forms. The proposed amendments, discussed in our prior alert, would result in the offering process being streamlined for most issuers and align with SEC Chairman Paul Atkins’ stated goals of reducing regulatory requirements that “burden the market without benefiting investors” and “rationaliz[ing] disclosure requirements by delivering the minimum dose of regulation.”

The SEC also took a brief excursion down an unrelated path, proposing rule amendments that would permit insurance companies to market their registered index-linked annuities (RILAs) and market value adjustment (MVA) annuities using broad-based advertisements without insurance companies satisfying prospectus delivery requirements. Under the current regulatory framework, Rule 482 under the Securities Act allows insurers to market their variable annuity and variable life insurance products, but not their RILAs or MVAs, through broad-based advertisements — such as magazines, newspapers, television commercials, or similar media aimed at the general public — without first satisfying prospectus delivery requirements.

This article summarizes the changes that have been proposed to facilitate RILA and MVA issuers’ ability to disseminate broad-based advertisements and the rationale for those changes. It also identifies additional rule changes that the SEC may wish to consider incorporating into its final rules.

Current Regulatory Framework

Rule 482 permits registered investment companies to advertise without satisfying prospectus delivery requirements. The rule applies equally to mutual funds and to insurance company separate accounts through which variable annuity and variable life insurance contracts are issued. Mutual funds and insurance companies have relied on Rule 482 extensively to advertise, in part because Rule 482 advertisements may include performance data.

Importantly, however, as discussed below, Rule 482 does not permit insurers to use broad-based advertisements for their RILAs and MVAs. Accordingly, insurers issuing RILAs and MVAs have to rely on the free writing prospectus (FWP) rule under the Securities Act — Rule 433 — which permits insurers to advertise RILAs and MVAs without a prospectus delivery requirement only if the RILA or MVA offering would otherwise be eligible to be registered on Form S-3.

One of the eligibility requirements to use Form S-3, in turn, is that an insurer prepare and timely file periodic reports under the Exchange Act, such as Forms 10-K and 10-Q. For insurers that are not eligible to file on Form S-3, Rule 433 currently requires that any RILA or MVA FWP be accompanied or preceded by a prospectus. In fact, prior to the 2024 amendments mandating that RILA and MVA issuers use Form N-4, many insurers registered their RILA and MVA offerings on Form S-1 instead of S-3 in order to avoid having to prepare and file periodic reports, through reliance on Rule 12h-7 under the Exchange Act, notwithstanding the more burdensome disclosure requirements of Form S-1.

Even though the SEC adopted the 2024 amendments to facilitate the registration of RILAs and MVAs, the agency determined at the same time not to extend the reach of Rule 482 to these products. Thus, unless an insurer is a reporting company and a seasoned or well-known seasoned issuer otherwise eligible to use Form S-3 — and timely files periodic Exchange Act reports — the insurer currently may advertise its RILAs or MVAs only if it satisfies prospectus delivery requirements.

In justifying its decision not to extend Rule 482 to non-variable annuities, the SEC in 2024 noted, among other concerns, that the performance data requirements of the rule were not suited to the bounded return structure of RILAs, which have frequently changing upside and downside limits. However, the SEC did express a willingness to continue to engage with the industry to explore an alternative approach that would address its concerns. The arguments raised by the industry to allow the extension of the rule have been summarized elsewhere, such as here, but they in large part focused on the disparity of treatment between non-variable and variable contracts, and between S-3 filers and non-S-3 filers, and on what was seen as unjustifiable additional burdens imposed by the exclusion of non-variable annuities from Rule 482.

Proposal

After further deliberations on the current regime, the SEC has determined that a consistent advertising framework for both variable and non-variable annuities is appropriate since “investors have access to similar information about the annuity and its issuer,” given that these products are registered on the same form. The SEC also noted that inclusion of RILAs and MVAs within the ambit of Rule 482 would eliminate the current regime of permitting broad-based advertising dependent upon filing Exchange Act reports, which the SEC has deemed unnecessary for these products.

