On March 4, 2020, the Securities and Exchange Commission (the “Commission”) announced (available here) that it is providing conditional regulatory relief (Order available here) for certain filing obligations under the federal securities laws to companies impacted by the coronavirus disease 2019 (“COVID-19”), including “U.S. companies located in the affected areas, as well as companies with operations in those regions.”
In connection with the Commission’s announcement, Chairman Jay Clayton remindedcompanies to consider disclosure obligations in connection with COVID-19. Specifically, he encouraged “all companies to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments.” Chairman Clayton recognized a company’s response to the outbreak can be important to an investment decision, and he urged“companies to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements.” Chairman Clayton added that, while providing forward-looking information “in an effort to keep investors informed about material developments, including known trends or uncertainties regarding coronavirus,” such companies “can take steps to avail themselves of the safe harbor in Section 21E of the Exchange Act for forward-looking statements.”
Relief from Filing Requirements
The Commission provided conditional relief in the form of an exemption from any requirement to file or furnish certain materials with the Commission. Specifically, the exemption covers those filingsmade under the following provisions of Securities Exchange Act of 1934, as amended (the “Exchange Act”),: Sections 12(a), 13(f), 13(g), 14(a), 14(c), 14(f), 15(d), Regulations 13A, 13D-G (except for those provisions mandating the filing of Schedule 13D or amendments to Schedule 13D), 14A, 14C and 15D, and Rules 13-f-1, and 14f-1. This includes Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, among others. This does not include Section 16 filings (such as Form 3 and Form 4) or Schedule 13D or its amendments.
The exemption is subject to the satisfaction of the following conditions:
• the registrant or any person required to make any filings with respect to such a registrant is unable to meet a filing deadline due to circumstances related to COVID-19;
• any registrant relying on the Order furnishes to the Commission a Form 8-K or, if eligible, a Form 6-K by the later of March 16, 2020 or 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 file such report, schedule or form on a timely basis;
• the estimated date by which the report, schedule, or form is expected to be filed;
• if appropriate, a risk factor explaining, if material, the impact of COVID-19 on the registrant’s business; and
• 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 must attach 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;
• The subject report is filed with the Commission no later than 45 days after the original due date; and
• In the subject report filed by the applicable deadline under the bullet-point above, the filer must disclose that it is relying on the Order and state the reasons why it could not file such report, schedule or form on a timely basis.
Relief from Furnishing of Proxy and Information Statements
The Commission’s exemption from the requirement of the Exchange Act and the rules thereunder to furnish (i) proxy statements, annual reports, and other soliciting materials (the “Soliciting Materials”) and (ii) information statements and annual reports (the “Information Materials”) (including Sections 14(a) and (c) and Regulations 14A and 14C and Rule 14f-1) is subject to the satisfaction of the following conditions:
• the registrant’s security holder has a mailing address located in an area where, as a result of COVID-19, the common carrier has suspended delivery service of the type or class customarily used by the registrant or other person making the solicitation; and
• the registrant, or other person making a solicitation, has made a good faith effort to furnish the Solicitation Materials to the security holder, as required by the rules applicable to the particular method of delivering Soliciting Materials to the security holder, or, in the case of Information materials, the registrant has made a good faith effort to furnish the Information Materials to the security holder in accordance with the rules applicable to Information Materials.
Relief Time Period
The relief applies for the period from and including March 1, 2020 to April 30, 2020. The Commission will continue monitoring the current situation and may, if necessary, extend the time period during which the relief applies.
Any registrant or other person in need of additional assistance related to filing deadlines, delivery obligations or their public filings should contact the Office of the Chief Counsel of the Division of Corporation Finance at (202) 551-3500 or at https://www.sec.gov/cgi-bin/corp_fin_interpretive.
Relief from In-Person Meeting Requirements for Investment Funds
In addition, the Commission Division of Investment Management issued a Staff Statement (available here) in connection with fund boards’ in-person attendance and concerns related to potential travel restrictions or the ability of directors to travel. The Division staff had issued a letter to the Independent Directors Council on February 28, 2019 (available here) that the staff would not recommend enforcement action if fund boards do not adhere to certain in-person voting requirements in the event of unforeseen or emergency circumstances. Consistent with the staff position in 2019, the staff extended the no-action position expressed in the Independent Directors Council letter with respect to unforeseen or emergency circumstances to cover “all approvals and renewals (including material changes) of contracts, plans or arrangements under section 15(c) or Rules 12b-1 or 15a-4(b)(2), as well as the selection of a fund’s independent public accountant pursuant to Section 32(a) where such accountant is not the same accountant as selected in the immediately preceding fiscal year,” each conditioned on board ratification of these actions at the next in-person board meeting.
We would like to thank Rodrigo Surcan in our New York office for his work on this article.