SEC Proposed New Disclosure Rules for Registered Index-Linked Annuities in 2023. Here Is Where Things Stand.

What the SEC Proposed

On September 29, 2023, the Securities and Exchange Commission put forward a rule package targeting registered index-linked annuities, known as RILAs. The proposal came directly out of a congressional mandate in the Consolidated Appropriations Act of 2023, which directed the SEC to conduct investor testing and then build a dedicated registration form for these products.

Then-Chair Gary Gensler framed it plainly: "Given the complexity and growing popularity of RILAs, it is important that investors receive the information they need — in plain English — to make informed investment decisions."

The SEC's stated goal was to require disclosure language tailored specifically to how RILAs actually work, rather than forcing these products into a variable-annuity disclosure framework that wasn't designed for them.

What RILAs Actually Are

A RILA is an annuity contract sold by insurance companies to retail investors. The return is tied at least partly to the performance of an index or benchmark over a defined period of time. The key feature: both gains and losses are capped.

The products typically involve layered trade-offs between participation rates, buffers, floors, and caps — language that obscures as much as it explains. A buyer who doesn't fully understand those terms can end up with an outcome very different from what they expected, particularly in a down market where the loss buffer runs out.

That is why Congress pushed the SEC to act. Investor testing conducted as part of the rulemaking process directly shaped the proposed disclosure format.

What the Proposal Would Have Done

The SEC's proposal had four main components. First, it would have established a tailored registration form for RILAs rather than requiring issuers to shoehorn these products into forms designed for variable annuities. Second, it would have allowed insurance companies to use a summary prospectus framework, one that puts the key facts up front while making fuller details available to investors who want them. Third, it would have extended existing antifraud guidance to RILA advertisements and sales literature, closing a gap that left marketing materials less regulated than the prospectuses themselves. Fourth, it aimed to let insurance companies run RILA offerings using the same operational processes already used for variable annuities, which would reduce compliance costs without reducing disclosure.

The Case for the Proposal

The strongest argument in favor of these rules is straightforward: RILAs are sold to ordinary retail investors, and the existing disclosure regime wasn't built for them. When a product's risk profile depends on the interaction of a participation rate, a buffer percentage, and an index calculation methodology, burying that information in a variable-annuity prospectus format doesn't serve the buyer. Investor testing is the right way to find out whether people actually understand what they're buying. Building disclosure around those test results is more rigorous than guessing.

The insurance industry argument for the rule change is also legitimate on its face: operational alignment with variable-annuity processes reduces friction and cost, and lower compliance overhead can translate to better product terms for buyers.

The Legitimate Concern

Critics of expansive SEC disclosure regimes make a reasonable point: more pages of mandated disclosure don't automatically produce better-informed investors. There's a documented phenomenon sometimes called "disclosure fatigue." The more documents a buyer receives, the less any single one gets read. A summary prospectus framework addresses part of this, but it doesn't resolve the deeper question of whether retail investors have the financial literacy to evaluate index-linked products regardless of how the disclosures are formatted.

This doesn't argue against the rule. It argues for making sure investor testing is rigorous and that the resulting disclosures are genuinely readable, not just technically compliant. The SEC's stated reliance on actual investor testing before finalizing the proposal was the right methodology. Whether it was executed well is a separate question.

Where Things Stand

The September 2023 release was a proposal, not a final rule. The comment period was set to remain open for 60 days after publication on sec.gov or 30 days after publication in the Federal Register, whichever period was longer. The open question remains whether a rulemaking explicitly mandated by Congress and directly tied to investor protection for a complex product sold to retail investors made it through to finalization, was scaled back, or is still sitting in the queue.