SEC readies for additional proxy voting rules

As announced by the SEC:

Open Meeting Agenda

Wednesday, July 22, 2020

The two items of the Open Meeting will address the Commission’s continued efforts to enhance transparency, improve disclosures, and increase confidence in the proxy process. The specific matters to be considered are:

Item 1: Exemptions from the Proxy Rules for Proxy Voting Advice
Office: Division of Corporation Finance
Staff: William Hinman, Michele Anderson, Ted Yu, Luna Bloom, Daniel Greenspan, and Valian Afshar

The Commission will consider whether to adopt proxy rule amendments to provide investors who use proxy voting advice with should receive more transparent, accurate, and complete information on which to make voting decisions, without imposing undue costs or delays.

For further information, please contact Daniel Greenspan or Valian Afshar in the Division of Corporation Finance at (202) 551-3430.

Item 2: Supplement to Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers
Office: Division of Investment Management
Staff: Dalia Blass, Paul Cellupica, David Bartels, Holly Hunter-Ceci, and Thankam Varghese

The Commission will consider whether to publish supplementary guidance to the Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers, Release No. IA-5325 (Aug. 21, 2019), 84 FR 47420 (Sept. 10, 2019), regarding how the fiduciary duty and rule 206(4)-6 under the Investment Advisers Act of 1940 relate to an investment adviser’s proxy voting on behalf of clients.

For further information, please contact Thankam Varghese or Holly Hunter-Ceci in the Division of Investment Management at (202) 551-6825.

DOL’s New Fiduciary Investment Advice Package Presents Significant Compliance Risk

The U.S. Department of Labor (DOL) announced last week a series of actions regarding the provision of “investment advice” under the U.S. Employee Retirement Income Security Act of 1974, as amended (ERISA) and the U.S. Internal Revenue Code of 1986, as amended (the Code). Investment advisers, broker-dealers, banks, insurance companies and other financial services firms, which interface with ERISA-covered plans and IRAs, should especially take note. The provision of “investment advice” to ERISA-covered plans and IRAs triggers a need to comply with stringent fiduciary duties and a complex web of prohibited transaction rules (depending on the nature of the advice recipient).

This is part of a long continuum of federal and state efforts to more comprehensively regulate communications between financial services firms, especially broker-dealers, and retail investors, such as plan participants and IRA owners. The 2010s were largely dominated by DOL efforts, including two separate proposals, the latter of which culminated in the controversial 2016 Conflicts of Interest rulemaking, largely known as “the Fiduciary Rule.” Since then, the U.S. Securities and Exchange Commission (SEC) published Regulation Best Interest, which went into effect last week, and numerous states have sought to create uniform standards of care between broker-dealers and advisers. Both the 2016 DOL Fiduciary Rule and Regulation Best Interest, took aim at investment advice regarding rollovers.

To further complicate matters, the U.S. Court of Appeals for the Fifth Circuit in 2018 vacated the DOL’s Fiduciary Rule, sowing both relief and confusion in the industry. During this time, the DOL granted some temporary relief and appeared to let the SEC take the lead on regulating broker-dealer practices, which would be in keeping with the court’s decision. The DOL further signaled that any DOL investment advice rulemaking would align with Regulation Best Interest.

The DOL’s series of actions last week include reinstating the DOL’s longstanding 1975 regulation on investment advice fiduciary status, removal of the 2016 Fiduciary Rule (and its accompanying class exemptions),1 and the proposal of a new (and nimble) class exemption that would enable certain types of investment advice fiduciaries to receive a wide range of fees and other compensation without engaging in non-exempt prohibited transactions.

The comment period for the proposed class exemption closes on Aug. 6, 2020. Firms may wish to evaluate whether they will seek to rely on this new class exemption or instead rely on one or more other (narrower) exemptions that may be available.

Status as an Investment Advice Fiduciary

One is an investment advice fiduciary under ERISA and the Code to the extent he or she provides investment advice for a fee or other consideration (direct or indirect) with respect to monies or other property of the plan (or has any responsibility or authority to do so). Under the newly reinstated 5-part test, a communication constitutes fiduciary investment advice if a financial institution or investment professional who is not otherwise a fiduciary:

  1. Renders advice to the plan as to the value of securities or other property, or make recommendations as to the advisability of investing in, purchasing, or selling securities or other property,
  2. On a regular basis,
  3. Pursuant to a mutual agreement, arrangement, or understanding with the plan, plan fiduciary or IRA owner, that
  4. The advice will serve as a primary basis for investment decisions with respect to plan or IRA assets, and that
  5. The advice will be individualized based on the particular needs of the plan or IRA.

Thus, if a financial institution or investment professional triggers all five conditions and receives a fee or other compensation (direct or indirect), it is an investment advice fiduciary under ERISA and the Code. As noted above, this status would trigger fiduciary obligations and the need to carefully structure the advice and attendant transactions so as to avoid non-exempt prohibited transactions.

Last week’s decision to reinstate the traditional 5-part test is important, but perhaps even more noteworthy are the DOL’s insights on how it would now interpret the test. For example, the DOL indicated that the first prong would encompass advice to a retirement investor as to whether to take a distribution from a plan or whether to roll out of a plan and into an IRA. This is a notable departure from the DOL’s previous position (DOL Advisory Opinion 2005-23A) that advice regarding rollovers were generally not considered investment advice. The first prong also appears to pick up advice on account type (e.g., commission-based or fee-based) and on advice as to persons the retirement investor may hire as an investment advice provider or asset manager.

The second prong would also be interpreted quite broadly. For example, this prong appears to be met if the advice communication at issue is part of an “ongoing relationship or an anticipated ongoing relationship that an individual enjoys with his or her advice provider.” For example, if an investment professional already has a relationship with a plan participant pursuant to which he or she provides investment advice, advice on whether to roll assets out of the plan is part of that ongoing relationship, and, therefore, the roll over advice communication meets the “regular basis” requirement. Even if the investment professional lacks an existing advice relationship, advice to roll assets out of a plan and into IRA, in anticipation of an ongoing advice relationship, will similarly meet this prong. A third-party solicitor, for example, which is paid by a financial institution (that has or may have an ongoing fiduciary investment advice relationship with the recipient), bears greater risk that a recommendation they render will be treated as investment advice under the proposal.

The avoidance of triggering the third prong was often addressed through contractual representations and disclaimers. Yet even here, the DOL cautioned that this approach is not dispositive in establishing that both parties agreed investment advice was being provided.

Moreover, the 2020 proposal clarifies that prong (iv) of the test does not depend on whether the advice serves as the primary basis for the investment decision, but whether it serves as a primary basis. On this point, the DOL stated that financial service professionals who make recommendations pursuant to a best interest standard, including as required under Regulation Best Interest, or other requirements to provide individualized advice, will satisfy this prong, meaning, the parties would reasonably understand that the advice in question will serve as at least a primary basis for the investment decision.

It is worth pointing out that a requirement of a financial services firm to provide individualized advice, or to act in the investor’s best interest, under other federal law (e.g., Regulation Best Interest) or state law may also work to establish that such firm is an investment advice fiduciary to a retirement investor for purposes of ERISA and the Code.

Some communications are unlikely to constitute investment advice, however. One-time sales transactions, and bank networking arrangements are two examples the DOL highlighted. But unlike the 2016 rule, there do not appear any express safe harbors for marketing the fiduciary’s own services or investment advice rendered to sophisticated financial professionals as part of arm’s-length transactions. Commenters may wish to seek more explicit protection for these types of communications, including, but not limited to, greater consistency with Regulation Best Interest.

New Class Exemption

The proposed class exemption would generally be available to registered investment advisers, broker-dealers, banks and insurance companies (Financial Institutions), their individual employees, agents, representatives and independent contractors (Investment Professionals), as well as their affiliates and related entities, who receive a wide range of fees and other compensation (e.g., 12b-1 fees, commissions, third-party payments, etc.) as a result of providing investment advice to retirement investors (i.e., ERISA plan participants, beneficiaries and fiduciaries, as well as IRA owners and fiduciaries), including rollover investment advice. For example, this exemption could be handy for an RIA that provides investment advice that causes itself to start earning a fixed fee or a management fee. Another potential prohibited transaction for which this exemption would provide relief is where an RIA gives investment advice to a Retirement Investor that causes its affiliated broker-dealer to earn commissions for executing those transactions.

The exemption would also cover riskless2 and certain other principal transactions between the Financial Institution and retirement investor. As proposed, a covered principal transaction is defined differently depending on whether the retirement investor is the purchaser or seller. For sales to a retirement investor, the principal transaction would have to involve: (i) a US dollar denominated debt security issued by a US corporation and offered pursuant to a registration statement under the ’33 Act; (ii) a US Treasury Security; (iii) a debt security issued or guaranteed by a US federal government agent other than the Treasury Department; (iv) a debt security issued or guaranteed by a government-sponsored enterprise; (v) a municipal security; (vi) a certificate of deposit; (vii) an interest in a unit investment trust; or (vi) any other investment permitted to be sold by an investment advice fiduciary to a retirement investor under an individual exemption granted by the DOL. If the recommendation is with respect to a debt security, the recommendation must be made pursuant to written policies and procedures adopted by the Financial Institution that are reasonably designed to ensure that the security, at the time of the recommendation, has no greater than moderate credit risk and sufficient liquidity that it could be sold at or near carrying value within a reasonably short period of time. For purchases from a retirement investor, the principal transaction may cover any type of securities or investment property.

Before describing the conditions to the proposed exemption, it is important to first highlight where the exemption would not be available:

A. Where the Financial Institution, Investment Professional or any affiliate is the employer of employees covered by an ERISA-covered retirement plan investor or is a named fiduciary or plan administrator to such plan, or was selected to provide investment advice to the plan by a fiduciary not “independent” of the Financial Institution, Investment Professional or their affiliates.3 Employers can continue to recover their direct expenses when providing investment advice to their plans.

B. The transaction is a result of robo investment advice generated solely by an interactive website in which computer software-based models or applications provide investment advice based on personal information each investor supplies through the website, without any personal interaction with an Investment Professional. Sections 408(b)(14) and 408(g) of ERISA may provide relief in these instances.

C. The transaction involves the Investment Professional acting in a fiduciary capacity other than providing investment advice (g., the Investment Professional has discretionary control over the retirement investor’s assets).

The following are the conditions to the exemption:

  1. The Financial Institution and Investment Professional complies with the Impartial Conduct Standards. The Impartial Conduct Standards have the following core components:
    1. The investment advice is, at the time it is provided, in the “best interest” of the retirement investor. This is to be interpreted and applied in a manner consistent with Regulation Best Interest and the SEC’s interpretive release regarding the conduct standard of registered investment advisers. The “best interest” requirement would permit Financial Institutions and Investment Professionals to provide investment advice despite having a financial or other interest in the transaction, provided they do not place their interests ahead of the retirement investor’s. Investment advice on proprietary products, and advice that generates third-party payments, could be consistent with this “best interest” requirement. As with Regulation Best Interest, the “best interest” requirement does not necessarily create a monitoring obligation; however, the DOL indicated that certain investments may be so complex or risky that they may necessitate monitoring by the Financial Institution.
    2. The compensation received (directly or indirectly) by the Financial Institution, Investment Professional, their affiliates and related entities for their services does not exceed reasonable compensation within the meaning of Section 408(b)(2) of ERISA. Whether compensation is “reasonable” is fact-specific, but some factors that may inform the analysis include the market price for the services, the scope of monitoring duties (if any), and the complexity of the product.
    3. As required by the federal securities laws, the Financial Institution and Investment Professional seek to obtain “best execution” of the investment transaction reasonably available under the circumstances.
    4. At the time they are made, statements by the Financial Institution and Investment Professional about the recommended transaction “and other relevant matters” (e.g., fees and compensation, material conflicts of interest, etc.) are not materially misleading. The DOL would consider it “materially misleading” for the Financial Institution or Investment Professional to include any indemnification or exculpation clauses that are prohibited by applicable law, including Section 410 of ERISA.
  2. Prior to engaging in the transaction covered by the exemption, the Financial Institution provides the following information in one or a combination of written documents, all written in Plain English:
    1. A written acknowledgment that the Financial Institution and its Investment Professionals are fiduciaries under ERISA and the Code (as applicable) with respect to any fiduciary investment advice to retirement investors. Please note that, notwithstanding this requirement, the exemption is not intended to expand the retirement investor’s ability to enforce their rights in court or create any new legal claims, in stark contrast to the 2016 Best Interest Contract Exemption.
    2. A written description of the services to be provided. This description does not have to be tailored to the specific retirement investor. It is unclear if Form CRS would suffice for broker-dealers and investment advisers.
    3. A written description of the Financial Institution’s and Investment Professional’s material conflicts of interest that is both accurate and not misleading in all material respects.
  3. Policies & Procedures
    1. The Financial Institution establishes, maintains and enforces written policies and procedures prudently designed to ensure compliance with the Impartial Conduct Standards with respect the investment advice and related transactions.
    2. The policies and procedures mitigate “conflicts of interest” (the meaning of this is designed to be consistent with Regulation Best Interest) to the extent the policies and procedures, as well as incentive practices, when viewed as a whole, are prudently designed to avoid a misalignment of interests.
      1. For example, the policies and procedures would likely need to protect retirement investors from making excessive trades or investing in illiquid or risky products.
      2. Recommending a fee-based account to an investor with low trading activity would also be an impermissible practice.
      3. The policies and procedures would need to specifically address and mitigate the conflicts that arise from advice regarding proprietary products or from a limited menu of products.
      4. The policies and procedures would also have to address and mitigate the conflicts arising out of transaction-based compensation. The compensation structures with respect to which the DOL has concerns include thresholds that disproportionately increase compensation through incremental increases in sales. In the wake of the 2016 DOL fiduciary rule, various firms revised their compensation grids to avoid this situation, so the DOL’s concerns in this proposal should not be a surprise or be too onerous to address. Moreover:
        1. Differential compensation across investment products, or within product categories, also raise concerns, as do incentives that favor proprietary products. One possible approach to addressing these conflicts is by basing compensation on neutral factors or by levelizing the compensation across fund families.
        2. Sales contests, sales quotas, bonuses and non-cash compensation that are based on the sales of certain investments within a limited period of time appear to be per se impermissible.
        3. Supervision would be especially important for monitoring recommendations that are near compensation thresholds, or involve products that pay off more compensation, for advice regarding proprietary products, and for rollover advice.
        4. Depending on the facts, it may be necessary to limit the type of products that may be recommended to retirement investors.
    3. The Financial Institution internally documents the specific reasons that any recommendation to roll over assets from a plan to another plan or IRA, from an IRA to a plan, from an IRA to another IRA, or from one type of account to another (e.g., a commission-based account to a fee-based account), is the “best interest” of the retirement investor. This analysis would include consideration of the alternatives to the rollover, including leaving the assets in the participant’s current employer’s plan and selecting different investment options, the fees and expenses associated with both the plan and the IRA, whether the employer pays for some or all of the plan’s administrative expenses, and the different levels of services and investments available under the plan and IRA. The Financial Institution and Investment Professional could secure the plan-specific information if it is readily available or by requesting it from the participant. If the participant refuses to provide the information, “even after a full explanation of its significance,” the Investment Professional could provide a reasonable estimate of estimated expenses, returns, etc. It is somewhat unclear the extent to which the foregoing analysis needs to be shared with the retirement investor.
  4. The Financial Institution conducts at least an annual retrospective review that is reasonably designed to detect and prevent violations of the Impartial Conduct Standards and related policies and procedures. The review would have to be certified by the Chief Executive Officer or equivalent. The DOL indicated that this review process is based on FINRA’s rules governing how broker-dealers supervise associated persons. The review would have to be completed within six months following the end of the reviewed period and would have to be retained for six years. It appears that only the DOL and other federal and state regulators (including SROs) would be privy to this report, though commenters may wish to seek confirmation on this point.
  5. Neither the Financial Institution nor Investment Professional has been convicted of any crime described in Section 411 of ERISA arising out of the provision of investment advice, absent special permission from the DOL.
  6. The Financial Institutions maintains all the records demonstrating compliance with the exemption for six years, and makes available such information to the DOL, a plan fiduciary, a plan sponsor or any participant, unless such information constitutes a trade secret or is privileged, etc., in which case the Financial Institution would have to provide a written notice of such determination to the requester within 30 days of the request.

The comment period for this proposed class exemption closes on Aug. 6, 2020.

 The DOL also reinstated Interpretive Bulletin 96-1 regarding the types of communications with plan participants that amount to investment education (rather than advice).

 2 A riskless principal transaction is a transaction in which a Financial Institution, after having received an order from a retirement investor to buy or sell an investment product, purchases or sells the same investment product for the Financial Institution’s own account to offset the contemporaneous transaction with the retirement investor.

The DOL would view a party as “independent” of the Financial Institution and Investment Professional if: (i) the person was not the Financial Institution, Investment Professional or an affiliate, (ii) the person did not have a relationship to, or an interest in, the Financial Institution, Investment Professional or any affiliate that might affect the exercise of the person’s best judgment in connection with transactions covered by the exemption, and (iii) the party does not receive and is not projected to receive within the current federal income tax year, compensation or other consideration for his or her own account from the Financial Institution, Investment Professional or an affiliate in excess of 2% of the person’s annual revenues based upon its prior income tax year.

1940 Act Issues to Consider During the Pandemic – Part 11

Stradley’s Coronavirus Task Force will be updating this high-level overview of coronavirus disease 2019 (COVID-19) related issues for registered investment companies and fund managers as developments warrant.

UPDATED ISSUES:

  • Market Closures and Market Restrictions: A list of securities market closures and market restrictions is available here(Updated 6/22/2020)
  • In-Person Board Meetings: The Securities and Exchange Commission has provided exemptive relief in orders under the Investment Company Act of 1940 (1940 Act Orders) to allow fund boards to meet telephonically or by video conference to consider and vote on matters that would otherwise require an in-person vote.1 The relief applies whenever reliance upon it is necessary or appropriate due to circumstances related to current or potential effects of COVID-19. The SEC has issued an order (1940 Act Extension Order) that extends relief from the in-person board meeting requirement, which previously was scheduled to expire on Aug.15, to a date to be specified in a public notice from SEC staff, which will be a date at least two weeks from the date of the notice and no earlier than Dec. 31, 2020.2 (Updated 6/22/2020)
  • SEC Filings: The 1940 Act Orders and orders under the Investment Advisers Act of 1940 provide relief from the timeliness requirements of certain filings under the 1940 Act and the Advisers Act.3 The 1940 Act Orders provide relief from the timeliness requirements of Form N-CEN, Form N-PORT, and Form N-23C-2 when a fund is unable to meet a deadline due to circumstances related to current or potential effects of COVID-19. The relief for Forms N-CEN and N-PORT applies to filing obligations for which the original due date is on or after March 13 but on or prior to June 30, 2020, while the relief for Form N-23C-2 extends to Aug. 15, 2020. The Advisers Act Orders provide timeliness relief for Form ADV and Form PF filings and for Form ADV Part 2 client delivery obligations for 45 days from the original due date, when the original due date is on or after March 13 but on or prior to June 30, 2020. The SEC previously posted staff guidance that Form ADV does not have to be updated to reflect temporary teleworking locations.4 The SEC has also provided relief from timeliness requirements for certain filings under the Securities Exchange Act of 1934.5 Note that filings not covered by the orders continue to be required on a timely basis, including filings on Form N-LIQUID, Form N-CR, and Form N-MFP, although it is possible that the SEC will consider issues with these forms on an individualized basis. The SEC provided information on contacting the staff with issues, including issues with these filings, in press releases announcing the actions.The SEC announced in the 1940 Act Extension Order that the relief from 1940 Act filings requirements provided in the 1940 Act Orders will not be further extended. (Updated 6/22/2020)
  • Delivery of Prospectuses and Shareholder Reports: The 1940 Act Orders also provide relief from the obligations to timely transmit annual and semiannual reports to shareholders and to file them with the SEC. The relief applies when the original due date is on or after March 13 but on or prior to June 30, 2020, and the fund is unable to prepare or transmit the report due to circumstances related to current or potential effects of COVID-19. In addition, the SEC announced that it would not provide a basis for an SEC enforcement action if a fund does not timely deliver a current prospectus because of circumstances related to COVID-19 when delivery was originally required during this period. The position is not available to an initial purchase by the investor of the fund’s shares.The SEC announced in the 1940 Act Extension Order that this relief will not be further extended. (Updated 6/22/2020)
  • Term Asset-Backed Securities Loan Facility: The Federal Reserve Bank of New York has established the Term Asset-Backed Securities Loan Facility (TALF), which provides non-recourse funding to eligible borrowers owning eligible collateral in the form of AAA-rated asset-backed securities backed by newly and recently originated consumer and small business loans.A TALF borrower must have significant operations in and a majority of its employees based in the United States. The New York Fed has provided guidance that, for a borrower organized as an investment fund, this test will be applied to the borrower’s investment manager.8 The facility initially will make up to $100 billion of loans available, and each loan provided under the facility will have a maturity of three years. Unless the program is extended, no new credit extensions will be made after Sept. 30, 2020. The SEC staff in 2009 provided no-action guidance to allow registered funds to participate in a similar facility established in 2008.9 The SEC staff has confirmed that the 2009 guidance is also applicable to the current facility, and it has provided guidance that a fund or business development company may participate in TALF indirectly through a private fund.10 The initial TALF subscription date was June 17, 2020, and the New York Fed has announced that approximately $252 million in TALF loans were requested on that date.11 (Updated 6/22/2020)
  • Money Market Mutual Funds:
    • Liquidity Facility: The Federal Reserve Board has announced a Money Market Mutual Fund Liquidity Facility (MMLF) that is intended to assist money market funds in meeting demands for redemptions.12 Under the MMLF, the Federal Reserve Bank of Boston will lend to depository institutions and bank holding companies, taking as collateral assets purchased by the borrower from prime money market funds (i) concurrently with the borrowing or (ii) or on or after March 18, but before the opening of the facility. The facility is similar to the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility that operated from late 2008 to early 2010 but will purchase a broader range of assets. The Federal Reserve Board expanded the facility to cover certain assets purchased from tax-exempt municipal money market funds.13 The Federal Reserve Board has announced that the facility opened March 23, and full documentation and additional guidance are available.14  As of May 31, 2020, the total outstanding amount of the loans under the facility was approximately $32.5 billion (down from $39.4 billion as of May 14 and $51.1 billion as of April 14).15 (Updated 6/22/2020)
    • Form N-CR: Several money market funds filed on Form N-CR in March to report financial support, and one money market fund filed on Form N-CR in March to report downward deviations of its shadow price by more than ¼ of 1%. An amended report is required to be filed within four business days of the provision of financial support or downward deviation that describes the reason for the support and terms of the support or the reason for the deviation, as applicable. (Updated 3/23/2020)
    • Purchases by Affiliated Banks: The Federal Reserve Board has issued a template exemptive letter allowing banks to purchase assets from affiliated money market funds, subject to certain conditions, including that the assets must be investment grade and purchased at fair market value.16 In addition, the SEC staff has granted no-action relief to permit certain bank affiliates of money market funds to purchase securities from the funds in accordance with the Federal Reserve Board guidance, but otherwise pursuant to rule 17a-9, subject to certain conditions.17 The SEC no-action letter does not affect the ability of other money market fund affiliates to purchase assets from the fund in accordance with rule 17a-9. (Updated 3/23/2020)
    • Guaranty: The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was enacted into law on March 27, suspends the existing prohibition on the use of the Exchange Stabilization Fund for the establishment of any guaranty programs for the money market fund industry.18 Any such guarantee shall be limited to a guarantee of the total value of a shareholder’s account in a participating fund as of the close of business on the day before the announcement of the guarantee and terminate not later than Dec. 31, 2020. This provision allows the Department of the Treasury to establish a Money Market Funds Guaranty Program but does not require it to do so. (Updated 3/31/2020)

ISSUES:

  • Transfer Agents and Fingerprinting Requirements: The SEC has provided a broad exemption from requirements applicable to transfer agents except for the safeguarding requirement.19 The exemption also applies to broker-dealers and other persons who are subject to a fingerprinting requirement. Transfer agents and other persons relying on the relief must provide notice to the SEC. The SEC encourages transfer agents and the issuers for whom they act to inform affected security holders. The SEC has extended the period covered by the exemption to June 30; it originally was due to expire May 31.20 (Updated 6/1/2020)
  • Exchange-Traded Funds:
    • The New York Fed has established the Secondary Market Corporate Credit Facility (SMCCF), which purchases in the secondary market corporate bonds issued by U.S. companies and shares of U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. corporate bonds.21 The New York Fed has retained BlackRock Financial Markets Advisory as a third-party vendor to serve as the investment manager for this facility.22 The SMCCF will cease making such purchases no later than Sept. 30, 2020, unless extended. The Federal Reserve Board announced on April 9 that the SMCCF had been expanded and, together with the Primary Market Corporate Credit Facility, will have a combined size of up to $750 billion.23 The SMCCF may purchase any U.S.-listed ETF whose investment objective is to provide broad exposure to the market for U.S. corporate bonds, although the preponderance of ETF holdings will be ETFs whose primary investment objective is exposure to U.S. investment-grade corporate bonds. The SMCCF will not purchase shares of an ETF if it then would own more than 20% of the ETF’s shares.  The facility began making purchases on May 12, 2020, and is transacting initially with primary dealers that deal directly with the New York Fed.  As of May 19, the SMCCF had made purchases of approximately $1.307 billion, all in ETFs, and it had an additional $287 million of purchases that had not yet reached settlement.24 (Updated 6/1/2020)
    • For an ETF that invests in foreign markets that close, the ETF may wish to consider whether to invest in alternative instruments, such as ADRs, in order to achieve the desired exposure to the foreign securities. In circumstances where there is no ability to make additional investments in appropriate alternative instruments, an ETF may wish to stop accepting creation unit purchases. The SEC previously has noted that ETFs generally may suspend the issuance of creation units only for a limited time and only due to extraordinary circumstances, such as when the markets on which the ETF’s portfolio holdings are traded are closed for a limited period of time.25 ETF issuers should be aware that any decision to suspend creations could have an impact on the arbitrage efficiency of the ETF and could lead to greater deviations between the market price of the ETF shares and the NAV of the shares. Like other open-end funds, ETFs cannot suspend redemptions unless the New York Stock Exchange is closed or there is appropriate guidance from the SEC. ETFs are permitted to charge transaction fees of up to 2% on redemptions. Such fees are designed to offset the costs of redemptions to the ETF. Some fixed-income ETFs that deliver cash redemptions instead of in-kind redemptions reportedly have increased their transaction fees on redemptions in light of increased transaction costs in the bond market. (Updated 3/23/2020)
  • Paycheck Protection Program:The Paycheck Protection Program authorizes forgivable loans to small businesses to pay their employees during the COVID-19 crisis.26 Borrowers submitting a PPP application must certify that current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant. The Small Business Administration, which implements the program, has announced that any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification in good faith. Hedge funds and private equity funds are not eligible for PPP loans, but their portfolio companies may be able to qualify.27 The SEC staff has provided guidance that an advisory firm that receives a PPP loan may be required to disclose the loan and its financial condition to clients.28 (New 5/15/2020)
  • Division of Investment Management Statement: The SEC’s Division of Investment Management has issued a statement emphasizing the ongoing importance of updating and delivering the required information to fund investors in a timely manner, even during this period of operational challenge.29 The statement reminds funds of the obligation to update prospectuses and deliver them to new investors,30 and it encourages funds to consider whether disclosures should be revised based on how COVID-19-related events may affect the fund and its investors. (New 4/20/2020)
  • Closed-End Funds: A closed-end fund is required to suspend its offering of shares until it amends its prospectus if the fund’s net asset value declines more than 10% from the NAV as of the effective date of the registration statement. The SEC staff has released guidance allowing the use of a prospectus supplement, with notice to the SEC staff, rather than an amendment to the registration statement.31 (New 4/20/2020)
  • Shareholder Meetings: The SEC staff has provided guidance to both operating companies and funds that is intended to provide regulatory flexibility to companies seeking to change the date and location of shareholder meetings and to use new technologies, such as “virtual” shareholder meetings that avoid the need for in-person shareholder attendance, while at the same time ensuring that shareholders and other market participants are informed of any changes.32 The guidance notes that the ability to conduct a “virtual” meeting is governed by state law, where permitted, and the issuer’s governing documents. Note that companies seeking to conduct a virtual meeting may, under state law, need to have an appropriate process for shareholders to vote at the meeting. The guidance has been revised to extend to special meetings as well as annual meetings and to provide further guidance on notice requirements. (Updated 4/20/2020)
  • Business Development Companies: The SEC has provided limited and conditional exemptive relief for business development companies that provides additional flexibility to BDCs to issue and sell senior securities.33 In addition, for BDCs with an SEC order permitting co-investment transactions with certain affiliates, the SEC relief allows the BDC to participate in certain follow-on investments with regulated funds and affiliated funds. The relief is available until Dec. 31, 2020. (New 4/13/2020)
  • Regulation BI/Form CRS: SEC Chairman Jay Clayton has announced that the SEC believes that the June 30, 2020, compliance date for Regulation Best Interest and other requirements, including the requirement to file and begin delivering Form CRS, remains appropriate.34 To the extent that a firm is unable to make certain filings or meet other requirements because of disruptions caused by COVID-19, including as a result of efforts to comply with national, state or local health and safety directives and guidance, the firm should engage with the SEC. The SEC’s Office of Compliance Inspections and Examinations has issued two Risk Alerts that provide broker-dealers and investment advisers with advance information about the expected scope and content of the initial examinations for compliance with Regulation BI and Form CRS,35 and FINRA has provided guidance on best practices in preparing for Regulation BI.36 The SEC staff has announced that it is now accepting filings on Form CRS.37 (Updated 4/13/2020)
  • Paper Submissions: Although most SEC filings are now made electronically via EDGAR, there are still some submissions that normally must be submitted in paper form.
    • The SEC’s Division of Trading and Markets has announced relief for certain submissions that are required to be filed in paper format with a manual signature and for related notarization requirements.38 The affected filings include audited annual reports submitted by broker-dealers. Filers should contact Division staff to discuss the appropriate process for filing. The staff statement covers submissions for the period from and including March 16, 2020, to June 30, 2020. (New 4/7/2020)
    • The SEC’s Division of Corporation Finance has announced that notices of proposed sales of securities on Form 144 may be filed via email and, subject to certain conditions, may have a typed form of signature rather than a manual signature.39 (New 4/13/2020)
    • The SEC’s Division of Investment Management has announced that requests for hearing applications on notices of applications for exemptive orders under the Investment Company Act of 1940 and the Investment Advisers Act of 1940 must be submitted by email.40 (New 4/13/2020)
  • Accounting Issues: SEC Chief Accountant Sagar Teotia has announced that the SEC’s Office of the Chief Accountant recognizes that the accounting and financial reporting implications of COVID-19 may require companies to make significant judgments and estimates in a number of accounting areas, including fair value and impairment considerations.41 The OCA has consistently not objected to well-reasoned judgments that entities have made, and it will continue to apply this perspective. The OCA remains available for consultation and encourages stakeholders to contact it with questions they encounter as a result of COVID-19. (New 4/7/2020)
  • Affiliated Purchases of Debt Securities: The SEC staff has issued no-action relief to affiliates of open-end funds, other than exchange-traded funds and money market funds, to allow them to purchase debt securities from the funds.42 The relief is subject to conditions, including that the price must be the security’s fair market value per Section 2(a)(41) of the 1940 Act, provided that this price is not materially different from the value indicated by a reliable third-party pricing service, and that the fund must publicly disclose the purchase on its website and inform the staff. In addition, if the purchaser thereafter sells the security for a higher price, it must promptly pay the difference to the fund, unless the purchaser is a bank or bank affiliate and this condition would conflict with Sections 23A and 23B of the Federal Reserve Act. The relief will be in effect until further notice from the staff. (New 3/31/2020)
  • SEC Lending and Borrowing Relief: The SEC has issued an order providing additional flexibility for open-end funds (other than money market funds) and insurance company separate accounts registered as unit investment trusts to obtain short-term funding.43 The relief is available until a notice terminating it is issued, which will be at least two weeks from the date of the notice and no earlier than June 30, 2020. Prior to relying on any of the relief, the fund would have to notify SEC staff. In addition, interfund lending requires notification on a fund’s public website.
    • Fund affiliates may lend money to the fund on a collateralized basis, provided the board makes determinations that the borrowing is in the best interest of the fund and its shareholders and that it will be for the purposes of satisfying shareholder redemptions.
    • For fund families with an SEC order permitting an interfund lending and borrowing facility, a lending fund may lend up to 25% of its current net assets and the term may be for any period that does not extend beyond the expiration of the relief, notwithstanding the terms of the order, provided, among other conditions, that the board reasonably determines that the maximum term for interfund loans is appropriate. (Recent orders typically limit lending funds to 15% of current net assets and the term to seven days.)
    • For fund families without an interfund lending order, funds may lend and borrow in accordance with the terms of any such order issued within the past twelve months, with the same modifications.44
    • Funds are not required to seek shareholder approval if lending under the relief would violate a fundamental policy, provided that the board reasonably determines that the lending or borrowing is in the best interests of the fund and its shareholders. (New 3/27/2020)
  • OCIE Statement: The SEC’s Office of Compliance Inspections and Examinations has issued a statement that it has moved to conduct examinations off-site through correspondence unless it is absolutely necessary to be on-site, and that it will work with registrants to ensure that its work can be conducted in a manner consistent with maintaining normal operations and with necessary or appropriate health and safety measures.45 OCIE also stated that reliance on regulatory relief would not be a risk factor utilized in determining whether OCIE commences an examination, and it encourages registrants to utilize available regulatory relief as needed. (New 3/27/2020)
  • Signatures on EDGAR Filings: The SEC staff has issued a statement on the manual signature and record requirements for documents filed electronically with the SEC.46 The staff will not recommend enforcement action if a signatory retains a document adopting the signature and provides the document to the filer for retention, with the time and date executed, and the filer establishes and maintains policies and procedures governing this process. (New 3/27/2020)
  • FINRA Guidance: FINRA has issued guidance that provides temporary relief and guidance with respect to a number of requirements, including filings that would otherwise be required for temporary relocations and the timing of FOCUS reports and certain other filings.47 The guidance will be available until FINRA publishes a Regulatory Notice announcing a termination date. (New 3/27/2020)
  • Blue Sky Guidance: A number of state and provincial securities regulators have published guidance that provides relief or other COVID-19-related updates. The North American Securities Administrators Association has established a resource page to collect these updates.48 (Updated 3/27/2020)
  • State and Local Closures: Many states, counties and cities have announced business closures in connection with “shelter-in-place” public health efforts to slow the spread of COVID-19. Some of the orders may contain broad exceptions for the financial services industry, while others may not. Beyond the direct impact on firms in those localities, review the location of service providers and the terms of these orders carefully to determine whether necessary support functions will remain available. FINRA has posted a resource page with links to state “shelter-in-place” and “stay-at-home” orders.49 (Updated 3/27/2020)
  • Tax Implications for Funds with Institutional Shareholders: For institutional funds with few shareholders, beware that the fund could fall into personal holding company status if at any time during the last half of the taxable year more than 50% in value of the fund’s shares are owned, directly or indirectly, by or for not more than 5 “individuals.” For purposes of this rule, employee pension trusts, private foundations, trusts forming part of a plan providing for the payment of supplemental unemployment compensation benefits, and a trust, a portion of which is permanently set aside or to be used exclusively for charitable purposes, are considered individuals. (New 3/23/2020)
  • CPO NFA Filings: The CFTC staff has provided no-action relief to commodity pool operators that extends certain filing deadlines.50 With respect to Form CPO-PQR filings under CFTC Regulation 4.27, Small and Mid-Sized CPOs had until May 15, 2020, to submit their annual filings for 2019, while Large CPOs have until July 15, 2020, to submit their filings for Q1 2020. For pool annual reports under CFTC Regulations 4.7(b)(3) or 4.22(c) that were due on or before April 30, 2020, the deadline for filing and distributing the report, which must include certified financial statements, was extended until 45 days after the due date specified in the regulations. For monthly or quarterly reports to pool participants under CFTC Regulation 4.7(b)(2) or 4.22(b) for all reporting periods ending on or before April 30, 2020, the deadline for distribution to participants was extended to 45 days after the end of the reporting period (instead of 30 days as stated in the regulations). The National Futures Association has issued similar relief for CPO Members and has provided Commodity Trading Advisor Members with similar relief for NFA Form PR filings.51 (Updated 3/23/2020)
  • Liquidity Risk Management: Current developments raise a number of issues for the management of funds’ liquidity risk:
    • Assessment, management, and periodic review of liquidity risk: Funds should review fund liquidity risk in light of current and reasonably expected market events and redemption patterns and may need to consider appropriate mitigating steps for strengthening the fund’s ability to meet redemptions, including readying borrowing and other liquidity facilities. Some fund managers may wish to consider use of the relief provided by the SEC and its staff for affiliated transactions.
    • Classification of portfolio investments: Rule 22e-4 requires funds to review their portfolio investments’ liquidity classifications more frequently than monthly if changes in relevant market, trading, and investment-specific considerations are reasonably expected to materially affect classifications. Such reviews should focus especially on holdings that could be considered illiquid investments as a result of these developments or that could fall out of highly liquid investment status. An important consideration will be a review of the reasonably anticipated trading sizes in light of redemption expectations. Funds should be alert to the possibility that vendor classifications may be based on historical rather than current data.
    • Highly liquid investment minimum: For funds that currently hold primarily highly liquid assets, and therefore are not required to have an HLIM, the program administrator may need to examine whether the fund can still qualify for that status. For HLIM funds, the HLIM may need to be reviewed under the required factors in light of current market and redemption developments and, if a shortfall is reasonably anticipated, a shortfall response plan should be developed, which must include a plan for reporting shortfalls to the fund’s board.
    • Illiquid investments: During this period of extreme market volatility, the fund should monitor closely whether there is a need to reclassify holdings as illiquid investments. Funds should be prepared to file Form N-LIQUID if the fund’s illiquid assets exceed 15% of its net assets. The program administrator should have guidance designed to prevent purchases that would violate the prohibition on acquiring illiquid investments when over the 15% limit. We do not yet know if the SEC will provide guidance relieving funds from filing Form N-LIQUID in the event of foreign or other market closings that are beyond the scope of existing guidance on extended foreign holidays.
    • Redemptions in kind: Funds may wish to consider whether redemptions in kind would be an appropriate tool for large redemption requests, including whether operational logistics are in place to accommodate any such redemption requests. (Updated 3/19/2020)
  • MiFID II Reporting: Under the MiFID II delegated regulation, investment firms providing the service of portfolio management and subject to MiFID II must inform the client where the overall value of the portfolio, as evaluated at the beginning of each reporting period, depreciates by 10% and thereafter at multiples of 10%, no later than the end of the business day in which the threshold is exceeded or, in a case where the threshold is exceeded on a non-business day, the close of the next business day.52 (New 3/19/2020)
  • Fund Boards: Fund directors should stay up to speed on current market events so they can properly apply their business judgment as necessary from a governance standpoint. In many cases, fund boards are receiving periodic status reports or attending status updates from fund advisers. Examples of areas for directors to consider include, for funds, fund flows, liquidity levels, valuation, and performance; and for fund advisers, status of operations under business continuity plans, market assessments, and the assessment of critical fund service providers. Board reporting from fund advisers is particularly important during times of market stress. To strike an appropriate balance between staying apprised and being efficient and respectful of fund advisory personnel time, boards may seek to channel questions or communications through independent counsel or the board chair/lead independent director. (New 3/19/2020)
  • Business Continuity Plans: Business continuity at the current time is key. In most cases, those plans already are in effect. Consideration should be given to contingency planning in the event that fund managers, transfer agents, pricing services, or other service providers are unable to provide services because of employee absences. Funds and fund managers should make and communicate revisions to their plans as they adjust to the developing environment.
  • Valuation: Funds should examine whether they are able to obtain valid prices for their investments, especially in markets that may be closed or have limited availability. Experience from the 2008 financial crisis shows that vendor reassurances as to the quality of their pricing information may provide false comfort, so vendor prices should be checked for reliability. At this time, we do not expect the SEC to provide relief from the daily pricing requirement.
  • Redemptions: Under Section 22(e) of the 1940 Act, open-end funds generally may not suspend the right of redemption unless the New York Stock Exchange is closed, or the SEC provides guidance that daily redemptions are not required because trading is restricted or an emergency exists. At this point, funds should assume that they must continue to provide daily redemptions. Funds should review any borrowing arrangements that may need to be utilized. We are closely monitoring for any relevant guidance from the SEC or its staff on this topic.
  • Cybersecurity: Firms are at increased risk of cyberattacks, particularly with the use of remote offices and telework. Anxious employees may be more vulnerable to email phishing attacks. Employees should be reminded of the continued need for vigilance.

Please do not hesitate to reach out to your Stradley Ronon contact, or to any member of Stradley’s Coronavirus Task Force, with any questions and concerns you may have during this period. You can reach Sara Crovitz at 202.507.6414 or scrovitz@stradley.com, or John Baker at 202.419.8413 or jbaker@stradley.com.


1 For the 1940 Act Orders, see Release No. IC-33824 (Mar. 25, 2020), https://www.sec.gov/rules/other/2020/ic-33824.pdf; Release No. IC-33817 (Mar. 13, 2020), https://www.sec.gov/rules/other/2020/ic-33817.pdf.  The various forms of relief provided in the 1940 Act Orders, which are further discussed below, are subject to conditions that are set out in the orders, such as subsequent ratification of votes, notice to the SEC of filing delays, and website disclosure of issues with the delivery of shareholder reports and prospectuses.

Release No. IC-33897 (June 19, 2020), https://www.sec.gov/rules/exorders/2020/ic-33897.pdf.

3 For the Advisers Act Orders, see IA-5469 (Mar. 25, 2020), https://www.sec.gov/rules/other/2020/ia-5469.pdf; Release No. IA-5463 (Mar. 13, 2020), https://www.sec.gov/rules/other/2020/ia-5463.pdf.

4 Using IARD, Form ADV: Item 1.F, https://www.sec.gov/divisions/investment/iard/iardfaq.shtml#item1f.

5 Release No. 34-88465(Mar. 25, 2020), https://www.sec.gov/rules/exorders/2020/34-88465.pdf; Release No. 34-88318 (Mar. 4, 2020), https://www.sec.gov/rules/other/2020/34-88318.pdf.

6 Press Release 2020-73, SEC Extends Conditional Exemptions from Reporting and Proxy Delivery Requirements for Public Companies, Funds, and Investment Advisers Affected by Coronavirus Disease 2019 (COVID-19) (Mar. 25, 2020), https://www.sec.gov/news/press-release/2020-73; Press Release 2020-63, SEC Takes Targeted Action to Assist Funds and Advisers, Permits Virtual Board Meetings and Provides Conditional Relief from Certain Filing Procedures (Mar. 13, 2020), https://www.sec.gov/news/press-release/2020-63.

7 Policy Tools:  Term Asset-Backed Securities Loan Facility, https://www.federalreserve.gov/monetarypolicy/talf.htm.

8 FAQs:  Term Asset-Backed Securities Loan Facility (June 15, 2020), https://www.newyorkfed.org/markets/term-asset-backed-securities-loan-facility/term-asset-backed-securities-loan-facility-faq.

9 Franklin Templeton Investments, SEC No-Action Letter (June 19, 2009), https://www.sec.gov/divisions/investment/noaction/2009/franklintempleton061909.htm.  Stradley Ronon acted as counsel for this no-action request.

10 Investment Company Institute, SEC No-Action Letter (May 27, 2020), https://www.sec.gov/investment/ici-sifma-052720.  The guidance on participating through a special purpose vehicle makes generally available to funds and BDCs a 2009 no-action position that originally was available only to the requesting party.  See T. Rowe Price Associates, SEC No-Action Letter (Oct. 8, 2009), https://www.sec.gov/divisions/investment/noaction/2009/troweprice100809.htm.

11 Term Asset-Backed Securities Loan Facility Rates, https://www.newyorkfed.org/markets/term-asset-backed-securities-loan-facility/term-asset-backed-securities-loan-facility-rates.

12 Press Release, Federal Reserve Board broadens program of support for the flow of credit to households and businesses by establishing a Money Market Mutual Fund Liquidity Facility (MMLF) (Mar. 18, 2020), https://www.federalreserve.gov/newsevents/pressreleases/monetary20200318a.htm.

13 Press Release, Federal Reserve Board expands its program of support for flow of credit to the economy by taking steps to enhance liquidity and functioning of crucial state and municipal money markets (Mar. 20, 2020) https://www.federalreserve.gov/newsevents/pressreleases/monetary20200320b.htm.

14 Policy Tools: Money Market Mutual Fund Liquidity Facility, https://www.federalreserve.gov/monetarypolicy/mmlf.htm.

15 Periodic Report: Update on Outstanding Lending Facilities Authorized by the Board under Section 13(3) of the Federal Reserve Act (June 9, 2020), https://www.federalreserve.gov/publications/files/pdcf-cpff-mmlf-pplf-6-10-2020.pdfsee also Periodic Report: Update on Outstanding Lending Facilities  Authorized by the Board under Section 13(3) of the Federal Reserve Act (May 23, 2020), https://www.federalreserve.gov/monetarypolicy/files/pdcf-cpff-mmlf-5-24-20.pdf; Periodic Report: Update on Outstanding Lending Facilities Authorized by the Board under Section 13(3) of the Federal Reserve Act (Apr. 23, 2020), https://www.federalreserve.gov/publications/files/pdcf-mmlf-and-cpff-4-24-20.pdf.

16 Money Market Mutual Funds Template Letter (Mar. 17, 2020), https://www.federalreserve.gov/supervisionreg/legalinterpretations/fedreserseactint20200317.pdf.

17 Investment Company Institute, SEC No-Action Letter (Mar. 19, 2020), https://www.sec.gov/investment/investment-company-institute-031920-17a.

18 H.R. 748, § 4015, 116th Cong. (2020), https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf.

19 Release No. 34-88448 (Mar. 20, 2020), https://www.sec.gov/rules/exorders/2020/34-88448.pdf.

20 Release No. 34-88960 (May 27, 2020), https://www.sec.gov/rules/exorders/2020/34-88960.pdf.

21 Policy Tools: Secondary Market Corporate Credit Facility, https://www.federalreserve.gov/monetarypolicy/smccf.htm.

22 Secondary Market Corporate Credit Facility, https://www.newyorkfed.org/markets/secondary-market-corporate-credit-facility.

