Wednesday, March 25. 2020
SEC Extends Conditional Exemptions From Reporting and Proxy Delivery Requirements In Light of Coronavirus Disease 2019
Relief for Public Companies
To address potential compliance issues, the SEC previously issued an order on March 4, 2020 that provides public companies with a 45-day extension to file certain disclosure reports that would have been due between March 1 and July 1, 2020. The new order supersedes and extends the original order. Among other conditions, companies must continue to offer a current report that conveys a summary of why the relief is needed in their particular circumstances for each periodic report that must be delayed.
For those companies seeking to rely upon the order, attention is directed to the various conditions stipulated including the requirement to furnish a Form 8-K or Form 6-K by the later of March 16 or the original reporting deadline.
SEC staff will also take the following positions with respect to certain obligations under the Securities Act and the Exchange Act:
- For purposes of eligibility to use Form S-3 or Form F-3 (and for well-known seasoned issuer status, which is based in part on Form S-3 or Form F-3 eligibility), a company relying on the exemptive order will be considered current and timely in its Exchange Act filing requirements as long as it was current and timely as of the first day of the relief period. It must also file any report due during the relief period within 45 days of the filing deadline for the report.
- For purposes of the Form S-8 eligibility requirements and the current public information eligibility requirements of Rule 144(c), a company relying on the exemptive order will be considered current in its Exchange Act filing requirements if it was current as of the first day of the relief period. It must also file any report due during the relief period within 45 days of the filing deadline for the report.
- Companies that receive an extension on filing Exchange Act annual reports or quarterly reports pursuant to the order will be considered to have a due date 45 days after the filing deadline for the report. Because of this, those companies will be permitted to rely on Rule 12b-25 if they are unable to file the required reports on or before the extended due date.
The SEC may provide extensions to the time period for the relief, along with any additional conditions it deems appropriate. It may also provide additional relief as circumstances warrant. Companies and their representatives are encouraged to contact SEC staff with questions or matters of particular concern. Check the recent SEC orders for more information regarding these temporary exemptions.
Relief for Investment Funds and Advisers
On March 13, 2020, the SEC issued orders that provide certain investment funds and investment advisers with additional time with respect to holding in-person board meetings and meeting certain filing and delivery requirements. The new orders supersede and extend the filing periods covered by that original SEC order. Among other conditions, entities must notify SEC staff and/or investors (as applicable) of their intent to rely on the relief but generally no longer need to describe why they are relying on the order or estimate a date by which the required action will occur. The time periods for relief are described in the order. The SEC may extend the time period, and it may also change or extend any additional conditions it deems appropriate. It may also provide further relief as circumstances warrant. Firms and financial professionals are encouraged to contact SEC staff with questions or matters of particular concern.
Subject to certain conditions, the following temporary exemptive relief is provided:
Relief Related to the Investment Company Act of 1940
- Registered management investment companies, business development companies, and any investment adviser or principal underwriter of such companies are relieved from Investment Company Act sections and rules requiring certain agreements, plans, or arrangements be approved by the company’s board of directors by an in-person vote. This is due to circumstances related to the current or potential effects of coronavirus. The order extends to the period from (and including) the date of the original order to (and including) August 15, 2020. The original order provided relief to June 15, 2020.
- Registered management investment companies and unit investment trusts affected by coronavirus are relieved from meeting Form N-CEN and Form N-PORT filing deadlines when the original due date is on or after the date of the original order but on or prior to June 30, 2020. The original order extended the filing deadlines on or prior to April 30, 2020. Filings would still need to be made as soon as practicable but no later than 45 days after the original due date.
- Registered management investment companies and unit investment trusts affected by coronavirus are temporarily relieved from annual and semi-annual report transmittal deadlines. Relief would extend to obligations for which the original due date is on or after the date of the original order but on or prior to June 30, 2020. The original order extended to April 30, 2020. Transmittal would still need to be made as soon as practicable but no later than 45 days after the original due date.
- Registered closed-end investment companies and business development companies are relieved from the requirement to file Form N-23C-2 at least 30 days prior to calling or redeeming securities. The order would extend to the period from (and including) the date of the original order to (and including) August 15, 2020. The original order extended to June 15, 2020.
Entities should read the SEC’s orders for specific instructions.
