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March 17, 2020

Stroock Special Bulletin

By: Eric Requenez, Robert Abrams, André B. Nance, Abdulmajeed F. Alhogbani

In response to the outbreak of coronavirus disease 2019 (“COVID-19”) and subsequent operational disruptions throughout the world, the Securities and Exchange Commission (“SEC” or “Commission”) issued guidance and conditional regulatory relief for fund managers, registered investment companies and their respective boards.[1]

Please do not hesitate to contact us with any questions or concerns you may have during this period and for assistance with the requirements or the conditions for relying on the relief granted by the SEC’s recently issued orders, including assistance drafting any of the emails referenced below.

Relief From Form ADV and Form PF Filing and Delivery Obligations

The SEC issued an order under the Investment Advisers Act of 1940, as amended (the “Advisers Act”; such order, the “Advisers Act Order”), which relieves certain registered investment advisers and exempt reporting advisers (each, an “Adviser”) from the timeliness requirements of Form ADV and Form PF filings and the Form ADV Part 2 client delivery obligations. The relief applies to Advisers when the original due date of such filing and delivery obligation is on or after March 13, 2020, but on or prior to April 30, 2020, and provides such Advisers with up to 45 days after the original due date for filing or delivery, as applicable, to make such filing or delivery, provided that the following conditions are satisfied:

(a) The Adviser is unable to meet a filing deadline or delivery requirement due to circumstances related to current or potential effects of COVID-19;

(b) The Adviser relying on the order with respect to the filing of Form ADV or delivery of its brochure, summary of material changes, or brochure supplement required by Rule 204-3(b)(2) or (b)(4) under the Advisers Act, promptly provides to the Commission via email at IARDLive@sec.gov and discloses on its public website (or if it does not have a public website, promptly notifies its clients and/or private fund investors of) the following information:

(1) that such Adviser is relying on the order;

(2) a brief description of the reasons why it could not file or deliver its Form ADV on a timely basis; and

(3) the estimated date by which it expects to file or deliver the Form ADV.

(c) Any Adviser relying on the order with respect to filing Form PF required by Rule 204(b)-1 must promptly notify the Commission via email at FormPF@sec.gov stating:

(1) that such Adviser is relying on the order;

(2) a brief description of the reasons why it could not file its Form PF on a timely basis; and

(3) the estimated date by which it expects to file the Form PF.

(d) The Adviser files the Form ADV or Form PF, as applicable, and delivers the brochure (or summary of material changes) and brochure supplement required by Rule 204-3(b)(2) and (b)(4) under the Advisers Act, as soon as practicable, but not later than 45 days after the original due date for filing or delivery, as applicable.[2]

It is important to note that filings not covered by the Advisers Act Order continue to be required on a timely basis, including filings on Form N-CR, Form N-MFP and Form N-LIQUID. In a press release announcing the Advisers Act Order, the SEC provided information on contacting its staff with issues, including issues related to the foregoing filings.[3]

Relief Applicable to Registered Investment Companies, Business Development Companies and Their Advisers

In-Person Meetings: On March 13, 2020, the SEC issued an order under the Investment Company Act of 1940 (“’40 Act Order”), which relieves boards of registered investment companies and any investment adviser of, or principal underwriter for, such registered investment company from any obligation to hold in-person meetings until June 15, 2020, provided that following conditions are satisfied:

(a) reliance on the order is necessary or appropriate due to circumstances related to current or potential effects of COVID-19;

(b) the votes required to be cast at an in-person meeting are instead cast at a meeting in which directors may participate by any means of communication that allows all directors participating to hear each other simultaneously during the meeting; and

(c) the board of directors, including a majority of the directors who are not interested persons of the registered management investment company or business development companies (“BDCs”), ratifies the action taken pursuant to this exemption by vote cast at the next in-person meeting.[4]

Certain SEC Filings: The ’40 Act Order also provides exemptions for Forms N-CEN, N-PORT and N-23C-2, to the extent a registered fund is unable to meet a deadline due to circumstances related to current or potential effects of COVID-19. The relief for Forms N-CEN and N-PORT apply to filing obligations for which the original due date is on or after March 13, 2020, but on or prior to April 30, 2020, provided that the following conditions are satisfied:

(a) The registered fund is unable to meet a filing deadline due to circumstances related to current or potential effects of COVID-19;

(b) Any registered fund relying on the order promptly notifies the Commission staff via email at IM-EmergencyRelief@sec.gov stating:

(1) that it is relying on the order;

(2) a brief description of the reasons why it could not file its report on a timely basis; and

(3) the estimated date by which it expects to file the report.

