A proposed rule from the securities industry's self-regulatory organization would provide enhanced consumer protections on marketing materials for variable-insurance products, though some critics have raised questions about the effectiveness of the regulation.
Provisions in the Financial Industry Regulatory Authority Inc.'s proposed rule, which would cover applicable insurers and broker- dealers, include a requirement that all marketing materials clearly identify the type of variable product that is being discussed and a prohibition against claims that the product is a mutual fund. Marketing materials will also be prohibited from presenting variable-insurance products as short-term liquid investments.
Finra of New York and Washington has also addressed guarantees and riders requiring a "fair and balanced" presentation of the features and forbidding member firms from exaggerating the features' benefits or from providing the insurer's credit rating or financial strength.
Limits would also be placed on how hypothetical illustrations of these products were presented; marketing materials would urge investors to get a personalized illustration reflecting fees and charges.
The proposed rule would codify existing rules and interpretations, including those governing broker-dealer communications. Currently, it is in its comment period, which will end Sept. 30.
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