SEC Guidance and Relief During COVID-19 Pandemic

Nelson Mullins Riley & Scarborough LLP

The Securities and Exchange Commission has been actively providing guidance and relief to issuers and other market participants amid the COVID-19 pandemic and has stated it may extend the relief granted if warranted by developing conditions. The SEC has published a detailed explanation of the measures they have taken on their website – Below is a summary of a few key initiatives.

Relief for Exchange Act Filings

On March 25, 2020, the SEC extended conditional exemptions from reporting and proxy delivery requirements for public companies, funds, and investment advisers affected by COVID-19.

In an order (Release No. 34-88465) (the “Order”), public companies were provided with a 45-day extension to file certain Exchange Act disclosure reports and other filings that would otherwise have been due between March 1 and July 1, 2020 (the “Relief Period”), if certain conditions are met. This relief affects the following filings:

  • Annual reports on Form 10-K;
  • Annual reports on Form 20-F (applicable to foreign private issuers);
  • Quarterly reports on Form 10-Q;
  • Current reports on Form 8-K;
  • Proxy and information statements; and
  • Beneficial ownership reports on Schedule 13G.

Companies should be aware that the Order does not apply to Schedule 13D filings and beneficial ownership filings under Section 16 of the Exchange Act, including Forms 3, 4 and 5.

In order to take advantage of the 45-day extension:

  • The registrant or person must be unable to meet a filing deadline due to circumstances related to COVID-19;
  • Anyone relying on the Order must furnish to the SEC a Form 8-K (or Form 6-K for foreign private issuers) by the original filing deadline of the report stating:
    • that it is relying on the Order;
    • a brief description of the reasons why it could not timely file;
    • the estimated date it is expected to file;
    • a company-specific risk factor explaining any material impact of COVID‑19 on its business; and
    • if the delay is due to a third party that cannot timely furnish its required opinion, report or certification, a signed statement from such person stating the specific reasons why.
  • The registrant or person makes the required filing no later than 45 days after the original due date; and
  • When making the required filing, the registrant or person must disclose that it is relying on the Order and state the reasons why it could not timely file.

Effect on Due Dates

If a company relies on the 45-day extension for a Form 10-K or Form 10-Q, the report will be considered to have a due date 45 days after the original filing deadline. Additionally, registrants will be able to rely on Rule 12b-25 to obtain further extensions for filing deadlines for reports beyond the extended due date.[1]

Effect on Form S-3 and Form S-8 Eligibility

For the purpose of determining eligibility to use registration statements on Form S-3 and Form S-8, a registrant that relies on the 45-day extension described above will be considered current and timely in its Exchange Act filing requirements if it was current and timely as of March 1, 2020 and files any report due during the Relief Period within 45 days of the filing deadline of such report.

Relief for Signatures for Electronic Filings

On March 24, 2020, the staff of the SEC’s Division of Corporation Finance, Division of Investment Management and Division of Trading and Markets published an announcement concerning the manual signature requirements under Regulation S-T for electronic filings made with the SEC, in light of health, transportation and other logistical issues raised by COVID-19.

Rule 302(b) of Regulation S-T requires each signatory to a document filed electronically with the SEC to manually sign a signature page, to retain the paper originals of the signatures for a period of five years and to furnish copies to the SEC upon request.

Because the COVID-19 pandemic has created difficulties in complying with Rule 302(b), the SEC staff stated that it would not recommend that the SEC take enforcement action with respect to the requirements of Rule 302(b) if:

  • the signatory retains the manually signed signature page or other authentication document and provides the document as promptly as reasonably practicable to the electronic filer in the ordinary course (e.g., if a signatory is teleworking, he or she may retain the original paper copy until the signatory can return to his or her place of work and deliver such document to the electronic filer);
  • the signature page indicates the date and time the signature was executed; and
  • the filer establishes and maintains policies and procedures governing this process.

Additionally, a signatory may provide to the filer an electronic record (such as a photograph or pdf) of the signed document.

Relief for Shareholder Meetings

The staff of the SEC Division of Corporation Finance and Division of Investment Management issued guidance for conducting annual shareholders meetings in light of COVID-19 concerns. The staff has provided the following guidance to assist issuers, shareholders, and other market participants affected by COVID-19 with meeting their obligations to deliver proxy materials to shareholders.

