SEC Relieves Regulatory Pressure on Investment Advisers, Funds

With the COVID-19 pandemic affecting financial markets and business operations worldwide, the Securities and Exchange Commission (SEC) issued guidance and conditional regulatory relief for fund managers, registered investment advisers and their respective boards.

Through two separate orders on March 13, 2020, the SEC announced a temporary easing of requirements for certain filing and delivery requirements as well as for in-person board meetings.

The announcement acknowledged “the impacts of the coronavirus may delay or prevent funds and advisers operating in affected areas from meeting certain regulatory obligations” due to disruptions related to travel, gathering restrictions, facility access, personnel availability and other issues. The relief aims to enable funds and advisers to meet regulatory obligations and continue operations in the current climate.

“Investment funds and advisers are at the forefront of Main Street investor access to financial markets, and the Commission is monitoring closely the impacts of the coronavirus on investors and market participants,” said SEC Chairman Jay Clayton. “As investors, investment funds, investment advisers and other market participants endeavor to address these challenges, the Commission stands ready to take action in the interest of our investors and our markets as appropriate.  Today’s targeted relief will provide additional time so affected funds and advisers can continue meeting the expectations of their investors and clients.”

SEC relief for registered investment companies

The SEC order temporarily exempts registered management investment companies, business development companies, and any investment adviser or principal underwriter of such companies affected by COVID-19 from the following requirements, subject to conditions:

• Certain agreements, plans or arrangements be approved by the company’s board of directors by an in-person vote
• Form N-CEN and Form N-PORT filing deadlines
• Annual and semi-annual report transmittal deadlines
• Requirement to file Form N-23C-2 at least 30 days prior to calling or redeeming securities

SEC relief for registered investment advisers

The SEC order temporarily exempts registered investment advisers and exempt reporting advisers affected by COVID-19 from the following requirements, subject to conditions:

• File an amendment to Form ADV or file reports on Form ADV part 1A
• Deliver amended brochures, brochure supplements or summary of material changes to clients where the disclosures are not able to be timely delivered because of circumstances related to coronavirus
• Form PF filing requirements

Per the SEC, “for an entity seeking to rely upon an order, attention is directed to the various conditions, including, as applicable, the requirements to notify Commission staff of the intention to rely upon the order and to disclose information on its website about its reliance upon the order.”

As of the date of this post, the SEC has not commented on any potential delays of the effective date (June 30, 2020) of Regulation Best Interest and Form CRS requirements for both broker-dealers and investment advisers. The SEC has said it will continue to assess impacts relating to the coronavirus on investors and market participants and will consider additional relief from other regulatory requirements or extending the time period of relief as it deems appropriate. Visit https://www.sec.gov/sec-coronavirus-covid-19-response for a full list of SEC guidance and targeted regulatory assistance and relief related to COVID-19.

Contact me or another member of Kaufman Rossin’s risk advisory services team to learn more about how these regulatory actions may affect you or your firm.