SEC Division of Investment Management Director Dalia Blass expressed support for Regulation Best Interest (Reg BI) and discussed the recently proposed disclosure framework for variable contracts. She also responded to concerns regarding the recently adopted liquidity risk management rule.
In an address at the ALI CLE 2018 Conference on Life Insurance Company Products, Ms. Blass urged persons commenting on the SEC's proposed reforms to the disclosure framework for variable contracts to seriously consider the consequences of the rule. As previously covered, the SEC proposed a rule that would allow an issuer to satisfy its prospectus delivery requirement for variable contracts by delivering a summary prospectus. Ms. Blass stated that the amendments "could be on the books for a long time," and that the agency does not want it to be "out of date the minute it is adopted." Additionally, Ms. Blass requested specific feedback on the proposal's approaches to discontinued contracts and how they may be affected by future developments in technology.
Ms. Blass expressed support for the proposed Best Interest standards of conduct for financial professionals. In discussing the proposals, Ms. Blass emphasized the importance of preserving choice for investors. She noted that just as investors benefit from a variety of financial services, they also benefit from a variety of investment options. According to Ms. Blass, the Proposed Regulation Best Interest and Form CRS will also benefit investors by facilitating regulatory consistency.
Ms. Blass also addressed concerns regarding the impact of the recently adopted liquidity risk management rule on mutual funds holding more than 15 percent in illiquid investments. According to Ms. Blass, some concern has been expressed that mutual funds will be forced to sell assets - "possibly in a down market" - due to the rule. However, Ms. Blass stated, the rule is intended to ensure that the adviser and a Board act in the best interests of the fund by making sure the portfolio is in an "appropriate liquidity posture."
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