Investment and Asset Managers May Qualify for Relief Under the CARES Act
On March 28, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act offers relief to small businesses with fewer than 500 employees through the Paycheck Protection Program (PPP), which provides loans for certain costs incurred February 15, 2020 to June 30, 2020. Investment managers with fewer than 500 employees may be eligible to borrow through the PPP to cover certain expenses, including payroll, group health care benefits, interest payments, rent, and utility payments. A certain portion of the loans are eligible for loan forgiveness, subject to certain requirements.
SEC Extends Regulatory Relief for Investment Advisers and Investment Companies
On March 25, 2020, in response to continuing challenges presented by the COVID-19 pandemic, the Securities and Exchange Commission (SEC) provided regulatory relief under the Investment Advisers Act of 1940 and Investment Company Act of 1940. The regulatory relief extends the timeframes for certain filing or delivery obligations, including deadlines for Form ADV, Form PF, and reports to shareholders, subject to satisfying certain conditions. The conditions for relief generally require the affected adviser or fund to: (1) fail to meet a deadline or delivery requirement due to circumstances related to COVID-19; (2) promptly notify SEC staff and disclose on its website that the adviser or fund is relying on the order; and (3) complete the filing or delivery as soon as practicable but no later than the deadline specified in the order.
Please see our advisory on this topic:
SEC Extends Timeframe for Regulatory Relief for Investment Advisers and Investment Companies
CFTC Issues No-Action Letter Offering Regulatory Relief for CPOs
The Commodity Futures Trading Commission and the National Futures Association issued parallel guidance extending certain filing deadlines for registered commodity pool operators and registered commodity trading advisors, including deadlines for Form CPO-PQR, pool annual reports, and periodic account statements.
Please see our advisory on this topic:
CFTC Issues No-Action Letter Offering Regulatory Relief for CPOs
SEC Delays Comment Period for Proposed Rules
In response to the coronavirus pandemic, the SEC has delayed the comment period for several pending items, including its proposal to expand the accredited investor definition to include persons holding certain professional certifications and designations or other credentials and “knowledgeable employees” of a private fund that are investing in the private fund.
The SEC will not take final action on the following pending items until April 24, 2020:
- Amendments to Rule 2-01, Qualifications of Accountants, File No. S7-26-19, Release Nos. 33-10738, 34-87864, FR-86, IA-5422, IC-33737.
- Amending the “Accredited Investor” Definition, File No. S7-25-19, Release Nos. 33-10734, 34-87784.
- Disclosure of Payments by Resource Extraction Issuers, File No. S7-24-19, Release No. 34-87783.
- Use of Derivatives by Registered Investment Companies and Business Development Companies; Required Due Diligence by Broker-Dealers and Registered Investment Advisers Regarding Retail Customers’ Transactions in Certain Leveraged/Inverse Investment Vehicles, File No. S7-24-15, Release Nos. 34-87607, IA-5413, IC-33704.
- Notice of Proposed Order Directing the Exchanges and the Financial Industry Regulatory Authority to Submit a New National Market System Plan Regarding Consolidated Equity Market Data, File No. 4-757, Release No. 34-88340.
SEC Eases Manual Signature Retention Requirements Under Rule 302(b) of Regulation S-T
In response to the public health and safety concerns related to COVID-19, the SEC has eased the authentication document retention requirements under Rule 302(b) of Reg S-T, which requires that each signatory to documents electronically filed with the SEC “manually sign a signature page or other document authenticating, acknowledging or otherwise adopting his or her signature that appears in typed form within the electronic filing,” and that electronic filers must retain such documents for five years and furnish copies to the SEC upon request.
SEC staff will not recommend enforcement action on the requirements of Rule 302(b) if:
- A signatory retains a manually signed signature page or other document authenticating, acknowledging, or otherwise adopting his or her signature that appears in typed form within the electronic filing and provides such document to the filer for retention as promptly as reasonably practicable.
- Such document indicates the date and time when the signature was executed.
- The filer establishes and maintains policies and procedures governing this process.
Importantly, the signatory may satisfy the first condition by providing to the filer an electronic copy (such as a photograph or pdf) of the signature page or authentication document.
Please see our advisory on this topic:
Keep Mystery to a Minimum in Your SEC COVID-19 Disclosures
SEC Reaffirms Original Compliance Date for Regulation Best Interest and Form CRS
SEC Chairman Jay Clayton confirmed in a statement on April 2, 2020 that Reg BI and Form CRS will be implemented on the original compliance date of June 30, 2020. Reg BI imposes a new standard of conduct requiring broker-dealers and associated persons to act in the best interest of a retail customer and not place the financial or other interest of the broker-dealer or associated persons ahead of the retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer. Form CRS and its related rules require registered investment advisers and registered broker-dealers to deliver to retail investors a brief customer or client relationship summary that provides information about the firm, and to file such summary with the SEC.
Please see our advisory on this topic:
Deadline for Reg BI and Form CRS Compliance Remains on Track
Additional Recent Publications
- FINRA Guidance: COVID-19 and Business Continuity Planning, March 13, 2020.
- FINRA Proposes Rule Updates to Conform with Reg BI—But State Suitability Standards Remain an Open Question, March 20, 2020.
UPCOMING EVENTS
This Thursday, April 9, Kate Hanniford is speaking as part of the NRS Investment Adviser Certified Compliance Professional (IACCP) program co-sponsored by the Investment Adviser Association (IAA). This webinar will discuss the core principles of privacy, identity theft, and cybersecurity to increase preparedness and help firms map policies and procedures to their particular risk profile. For more information, click here. There is a discount of 10% off the individual course, which has a list price of $240. To register with the discount, contact Wade Quinn at wquinn@nrs-inc.com or 858-586-2551.