SEC Provides Additional Relief for COVID-19

The SEC has announced additional relief in consideration of COVID-19 (Coronavirus) for registered agents, certain other persons, and registered investment companies.

Conditional Regulatory Relief for Registered Transfer Agents and Certain Other Persons

The SEC is providing conditional regulatory relief for registered transfer agents and certain other persons with regulatory obligations under the federal securities laws.   

The SEC indicated that the “impacts of COVID-19 may present challenges for transfer agents and other persons that are affected either directly or indirectly by COVID-19. To address these challenges, the Commission has issued an order that, subject to certain conditions, provides registered transfer agents and certain other persons with exemptive relief for certain regulatory obligations under the federal securities laws through May 30, 2020. Importantly, however, transfer agents at all times continue to be subject to the requirements of Exchange Act Rule 17Ad-12, which requires transfer agents to ensure that they adequately safeguard securities and funds in their possession or custody.”

Among other conditions, persons that wish to take advantage of the relief must provide written notification to the SEC that such person is taking advantage of the relief, a description of the specific regulatory obligations that the person is unable to comply with, and a statement of the reasons the person is unable to comply with such obligations. The SEC may extend the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant.

Temporary Additional Flexibility to Registered Investment Companies

The SEC also announced temporary flexibility for registered funds affected by recent market events to borrow funds from certain affiliates and to enter into certain other lending arrangements. This relief is “designed to provide funds with additional tools to manage their portfolios for the benefit of all shareholders as investors may seek to rebalance their investments.”

The SEC has issued the order as necessary and appropriate in the public interest and consistent with the protection of investors. For an entity seeking to rely on the order, attention is directed to its various conditions. Subject to these conditions, the order provides the following temporary exemptive relief from the Investment Company Act of 1940:

  • Permitting registered open-end funds and insurance company separate accounts to borrow money from certain affiliates;
  • Providing additional flexibility under existing interfund lending arrangements and extends the ability to use interfund lending arrangements to funds that do not currently have exemptive relief; and
  • Relief that permits registered open-end funds to enter into lending arrangements or borrowings that deviate from fundamental policies, subject to prior board approval.

This temporary relief will extend until the date specified in a public notice from the staff stating that the relief will terminate, which date will be at least two weeks from the date of the notice and no earlier than June 30, 2020. 

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