On March 25, 2020, the Securities and Exchange Commission (SEC) issued several orders (the Orders) under the Securities Exchange Act of 1934 (the “Exchange Act”), the Investment Company Act of 1940 (the 1940 Act) and the Investment Advisers Act of 1940 (the Advisers Act), and an accompanying press release (the Press Release¹) intended (i) to further extend the filing periods covered by its previously enacted conditional reporting relief for certain public company filing obligations, (ii) to further extend regulatory relief previously provided to funds and investment advisers whose operations may be affected by COVID-19, and (iii) to provide public company disclosure guidance. The relief builds upon relief issued by the SEC in late February and early March, including orders issued on March 4, 2020 (the March 4 Order)² under the Exchange Act and orders issued on March 13, 2020 under the 1940 Act³ (the 1940 Act March 13 Order) and Advisers Act⁴ (the Advisers Act March 13 Order). For a chart setting forth the various relief provided to investment companies and investment advisers, see “COVID-19: Eversheds Sutherland Chart of SEC Relief for Investment Companies and Advisers”, posted on March 25, 2020.

Public Company Reporting Relief

On March 25, 2020, the SEC issued an order to extend the period covered by the relief granted in its March 4 Order with respect to both periodic report filing obligations and proxy and information statement related obligations from April 30, 2020 to July 1, 2020 (the Public Company Reporting Order).

Under the Public Company Report Order, as in the March 4 Order, companies subject to Exchange Act reporting obligations, including public companies and business development companies (BDCs), are granted a 45-day extension for filing reports, schedules (not including Schedule 13D or any amendments required to be filed there) and forms pursuant to the Exchange Act, including annual reports on Form 10-K and quarterly reports on Form 10-Q, if the registrant or other person obligated to make such filing is unable to timely file such report due to circumstances relating to COVID-19 subject to certain conditions. In order to rely on the extended filing deadline, the company must file a Form 8-K (or Form 6-K, as applicable) by the later of March 16 or the original reporting deadline stating, (1) that it is relying on the Public Company Reporting Order, (2) a description of the reasons preventing a timely filing, (3) the estimated date on which the report, schedule or form is expected to be filed, (4) if appropriate, risk factor disclosure, explaining any material impact of COVID-19 on the registrant’s business, and (5) if the reason the subject report cannot be filed timely relates to the inability of any person, other than the registrant, to furnish any required opinion, report or certification, the Form 8-K or Form 6-K shall have attached as an exhibit a statement signed by such person stating the specific reasons why such person is unable to furnish the required opinion, report or certification on or before the date such report must be filed. This extension means that companies with a quarterly report due on May 15th must file a Form 8-K with the requisite statements no later than May 15th and must file the quarterly report on Form 10-Q by June 29th.

The Public Company Reporting Order, like the March 4 Order, provides an exemption from the Exchange Act requirements to furnish proxy statements, annual reports and other soliciting materials and information statements if the security holder to whom such information is to be provided has a mailing address in an area where the common carrier has suspended delivery as a result of COVID-19, and provided that the registrant or other person relying on the Public Company Reporting Order has made a good faith effort to deliver such materials in accordance with applicable rules.

The SEC also noted in connection with the Public Company Reporting Order that it would take the following positions:   

• For purposes of eligibility to use Form S-3 or Form F-3 (and for well-known seasoned issuer status, which is based in part on Form S-3 or Form F-3 eligibility), a company relying on the Public Company Reporting Order will be considered current and timely in its Exchange Act filing requirements if it was current and timely as of the first day of the relief period and it files any report due during the relief period within 45 days of the filing deadline for the report.
• For purposes of the Form S-8 eligibility requirements and the current public information eligibility requirements of Rule 144(c), a company relying on the Public Company Reporting Order will be considered current in its Exchange Act filing requirements if it was current as of the first day of the relief period and it files any report due during the relief period within 45 days of the filing deadline for the report.
• Companies that receive an extension on filing Exchange Act annual reports on Form 10-K  or quarterly reports on Form 10-Q pursuant to the Public Company Reporting Order will be considered to have a due date 45 days after the filing deadline for the report. As such, those companies will be permitted to rely on Rule 12b-25 if they are unable to file the required reports on or before the extended due date.

Registered Investment Company Relief

On March 25, 2020, the SEC issued an order to extend the relief to investment companies initially granted in the 1940 Act March 13 Order, and reiterates the SEC’s statement regarding prospectus delivery obligations of registered funds, but extends the period for which this position is available and updates the associated notice requirements (the 1940 Act Order). Specifically: 

• The 1940 Act Order extends the relief under which registered management investment companies, BDCs, and any investment adviser or principal underwriter of such companies are exempted from 1940 Act sections and rules requiring certain agreements, plans or arrangements be approved by the company’s board of directors by an in-person vote due to circumstances related to the current or potential effects of COVID-19 from June 15, 2020 to August 15, 2020. 
• The 1940 Act Order extends the relief under which registered management investment companies and unit investment trusts affected by COVID-19 are exempted from Form N-CEN and Form N-PORT filing deadlines from April 30, 2020 to June 30, 2020. Filings still need to be made as soon as practicable but no later than 45 days after the original due date.
• The 1940 Act Order extends the relief under which registered management investment companies and unit investment trusts affected by COVID-19 are exempted from annual and semi-annual report transmittal deadlines from April 30, 2020 to June 30, 2020. Transmittal still needs to be made as soon as practicable but no later than 45 days after the original due date.
• The 1940 Act Order extends the relief under which registered closed-end investment companies and BDCs are exempted from the requirement to file Form N-23C-2 at least 30 days prior to calling or redeeming securities from June 15, 2020 to August 15, 2020.
• The 1940 Act Order extends the SEC’s position that it would not provide a basis for enforcement action if a registered fund does not deliver to investors its current prospectus where the prospectus is not able to be timely delivered because of circumstances related to COVID-19, provided that the sale of shares to the investor was not an initial purchase by the investor of shares of the registered fund, and subject to the conditions described in the 1940 Act Order, from April 30, 2020 to June 30, 2020.