Required Disclosures. As with mutual fund and variable contract advertisements, Rule 482 RILA and MVA advertisements would continue to be subject to the fair and balanced presentation requirements in Securities Act Rule 156 and would have to contain certain required disclosures for the benefit of investors. Among other things, these include a statement advising investors to carefully consider the investment objective, risks, and charges and expenses of the RILA or MVA before investing.

Performance Data. The SEC explained in the proposing release how the variable and investor-specific nature of a RILA’s bounded index return structure has, in its words, “prevented the Commission from developing standardized performance requirements for RILAs similar to [those] for variable annuities and other open-end investment companies that are the focus of Rule 482.” Accordingly, the SEC has proposed limiting the use of Rule 482 to RILA advertisements that do not include RILA performance data and has solicited comment on whether there is a way to standardize RILA past performance.

That said, the proposal would allow the inclusion of historical performance of an index, provided the presentation complies with index performance data requirements in Form N-4. Among other things, these requirements include a bar chart of index annual return performance over the last 10 years (or for the life of the index, if less) and a hypothetical example that reflects the return after applying a five percent cap and a negative 10% buffer, together with a legend emphasizing that the performance of the index is not the performance of the RILA.

Fees and Expenses. In addition, the SEC has proposed requiring other disclosures in Rule 482 RILA or MVA advertisements that explain information on fees and expenses. Aside from disclosures that are similar to those imposed on mutual fund and variable product advertisements, such as those relating to any maximum sales load, these communications would have to state the maximum loss percentage from contract adjustments.

Further, any RILA advertisement disclosing information regarding fees and expenses must state that, apart from any fees or expenses, the insurer limits what the investor can earn on the RILA, with the result that returns may be less than the index but that in exchange the investor receives some protection from loss. These two statements, of course, mirror required disclosure in RILA prospectuses.

Other Changes. Aside from the conditions regarding the availability of Rule 482, one other notable proposed change to Rule 482 is that advertisements for RILAs and MVAs must either be filed with the SEC under a separate section of Securities Act Rule 497 or with FINRA. Although RILA advertisements generally are already filed with FINRA, those filings are voluntary.

Separately, since the proposal would allow RILA and MVA issuers to rely on Rule 482 for their advertisements, the SEC has also proposed rescinding Rule 433(b)(1)(v) governing the use of FWPs that allowed RILA and MVA issuers who otherwise qualified to register on Form S-3 to disseminate advertisements without having to satisfy prospectus delivery requirements.

Possible Outstanding Matters

The SEC did not propose — nor did it address — an extension of Rule 482 to cover other non-variable insurance products. These products include registered contingent deferred annuities (CDAs) and registered index-linked universal life policies (RIULs), both of which must be registered on Form S-1 or Form S-3. As to the latter, the investment component operates very much like RILAs, and variable life products already can rely on Rule 482. Unlike variable and non-variable annuities, variable life and RIULs do not register on the same form. Due to the close collaboration with the SEC staff, however, registrants of RIULs (on S-1 or S-3) have developed extensive disclosures that are similar to variable life disclosures on Form N-6, which we believe justifies the use of a consistent advertising framework for these types of life products.

As to CDAs, these products operate similarly to guaranteed minimum withdrawal benefits, a feature that has been a part of many variable annuities and that has been frequently featured in advertisements that rely on Rule 482. Thus, an extension of Rule 482 to CDAs as well as to RIULs would promote investors’ interests and be consistent with the goals underlying the extension of Rule 482 to RILAs and MVAs.

Lastly, as to the proposed requirement in Rule 482 that advertisements for RILAs and MVAs be filed either with the SEC or with FINRA, the SEC might consider clarifying what the review process would be for communications submitted to the SEC. In the alternative, since insurers generally have been submitting advertisements to FINRA for many years under an established review process, the SEC might consider simply requiring that FINRA be the sole venue for that review.

Conclusion

RILA and MVA issuers would benefit significantly from the SEC’s commonsense proposal to rationalize the regulation of insurance product advertisements. Carlton Fields will continue to monitor developments and provide additional insights as this rulemaking proceeds.

The comment period for this proposal ends on July 27, 2026. If you would like to discuss any issues contained in the proposal, please contact the authors of this article.