Changing the Date, Time, or Location of an Annual Meeting

If an issuer has already mailed and filed its definitive proxy materials, the issuer can change the date, time, or location of the annual meeting so long as the decision is made sufficiently in advance of the meeting to alert the market in a timely manner. Once the decision to change the date, time, or location of the meeting is made, the issuer must promptly notify shareholders of the change of its annual meeting, but is not required to mail additional soliciting materials or to amend its proxy materials if it:

  • issues a press release announcing such change;
  • files the announcement as definitive additional soliciting material on EDGAR; and
  • takes all reasonable steps necessary to inform other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as the appropriate national securities exchanges) of the change.

If an issuer has not yet mailed and filed their definitive proxy materials, the SEC encourages issuers to consider whether to include disclosures regarding the possibility that the date, time, or location of the annual meeting will change due to COVID-19.

Virtual Shareholder Meetings

An issuer that plans to conduct a “virtual” or “hybrid” meeting, as permitted by state law and its governing documents, is expected to notify its shareholders, intermediaries in the proxy process, and other market participants of such plans in a timely manner and to disclose clear directions as to the logistical details of the virtual or hybrid meeting, including how shareholders can remotely access, participate in, and vote at the meeting.

If an issuer has not yet filed and delivered its definitive proxy materials, these disclosures should be included in the definitive proxy statement and other soliciting materials.

If an issuer has already filed and mailed its definitive proxy materials, the issuer does not need to mail additional soliciting materials (including new proxy cards) solely for the purpose of switching to a virtual or hybrid meeting so long as they follow the steps described above for announcing a change in the meeting date, time, or location.

Presentation of Shareholder Proposals

While Exchange Act Rule 14a-8(h) requires shareholder proponents, or their representatives, to appear and present their proposals at the annual meeting, the SEC staff encourages issuers (to the extent feasible under state law) to provide shareholder proponents or their representatives with the ability to present their proposals through alternative means, such as by phone. In addition, if a shareholder proponent or representative is not able to attend the annual meeting and present the proposal due to the inability to travel or other hardships related to COVID-19, the staff would consider this to be “good cause” under Rule 14a-8(h)(3), protecting shareholders from having future proposals excluded for the following two calendar years.

Relief from Delivery Requirements for Proxy Materials

Acknowledging that mail delivery may be suspended in certain areas due to COVID‑19, under the same order referenced above (Release No. 34-88465), the SEC granted some relief from the rules covering delivery of proxy statements, annual reports, information statements, and other soliciting materials, if the following conditions are met:

  • A security holder has a mailing address in an area where delivery service of the type or class typically used by the registrant or other person has been suspended as a result of COVID-19; and
  • The registrant or other person has made a good faith effort to furnish the materials to the security holder in compliance with the rules applicable to such materials.

Insider Trading and Selective Disclosure Considerations

The SEC also advised companies and other related persons to pay special attention to their market activities during this time. Companies should publicly disclose applicable information if COVID-19 has already affected a company in a way that would be material to investors or when a company becomes aware of a risk related to COVID-19 that would be material to investors. When companies disclose material information related to the impacts of COVID-19, they must take the necessary steps to comply with Regulation FD and avoid selective disclosures by disseminating such information broadly to the public. Companies should consider whether they need to revisit, refresh, or update previous disclosures (including such matters as earnings guidance or outlook) to the extent that information becomes materially inaccurate.

Disclosure Guidance

The SEC Division of Corporation Finance issued Disclosure Guidance Topic No. 9, providing the SEC’s current views regarding disclosure and other securities law obligations that companies should consider with respect to COVID-19 and related business and market disruptions. The SEC provides a list of questions company management should be considering in light of continued disclosure obligations. The SEC encourages tailored disclosure that provides material information about the impact of COVID-19 to investors and market participants and that allow investors to evaluate the current and expected impact of COVID-19 through the eyes of management. Companies are encouraged to proactively revise and update disclosures as facts and circumstances change.

[1]  If one intends to rely on the Order, it must do so before relying on Rule 12b-25 to obtain an extension of the filing date.  Rule 12b-25, however, is available after the expiration of the time period granted by the Order.  See  C&DIs – Exchange Act Rules – Questions and Answers of General Applicability – Questions 135.12 and 135.13 (March 31, 2020).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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