(c) Any registered fund relying on the order includes a statement on the applicable registered fund’s public website briefly stating that it is relying on the order and the reasons why it could not file its reports on a timely basis;

(d) The registered fund required to file such Form N-CEN or Form N-PORT files such report as soon as practicable, but not later than 45 days after the original due date; and

(e) Any Form N-CEN or Form N-PORT filed pursuant to the order must include a statement of the filer that it relied on the order and the reasons why it was unable to file such report on a timely basis.

The relief for Form N-23C-2 is limited to the period from March 13, 2020, to June 15, 2020, provided that the following conditions are satisfied:

(a) The closed-end fund or BDC (“Company”) relying on the order:

(1) promptly notifies Commission staff via email at IM-EmergencyRelief@sec.gov stating:

a. that the Company is relying on the order; and

b. a brief description of the reasons why it needs to file a notice fewer than 30 days in advance of the date set by the Company for calling or redeeming the securities of which it is the issuer;

(2) ensures that the filing of the notice on an abbreviated time frame is permitted under relevant state law and the Company’s governing documents; and

(3) files a notice that contains all the information required by Rule 23c-2 prior to:

a. any call or redemption of existing securities;

b. the commencement of any offering of replacement securities; and

c. providing notification to the existing shareholders whose securities are being called or redeemed.

Delivery of Prospectuses: The SEC announced that it would not provide a basis for an SEC enforcement action if a registered fund does not timely deliver a current prospectus because of circumstances related to COVID-19, when delivery was originally required during this period, provided that the sale of shares to the investor was not an initial purchase by the investor of shares of the registered fund and the following conditions are satisfied:

(a) The registered fund:

(1) Notifies Division of Investment Management staff via email at
IM-EmergencyRelief@sec.gov stating: (i) that it is relying on this Commission position; (ii) a brief description of the reasons why it or any other person required could not deliver the prospectus to investors on a timely basis; and (iii) the estimated date by which it expects the prospectus to be delivered;

(2) Publishes on its public website that it intends to rely on the Commission position and briefly states the reasons why it could not deliver the prospectus on a timely basis;

(3) Publishes its current prospectus on its public website; and

(b) Delivery was originally required on or after the date of the order but on or prior to April 30, 2020, and the prospectus is delivered to investors as soon as practicable, but not later than 45 days after the date originally required.

Shareholder Reports: The ’40 Act Order also provides exemptions from the obligations to timely transmit annual and semi-annual reports to shareholders and to file them with the SEC. The exemption applies when the original due date is on or after March 13, 2020, but on or prior to April 30, 2020, provided that the following conditions are satisfied:

(a) The registered fund is unable to prepare or transmit the report due to circumstances related to current or potential effects of COVID-19;

(b) Any registered fund relying on the order promptly notifies the staff via email at IM-EmergencyRelief@sec.gov stating:

(1) that the registered fund is relying on the order;

(2) a brief description of the reasons why it could not transmit its report on a timely basis; and

(3) the estimated date by which it expects to transmit the report;

(c) Any registered fund relying on the order includes a statement on the applicable registered fund’s public website briefly stating that it is relying on the order and the reasons why it could not prepare and transmit its reports on a timely basis; and

(d) The registered fund transmits the reports to shareholders as soon as practicable, but not later than 45 days after the original due date and files the report within 10 days of its transmission to shareholders.

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We also have released a number of alerts identifying additional issues to consider:

 

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For More Information

Eric Requenez

André B. Nance

[1] Press Release 2020-63, SEC Takes Targeted Action to Assist Funds and Advisers, Permits Virtual Board Meetings and Provides Conditional Relief from Certain Filing Procedures (Mar. 13, 2020), https://www.sec.gov/news/press-release/2020-63.

[2] Release No. IA-5463 (Mar. 13, 2020), https://www.sec.gov/rules/other/2020/ia-5463.pdf.

[3] For general questions or concerns related to impacts of the 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.

[4] Release No. IC-33817 (Mar. 13, 2020), hnotice to the SEC of filing delays, and website disclosure of issues with the delivery of shareholder rettps://www.sec.gov/rules/other/2020/ic-33817.pdf. The various forms of relief provided by the SEC are subject to conditions that are set out in the respective orders, such as subsequent ratification of votes, ports, prospectuses, and Form ADV client brochures.

 

This Stroock publication offers general information and should not be taken or used as legal advice for specific situations, which depend on the evaluation of precise factual circumstances. Please note that Stroock does not undertake to update its publications after their publication date to reflect subsequent developments. This Stroock publication may contain attorney advertising. Prior results do not guarantee a similar outcome.