SEC Provides Conditional Relief to Investment Advisers and Investment Companies Impacted By Coronavirus – But Should You Use It?

On March 13, 2020, the SEC announced regulatory relief for investment advisers and investment companies who may be affected by the coronavirus.  The SEC is recognizing that limits on travel, reduced personnel and other business disruptions as a result of the coronavirus may cause delays in meeting regulatory filing deadlines and other regulatory obligations.

limits on travel, reduced personnel and other business disruptions as a result of the coronavirus may cause delays in meeting regulatory filing deadlines and other regulatory obligations

While this is welcome news given the extraordinary circumstances we are going through, it’s still ideal for firms to abide by original filing and/or delivery deadlines, if possible. In our recap of the conditional relief being provided, you’ll see that in most cases, firms are going to have to notify the SEC and clients that they are having trouble meeting regulatory requirements, which is generally not ideal. Of course, some firms will have very understandable reasons for needing the extra time. The impact of coronavirus is unprecedented so if you meet the required conditions and DO need more time, then certainly use it.

Here is what the SEC is allowing for:

For Investment Advisers

The conditional relief only applies to filings or delivery obligations with a deadline between March 13 and April 30, 2020. In other words, it applies to Form ADV Parts 1 and 2 (but NOT the new Part 3) and Form PF.

Specifically, relief is available to:

  • Registered investment advisers that have to file an amendment to Form ADV or Form PF; or deliver an amended Form ADV Part 2 to existing clients
  • Exempt reporting advisers that have to file reports on Form ADV

Advisers have up to 45 extra days to fulfill these filing/delivery requirements as long as the delay is due to circumstances related to the coronavirus.

To receive this extension, you must notify the SEC via email and publicly disclose on your website:

  • that you need the extra time
  • why you cannot file or deliver by the original deadline
  • the estimated date by which you will file or deliver

If you want to read the full text of this SEC order for investment adviser relief, you can do so here.

New FAQs

The SEC also recently provided a couple of FAQ responses related to the coronavirus.

No Need to Report Temporary Teleworking Addresses

On 1.F of Form ADV, regarding investment advisers conducting business from a temporary location, a firm is not required to update either Item 1.F of Part 1A or Section 1.F of Schedule D in order to list the temporary teleworking addresses of its employees due to the coronavirus. 

Defining Receipt of Client Assets When Firm Office is Temporarily Shut Down

For the custody rule (FAQ Question II.1), it states that, for the purpose of inadvertently receiving securities from a client per the custody rule, the investment adviser would not “receive” client assets at an office location until the firm personnel are able to access the mail or deliveries at the location. 

For Investment Companies

This includes registered investment companies, business development companies and unit investment trusts, as applicable. The conditional relief applies to the following:

  • In person board meetings required by federal securities laws
  • Form N-CEN and N-PORT filing requirements
  • Transmittal of annual and semi-annual reports to investors
  • Form N-23C-2 filing requirements
  • Prospectus delivery requirements

The reasons for needing temporary relief on filing deadlines or regulatory requirements must be due to the coronavirus.  Each relief item includes a set of specific conditions, but generally speaking an investment company must provide notice to the SEC and promptly notify its investors that it’s relying on the relief.     

If you want to read the full text of this SEC order for investment company relief, you can do so here.

For More Corona Virus Related Information

The SEC has established a page on its website that contains various updates about the coronavirus. 

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