Conditional Exemptions from Reporting and Proxy Delivery Requirements for Public Companies, Funds, and Investment Advisers Affected by Coronavirus Disease 2019 (COVID-19)
The SEC issued temporary relief for both registered funds and advisers concerning in-person board meetings and several filing or delivery obligations on account of business disruptions associated with the COVID-19 pandemic. Detailed conditions and requirements are set forth in a series of SEC Orders, but in general the relief covers:
- In-person board votes – until August 15, boards are relieved from in-person board votes in connection with Sections 15(c) and 32(a) if votes are cast at a meeting held by other means (e.g., telephonic or videoconference) where everyone can hear each other simultaneously, and the board, including a majority of non-interested trustees, ratifies its vote at the next in-person meeting.
- Forms N-CEN and N-PORT – relief from filing until June 30 upon providing notice to the SEC, issuing a public statement on the fund’s public website, and the fund files the required Forms as soon as practicable but no later than 45 days from the original due date, and the delayed filings include a statement that the fund relied on the delaying order and reasons for non-timely filing.
- Annual and semi-annual shareholder reports – relief until June 30 from transmitting reports if the fund meets all the same conditions as with Forms N-CEN and N-PORT except the transmittal to shareholders is within 45 days from the original due date and you file within 10 of transmission to shareholders. There is no requirement to put a statement in the reports about the delays.
- Form N-23C-2 (closed-end funds and BDCs) – relief until August 15 for notices to call or redeem securities need not be made 30 days in advance if the fund notifies the Commission, ensures that the shortened notice period is permitted under state law and governing documents, and the fund files a notice containing all information required by Rule 23c-2 before any call or redemption of existing securities, offering replacement securities, or notifying existing shareholders.
- Prospectus Delivery delays – untimely delivery would not be a basis for enforcement if delay related to COVID-19 if the fund notifies Commission, publishes reasons on the fund’s website, publishes the current prospectus on its public website, and the prospectus is delivered as soon as practicable but not later than 45 days from original due date.
Investment advisers may delay filing Form ADV amendments and delivery of Part 2 to existing clients; and filing of Form PF with due dates until June 30 if the adviser has notified the Commission and files or delivers the relevant document as soon as practicable, but not later than 45 days from the original due date.
The SEC also emphasized registrants should consider whether they need to refresh their public disclosures. Furthermore, those facing difficulties in meeting other regulatory obligations (e.g., satisfying filing requirements), should contact the SEC staff for further assistance. For more information, including specific detailed requirements, registrants should review the Orders available at the following links on the SEC’s website:
Temporary Exemptive Relief for Interfund Lending
The SEC provided temporary relief to open-end funds and insurance company separate accounts to borrow money from certain affiliates, subject to certain conditions, including notice to the SEC and on the fund’s public website, and making certain other public disclosures. The Order allows borrowing up to 25% of net assets. The Board also may approve expanding a borrowing facility beyond a policy stated in the registration statement. If there is not an existing interfund lending (IFL) agreement in place (and even if not disclosed in registration statement), a fund may still rely on the relief subject to the same terms as other IFL precedent. The relief extends until June 30, 2020. For more information, please follow this link to the SEC’s website:
No-Action Letter Permitting Temporary Affiliated Purchases of Debt Securities
The SEC’s Division of Investment Management granted relief by no-action letter that would permit a registered open-end investment company that does not hold itself out as a money market fund and is not an ETF to allow an affiliated person that is not a registered investment company to buy illiquid debt securities at fair market value (rather than amortized cost) from the fund, in general accordance with the requirements of Rule 17a-9 and other conditions. The relief requires notifying Division Staff and posting related information on the fund’s public website within one business day of the purchase. For more information, please follow this link to the SEC’s website:
