June 27, 2022

Volume XII, Number 178

Advertisement
Advertisement

June 24, 2022

Subscribe to Latest Legal News and Analysis
Advertisement

ETFs and Variable Annuities – A New Marketing Opportunity for ETFs

On Tuesday, March 29, the U.S. House of Representatives passed the “Securing a Strong Retirement Act of 2022,” or, as it is already being called, “Secure 2.0.”  Secure 2.0 builds on the important retirement security legislation that Congress passed in 2019 — the “Setting Every Community Up for Retirement Enhancement Act,” or the “Secure Act.”  While Secure 2.0 chiefly addresses retirement-oriented products, it includes a provision that may create broad new marketing opportunities for ETF sponsors.

Currently, ETFs are widely available through IRAs and retail investor accounts.  Retail investors, however, generally may not invest directly in ETFs within their variable annuity and variable life insurance products.  ETFs are not available because Treasury Department regulations, which pre-date ETFs, have created a technical gap that prevents ETFs from being offered directly in variable insurance products.  Section 203 of Secure 2.0 directs the Treasury Department to amend its tax regulations to allow ETFs to be offered within variable insurance products.  

Granted, when we talk with ETF clients, “insurance products”  is not a term that pops into mind.  But retail mutual funds already have a massive presence as investment options within insurance products, and the  range of mutual funds offered in these variable products is as diverse as in the retail mutual fund space.

The U.S. Senate is currently considering companion legislation for Secure 2.0. In anticipation of this legislation passing and becoming law, we believe many insurers will be looking to partner with ETF sponsors to develop new and innovative products, including ETF-structured annuity offerings that provide investors with lower-cost investment options within insurance products. 

© 2022 Vedder PriceNational Law Review, Volume XII, Number 96
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Thomas Conner Investment Lawyer Vedder Price
Shareholder

W. Thomas Conner is a Shareholder in the Investment Services group in the firm’s Washington, DC office.

Mr. Conner has represented financial services companies, including mutual funds, exchange traded funds (ETFs), insurance companies issuing fixed and variable annuities, commodity pools and commodity pool operators and other types of financial services firms for over 25 years. His practice combines regulatory experience with an extensive knowledge of the mutual fund, ETF, commodity pool, variable contract and investment advisory services.

...
(202) 312 3331
Nathaniel Segal Investment Attorney Vedder Price Law Firm
Counsel

Nathaniel Segal is counsel at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due diligence...

(312) 609 7747
Jeremy I. Senderowicz Finance Lawyer Vedder Price
Shareholder

Jeremy I. Senderowicz is a Shareholder in Vedder Price’s New York office and a member of the firm’s Investment Services practice group.

Mr. Senderowicz focuses his practice on advising registered investment companies, private funds and their investment advisers on a variety of matters pertaining to the Investment Company Act of 1940, the Investment Advisers Act of 1940 and other securities laws. He is a leading practitioner in the area of exchange-traded funds (ETFs), with extensive experience representing ETF sponsors and ETF fund complexes. His ETF clients include a wide range...

+1 (212) 407 7740
Advertisement
Advertisement
Advertisement