Advice for Businesses in Dealing with the Expanding Coronavirus Events

SEC Releases Additional Guidance to Promote Virtual Annual Meetings and Grants Additional Relief to Investment Advisers and Investment Funds

March 13, 2020

Paul Hastings Covid-19 Task Force

On March 13, 2020, the SEC issued additional guidance to assist market participants with upcoming annual shareholder meetings, and in particular, to facilitate their ability to hold these meetings and engage with shareholders virtually while maintaining compliance with federal securities laws in the wake of the Coronavirus.  SEC Chairman Jay Clayton acknowledged the transition of many public companies and other market participants to teleworking, and the SEC “stands ready to facilitate this transitions.”  Market participants are encouraged to contact the SEC with requests for guidance or relief.
Federal securities laws require many public companies and investment companies to hold annual meetings and deliver proxy materials to voting shareholders, but the Coronavirus has substantially interfered with their ability to hold in-person meetings.  Accordingly, the new SEC guidance provides flexibility to companies seeking to reschedule or relocate their meetings or use technology to facilitate virtual shareholder meetings.  Affected companies may announce these changes in SEC filings without incurring costs associated with physical mailing.  As we previously reported, the SEC itself has transitioned to teleworking and holding virtual meetings in light of the Coronavirus outbreak.

The SEC also granted similar relief on March 13, 2020 for investment advisers and investment funds with respect to in-person board meetings and certain filing and delivery requirements due on or before April 30, 2020 (with potential future extensions possible),1 to enable those funds and advisers to meet regulatory obligations and continue operations notwithstanding disruptions caused by the Coronavirus.  The SEC’s orders grant relief from the following requirements:

Investment Company Act of 1940

• Registered management investment companies, business development companies, and investment advisers or principal underwriters thereof, due to circumstances related to the Coronavirus: from requirements that certain agreements, plans, or arrangements be approved by the board of directors by an in-person vote;

• Registered management investment companies and unit investment trusts affected by the Coronavirus: from (1) Form N-CEN and Form N-PORT filing deadlines, and (2) annual and semi-annual report transmittal deadlines; and

• Registered closed-end investment companies and business development companies: from the requirement to file Form N-23C-2 at least 30 days prior to calling or redeeming securities.

Investment Advisers Act of 1940

• Registered investment advisers and exempt reporting advisers affected by the Coronavirus: from filing an amendment to Form ADV or reports on Form ADV part 1A, respectively;

• Registered investment advisers affected by the Coronavirus: from requirements to deliver amended brochures, supplements, or summary of material changes to clients where the disclosures cannot be timely delivered because of circumstances related to the Coronavirus; and

• Private fund advisers affected by the Coronavirus: from Form PF filing requirements.

Entities seeking such relief must satisfy a number of conditions, including promptly notifying the SEC of the intention to rely on the orders and disclosing reliance on the orders on their own websites.  The SEC also announced that a registered fund’s failure to deliver to investors its current prospectus because of circumstances related to the Coronavirus will not afford a basis for SEC enforcement action, provided that the fund fulfills certain conditions.  The SEC’s full orders granting the aforementioned relief are available here and here.

1 Certain of the relief granted extends to June 15, 2020.