23 Press Release, Federal Reserve takes additional actions to provide up to $2.3 trillion in loans to support the economy (Apr. 8, 2020), https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm.

24 Periodic Report: Update on Outstanding Lending Facilities  Authorized by the Board under Section 13(3) of the Federal Reserve Act (May 28, 2020), https://www.federalreserve.gov/publications/files/pmccf-smccf-talf-5-29-20.pdf.  The Federal Reserve Board is making publicly available detailed information on its transactions and holdings under the facility.  See SMCCF Transaction-specific Disclosures (May 29, 2020), https://www.federalreserve.gov/monetarypolicy/files/smccf-transition-specific-disclosures-5-29-20.xlsx.

25 Release Nos. 33-10695, IC-33646 (Sept. 25, 2019), 84 Fed. Reg. 57162, 57178 (Oct. 24, 2019), https://www.federalregister.gov/d/2019-21250.

26 Paycheck Protection Program, https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program.

27 Business Loan Program Temporary Changes; Paycheck Protection Program—Requirements—Promissory Notes, Authorizations, Affiliation, and Eligibility, 85 Fed. Reg. 23450, 23451 (Apr. 28, 2020), https://www.federalregister.gov/d/2020-09098.

28 Division of Investment Management Coronavirus (COVID-19) Response FAQs, Q&A II.4, https://www.sec.gov/investment/covid-19-response-faq.

29 SEC Division of Investment Management, Importance of Delivering Timely and Material Information to Investment Company Investors (Apr. 14, 2020), https://www.sec.gov/investment/delivering-timely-material-information.

30 As discussed above, the SEC has provided limited conditional relief from the obligation to timely deliver prospectuses to existing shareholders. See supra Delivery of Prospectuses and Shareholder Reports.

31 Division of Investment Management Coronavirus (COVID-19) Response FAQs, Q&A III.5, https://www.sec.gov/investment/covid-19-response-faq.

32 Staff Guidance for Conducting Annual Meetings in Light of COVID-19 Concerns (Apr. 7, 2020), https://www.sec.gov/ocr/staff-guidance-conducting-annual-meetings-light-covid-19-concerns.

33 Release No. IC-33837 (Apr. 8, 2020), https://www.sec.gov/rules/exorders/2020/ic-33837.pdf.

34 SEC Chairman Jay Clayton, Investors Remain Front of Mind at the SEC: Approach to Allocation of Resources, Oversight and Rulemaking; Implementation of Regulation Best Interest and Form CRS (Apr. 2, 2020), https://www.sec.gov/news/public-statement/statement-clayton-investors-rbi-form-crs.

35 OCIE, Risk Alert: Examinations that Focus on Compliance with Regulation Best Interest (Apr. 7, 2020),
https://www.sec.gov/files/Risk%20Alert-%20Regulation%20Best%20Interest%20Exams.pdf; OCIE, Risk Alert: Examinations that Focus on Compliance with Form CRS (Apr. 7, 2020), https://www.sec.gov/files/Risk%20Alert%20-%20Form%20CRS%20Exams.pdf.

36 FINRA Highlights Firm Practices from Regulation Best Interest Preparedness Reviews (Apr. 8, 2020), https://www.finra.org/rules-guidance/key-topics/regulation-best-interest/preparedness.

37 Frequently Asked Questions on Form CRS, https://www.sec.gov/investment/form-crs-faq#filing.

38 Division of Trading and Markets Staff Statement Regarding Requirements for Certain Paper Submissions in Light of COVID-19 Concerns (Apr. 2, 2020), https://www.sec.gov/tm/paper-submission-requirements-covid-19.

39 SEC Division of Corporation Finance, Statement Regarding Requirements for Form 144 Paper Filings in Light of COVID-19 Concerns (Apr. 10, 2020), https://www.sec.gov/corpfin/announcement/form-144-paper-filings-email-option.

40 IM Information Update IM-INFO-2020-03 (Apr. 8, 2020), https://www.sec.gov/files/im-info-2020-03.pdf.

41 SEC Chief Accountant Sagar Teotia, Statement on the Importance of High-Quality Financial Reporting in Light of the Significant Impacts of COVID-19 (Apr. 3, 2020), https://www.sec.gov/news/public-statement/statement-teotia-financial-reporting-covid-19-2020-04-03.

42 Investment Company Institute, SEC No-Action Letter (Mar. 26, 2020), https://www.sec.gov/investment/investment-company-institute-032620-17a.

43 Release No. IC-33821 (Mar. 23, 2020), https://www.sec.gov/rules/other/2020/ic-33821.pdf.

44 Recent interfund lending orders are available at https://www.sec.gov/rules/icreleases.shtml#interfundlending.

45 OCIE Statement on Operations and Exams – Health, Safety, Investor Protection and Continued Operations are our Priorities (Mar. 20, 2020), https://www.sec.gov/ocie/announcement/ocie-statement-operations-health-safety-investor-protection-and-continued.

46 Staff Statement Regarding Rule 302(b) of Regulation S-T in Light of COVID-19 Concerns (Mar. 24, 2020), https://www.sec.gov/corpfin/announcement/staff-statement-regarding-rule-302b-regulation-s-t-light-covid-19-concerns.

47 Frequently Asked Questions Related to Regulatory Relief Due to the Coronavirus Pandemic (Mar. 24, 2020), https://www.finra.org/rules-guidance/guidance/faqs/coronavirus. FINRA guidance, updates, and other information on COVID-19 are available at https://www.finra.org/rules-guidance/key-topics/covid-19. Other self-regulatory organizations are also providing relief and guidance. See, e.g., Cboe Regulatory Circular 20-021 (Mar. 25, 2020), http://cdn.cboe.com/resources/regulation/circulars/regulatory/RC20-021-Filing-Extensions-for-Annual-Reports-and-FOCUS-Reports.pdf; Cboe Regulatory Circular 20-022 (Mar. 25, 2020), http://cdn.cboe.com/resources/regulation/circulars/regulatory/RC20-022-Extension-of-Time-for-Certain-Filings-Currently-Due-April-1-2020.pdf.

48 Novel Coronavirus COVID-19 Updates, https://www.nasaa.org/industry-resources/covid-19-updates/.

49 State “Shelter-in-Place” and “Stay-at-Home” Orders, https://www.finra.org/rules-guidance/key-topics/covid-19/shelter-in-place.

50 Press Release No. 8136-20, CFTC Issues Third Wave of Relief to Market Participants in Response to COVID-19 (Mar. 20, 2020), https://www.cftc.gov/PressRoom/PressReleases/8136-20.

51 Notice to Members I-20-15 (Mar. 23, 2020), https://www.nfa.futures.org/news/newsNotice.asp?ArticleID=5218.

52 European Commission Delegated Regulation art. 62, https://ec.europa.eu/transparency/regdoc/rep/3/2016/EN/3-2016-2398-EN-F1-1.PDF.