Relief Related to the Investment Advisers Act of 1940
The order extends the following obligations for which the original due date is on or after the date of the original order but on or prior to June 30, 2020. The original order extended to April 30, 2020. Filing or delivery (as applicable) would still need to be made as soon as practicable but no later than 45 days after the original due date.
- Registered investment advisers and exempt reporting advisers affected by coronavirus are relieved from filing an amendment to Form ADV or file reports on Form ADV Part 1A, respectively.
- Registered investment advisers affected by coronavirus are relieved from requirements to deliver amended brochures, brochure supplements, or summary of material changes to clients where the disclosures are not able to be timely because of circumstances related to coronavirus.
- Private fund advisers affected by coronavirus are relieved from Form PF filing requirements.
Guidance for Public Company Disclosure
The Division of Corporation Finance has issued Disclosure Guidance Topic No. 9, which provides the staff’s current views regarding disclosure and other securities law obligations that companies should consider with respect to COVID-19 and related business and market disruptions. The Division has been monitoring the ways in which companies are reporting the effects and risks of COVID-19 on their businesses, financial condition, and results of operations. It is providing this guidance as companies prepare disclosure documents during this uncertain time.
As it did in past orders, the SEC is encouraging all companies and other related persons to consider their activities in these unprecedented times in light of their disclosure obligations under the federal securities laws. Where a company has become aware of a risk related to the coronavirus that would be material to its investors, it should refrain from engaging in securities transactions with the public. It should also discourage directors and officers (and other corporate insiders who are aware of these matters) from initiating such transactions until investors have been appropriately informed about the risk. The registrant should consider what disclosures are required in order to inform the public of its financial condition.
If a company should disclose material information related to the impacts of the coronavirus, it should take the necessary steps to avoid selective disclosures and to disseminate such information broadly. Depending on that company’s particular circumstances, it should also consider whether it may be necessary to revisit, refresh, or update previous disclosures. In addition, companies providing forward-looking information in an effort to keep investors informed about material developments (including known trends or uncertainties regarding the impacts of coronavirus) can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act.
The guidance encourages timely reporting but recognizes that it may be difficult to assess or predict with precision the broad effects of COVID-19 on industries or individual companies. The SEC divisions and offices that oversee companies, accountants, investment advisers, mutual funds, brokerage firms, transfer agents, and other regulated entities and financial professionals will continue to closely track developments. If appropriate, additional relief from other regulatory requirements for those affected by the coronavirus may be considered and released. Again, entities and financial professionals affected by the coronavirus are encouraged to contact SEC staff with questions and concerns.
Relief Concerning Delivery of Fund Prospectuses
As described in its orders, the SEC takes the position that there will be no enforcement action if a registered fund does not deliver to investors the current prospectus of the registered fund where the delivery of the prospectus is not able to be timely because of circumstances related to coronavirus. This is subject to the conditions described in the orders. The SEC’s position has been extended to June 30, 2020 via the most recent order. Delivery would still need to be made as soon as practicable but no later than 45 days after the date originally required.
Requests for Additional Assistance and Contacting the Division of Investment Management
Some companies and other affected persons may require additional or different assistance in their efforts to comply with the requirements of the federal securities laws. The SEC recognizes this situation and encourages these entities to contact its staff. Registrants facing administrative difficulties in the filing process (e.g., inability to obtain a required signature due to an executive officer being located in a quarantined zone) are encouraged to contact the staff who will be available to help with these issues. The SEC staff will continue to address these and any issues on a case-by-case basis in light of their fact-specific nature. Call (202) 551-3500 for general assistance with this order or submit a request for assistance and contact information at: https://www.sec.gov/forms/corp_fin_interpretive.
For general questions or concerns related to impacts of coronavirus on the operations or compliance of funds and advisers, including questions about Form N-MFP and Form N-CR, please email IM-EmergencyRelief@sec.gov.
For questions regarding Form N-LIQUID, please email IM-N-LIQUID@sec.gov and simultaneously contact: Tim Husson, Associate Director, at (202) 551-6803 and Jon Hertzke, Assistant Director, at (202) 551-6247.
For questions regarding Form ADV, email IARDLive@sec.gov.
For questions regarding Form PF, email FormPF@sec.gov.