Among other conditions, entities must notify the SEC staff and/or investors, as applicable, of the intent to rely on the relief, but generally no longer need to describe why they are relying on the order or estimate a date by which the required action will occur. Specifically, in light of the evolving COVID-19 pandemic, the SEC removed the 1940 Act March 13 Order’s conditions that a registered fund that intends to rely upon the relief must include, in its email correspondence to SEC staff and on its website, a brief description of the reasons why it is unable to file the notice or report (and, if applicable, provide SEC staff with an estimated date by which it expects to make such filing).

Advisers Act Relief

On March 25, 2020, the SEC issued an order to extend the relief previously granted to investment advisers registered with the SEC (RIAs) and exempt reporting advisers (ERAs) with respect to certain filing, delivery and reporting requirements under the Advisers Act due to disruptions and limitations caused by COVID-19 from April 30, 2020 to June 30, 2020 (the Advisers Act Order).

Under the Advisers Act Order, like the Advisers Act March 13 Order, if the conditions are satisfied, exemptions are available from the following filing, delivery and reporting requirements arising during the Period:

• Form ADV Filing and Reporting. An RIA is exempt from the requirements of Rule 204-1 under the Advisers Act to file an annual Form ADV update or otherwise to file an updated Form ADV. In addition, an ERA is exempt from the requirements of Rule 204-4 under the Advisers Act to file reports on Form ADV.
• Form ADV Delivery. An RIA is exempt from the requirements of Rules 204-3(b)(2) and (b)(4) under the Advisers Act to deliver its Form ADV Part 2 (or a summary of material changes).
• Form PF. An RIA is exempt from the requirements of Section 204(b) of the Advisers Act and Rule 204(b)-1 thereunder to file Form PF.

In light of the evolving COVID-19 pandemic, the Advisers Act Order removed the Advisers Act March 13, 2020 Order’s conditions that an investment adviser that intends to rely upon the relief must (i) include, in its email correspondence to SEC staff and on its website, as applicable, why it is unable to meet a filing deadline or delivery requirement, and (ii) provide an estimated date of filing or delivery completion.

Public Company Disclosure Guidance 

Simultaneously with the release of the Orders, the SEC’s Division of Corporation Finance (the Corporation Finance Staff) issued Disclosure Guidance Topic No. 9 (the Guidance), which provides the Corporation Finance Staff’s current views regarding disclosure and other obligations that companies should consider with respect to COVID-19.

While recognizing that the impact of COVID-19 on companies is evolving rapidly and its future effects are uncertain, the Corporation Finance Staff in the Guidance encourages companies to consider the need for COVID-19-related disclosures in management’s discussion and analysis, the business section, risk factors, legal proceedings, disclosure controls and procedures, internal control over financial reporting and the financial statements. Such disclosure should be tailored, provide material information about the impact of COVID-19 to investors and market participants and allow investors to evaluate the current and expected impact of COVID-19 through the eyes of management. The Guidance provides a non-exhaustive list of questions that companies may wish to consider when assessing such disclosure, including how COVID-19 has impacted financial condition and results of operations, capital and financial resources and assets on the company’s balance sheet. 

The Guidance, and the SEC in the Press Release, also reminds companies that they should avoid selective disclosure of material non-public information in connection with COVID-19, and that company insiders should avoid trading on such information prior to public dissemination. Further, both the Guidance and the Press Release remind companies that companies providing forward-looking information in an effort to keep investors informed about material developments, including known trends or uncertainties regarding the coronavirus, can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for this information.

The Guidance also addresses the impacts that COVID-19 may have on the ability of companies to timely report earnings and financial results in GAAP and non-GAAP formats, and encourages companies to proactively address financial reporting matters earlier than usual. 

Outlook

The Orders, the Press Release and the Guidance signify a continuing recognition by the SEC and its staff of the significant impacts of COVID-19 on the companies under its purview. The Orders note that the SEC intends to continue to monitor the current situation. The time period for any or all of the relief may, if necessary, be extended with any additional conditions that are deemed appropriate, and the SEC may continue to issue other relief as necessary or appropriate. In connection with the issuance of the Orders, the SEC also stated that registrants facing administrative difficulties in the filing process are encouraged to contact SEC staff, who will be available to help address these issues, and that the SEC staff will continue to address these and any issues on a case-by-case basis in light of their fact-specific nature.  

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¹The Press Release is available at https://www.sec.gov/news/press-release/2020-73.
²For more information, see our March 10, 2020 legal alert, “Coronavirus - The SEC acts quickly - United States,” available at https://www.eversheds sutherland.com/global/en/what/articles/index.page?ArticleID=en/coronavirus/COVID-19-The-SEC-acts-quickly.
³For more information, see our March 17, 2020 legal alert, “Coronavirus – The SEC provides relief for investment companies,” available at https://us.eversheds-sutherland.com/NewsCommentary/Legal-Alerts/229856/Legal-Alert-Coronavirus-The-SEC-provides-relief-for-investment-companies.
⁴For more information, see our March 17, 2020 legal alert, “SEC relief for advisers impacted by COVID-19,” available at https://us.eversheds-sutherland.com/NewsCommentary/Legal-Alerts/229831/Legal-Alert-SEC-relief-for-advisers-impacted-by-COVID-19.

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