Advice for Businesses in Dealing with the Expanding Coronavirus Events

Coronavirus Impact on Investment Fund Board Meetings

March 11, 2020

Paul Hastings Covid-19 Task Force

The SEC Division of Investment Management (the “Division”) issued a statement on March 4, 2020 concerning the impact that emergency circumstances related to the Coronavirus might have on investment fund board meetings required under the Investment Company Act of 1940 (the “Act”) and related rules.1  In February 2019, the Division issued a letter to the Independent Directors Council indicating that it would not recommend enforcement action if fund boards do not adhere to certain in-person voting requirements in the event of unforeseen or emergency circumstances affecting some or all of the directors.2  In its most recent March 2020 statement, the Division stated that it would extend its no-action position with respect to Coronavirus-related emergencies to cover all approvals and renewals (including material changes) of contracts, plans, or arrangements under Section 15(c) of the Act or Rules 12b-1 or 15a-4(b)(2), as well as the selection of a fund’s independent public accountant pursuant to Section 32(a) where the accountant is not the same accountant selected in the preceding fiscal year.  The no-action position applies to board meetings held through June 15, 2020 and may be extended, but is conditioned on the board ratifying these actions at the next in-person meeting.

1 SEC, Division of Investment Management Staff on Fund Board Meetings and Unforeseen or Emergency Circumstances Related to Coronavirus Disease 2019 (COVID-19) (Mar. 4, 2020), https://www.sec.gov/investment/staff-statement-im-covid-19.
2 See id.; SEC, Letter from the staff of the Division of Investment Management to Independent Directors Council (Feb. 28, 2019), https://www.sec.gov/divisions/investment/noaction/2019/independent-directors-council-022819.