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As a result of the current and potential effects of COVID-19, the SEC has relaxed certain requirements of the Investment Company Act of 1940 and the Investment Advisers Act of 1940 and rules under the Acts.
Specifically, on March 13, 2020, the Commission issued an order that temporarily eliminates in-person board meeting requirements, and permits a fund to delay certain filing obligations and prospectus delivery requirements under the Investment Company Act of 1940 (the ICA Order), and an order temporarily delaying deadlines for filing Forms ADV and Forms PF by investment advisers and exempt reporting advisers under the Investment Advisers Act of 1940 (the Advisers Act Order).
Pepper Hamilton attorneys are monitoring regulatory developments closely, and remain committed to assisting our clients through this time. Do not hesitate to contact any of the authors listed here.
In-Person Board Meeting Requirements
Until June 15, 2020, a registered investment company or Business Development Company (BDC) and any investment adviser of or principal underwriter for such registered investment company or BDC is exempt from certain requirements that votes of boards of directors be cast in person.1 Specifically, the relief relates to the following sections of and rules under the Investment Company Act:
Reliance on the ICA Order with respect to in-person meeting requirements is subject to the following conditions:
Additional 45 Days to File Form N-Port and Form N-CEN Filings
Until April 30, 2020, a registered fund that is required to file Form N-CEN pursuant to Rule 30a-1 under the Investment Company Act, or Form N-PORT pursuant to Rule 30b1-9 under the Investment Company Act, is temporarily exempt from such form-filing requirements.
Reliance on the ICA Order with respect to Form N-Port or From N-CEN is subject to the following conditions:
Additional 45 days to Transmit Annual and Semi-Annual Reports by Investment Companies
Until April 30, 2020, a registered investment company is temporarily exempt from the requirements of Section 30(e) of the Investment Company Act and Rule 30e-1 thereunder to transmit annual and semi-annual reports to investors.
Reliance on the ICA Order with respect to transmittal of annual and semi-annual reports is subject to the following conditions:
Reduced Notice Period for Share Repurchases
Until June 15, 2020, closed-end funds and BDCs are temporarily exempt from the requirement to file with the Commission notices of their intention to call or redeem securities at least 30 days in advance under Sections 23(c) and 63, as applicable, of the Investment Company Act and Rule 23c-2 thereunder, if such company files a Form N-23C-2 (Notice) with the Commission less than 30 days before, including the same business day as, the company’s call or redemption of securities of which it is the issuer.
Reliance on the ICA Order with respect to Form N-23C-2 is subject to the following conditions:
Additional 45 Days to Deliver Prospectuses
The Commission stated that it would not provide a basis for a Commission enforcement action if a registered fund does not deliver to investors the current prospectus of the registered fund where the prospectus is not able to be timely delivered because of circumstances related to COVID-19 and delivery was due during the limited period specified below, provided that the sale of shares to the investor was not an initial purchase by the investor of shares of the registered fund.
Reliance on the ICA Order with respect to prospectus delivery requirements is subject to the following conditions:
Suspension of Form ADV Amendment and Delivery Requirements
The Advisers Act Order provides a temporary exemption from certain requirements. Specifically, subject to certain conditions, for filings due from March 13, 2020 but before April 30, 2020:
Additional 45 Days to File Annual Form ADV
Registered investment advisers or exempt reporting advisers that rely on the Advisers Act Order must satisfy certain requirements:
Should you have any questions related to the items discussed in this Client Alert or regarding your legal and compliance obligations during the COVID-19 outbreak, please do not hesitate to contact any of the authors listed here. Pepper Hamilton attorneys are ready to assist you through this rapidly developing situation.
1 On March 14, 2020, the Staff of the Division of Investment Management extended until June 15, 2020 the relief granted to the Independent Directors Council in February 2019, which provided that it would not recommend enforcement if a board did not satisfy the in-person vote requirement due to emergency circumstances affecting some or all of the directors. https://www.sec.gov/investment/staff-statement-im-covid-19. See also Independent Directors Council, No Action Letter (Feb. 28, 2019) https://www.sec.gov/divisions/investment/noaction/2019/independent-directors-council-022819.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.