In an Order dated March 13, 2020, the Securities and Exchange Commission offered an exemption to investment companies, business development companies (BDCs) and investment advisers grappling with challenges to the routine meeting and reporting requirements of the Investment Company Act of 1940 and the Investment Advisers Act of 1940 caused by COVID-19.

This sweeping temporary order provides relief to funds, BDCs and unit investment trusts (UITs) from the requirements to hold in-person meetings to approve advisory contracts, rule 12b-1 plans and independent auditors; from certain filing requirements; the requirement to send reports to shareholders; notice of call or redemption requirements that apply to closed-end funds and BDCs; and certain prospectus delivery requirements.

In person voting requirements for registered investment companies and BDCs

Subject to certain conditions, the Order exempts registered investment companies, BDCs, and their investment advisers and principal underwriters from certain statutory in-person meeting requirements:

  • Approval of investment advisory contracts (Section 15(c))
  • Approval of principal underwriter agreements (Section 15(c))
  • Approval of Rule 12b-1 distribution plans (Rule 12b-1)
  • Approval of independent public accountants (Section 32(a))

Boards are exempt from the requirement to take these actions at an in-person meeting called specifically for that purpose, provided they meet the following conditions:

  • Reliance on the Order is necessary or appropriate due to circumstances related to current or potential effects of COVID-19;
  • The votes required to be cast at an in-person meeting are instead cast at a meeting in which directors may participate by any means of communication that allow all directors participating to hear each other simultaneously during the meeting; and
  • The board of directors, including a majority of the directors who are not interested persons of the registered management investment company or BDC, ratifies the action taken pursuant to this exemption by vote cast at the next in-person meeting. 

The in-person meeting exemption is limited from March 13, 2020 until June 15, 2020.

Forms N-CEN and N-PORT filing requirements

The Order temporarily exempts registered funds required to file Form N-CEN (pursuant to Rule 30a-1) or Form N-PORT (pursuant to Rule 30b1-9), provided they meet the following conditions:

  • The fund is unable to meet a filing deadline due to circumstances related to current or potential effects of COVID-19;
  • Any fund relying on the Order promptly notifies the Commission staff via email at IM-EmergencyRelief@sec.gov stating:
    • that it is relying on the Order;
    • a brief description of the reasons why it could not file its report on a timely basis; and
    • the estimated date by which it expects to file the report.
  • Any fund relying on the Order must disclose on its website a brief statement that it is relying on the Order and the reasons why it could not file its reports on a timely basis;
  • The registered fund files the Form N-CEN or Form N-PORT files as soon as practicable, but not later than 45 days after the original due date; and
  • Any Form N-CEN or Form N-PORT filed pursuant to the Order must include a statement of the filer that it relied on the Order and the reasons why it was unable to file it on a timely basis.

The N-CEN and N-PORT filing exemption is limited to reports with an original due date on or after March 13, 2020, but on or prior to April 30, 2020.

Transmittal of annual and semi-annual reports

The Order temporarily provides a 45-day exemption to registered funds and UITs from the requirements of Section 30(e) and related rules to send annual and semi-annual reports to shareholders and unit holders, provided they comply with the following conditions:

  • The fund is unable to prepare or transmit the report due to circumstances related to current or potential effects of COVID-19;
  • Any fund relying on the Order promptly notifies the staff via email at IMEmergencyRelief@sec.gov stating:
    • that it is relying on the Order;
    • a brief description of the reasons why it could not transmit its report on a timely basis; and
    • the estimated the estimated date by which it expects to transmit the report;
  • Any fund relying on the Order must include on its website a brief statement that it is relying on the Order and the reasons why it could not prepare and transmit its reports on a timely basis; and
  • The fund sends the reports to shareholders as soon as practicable, but not later than 45 days after the original due date and files the report within ten days of its transmission to shareholders. 

The exemption to send reports to shareholders/unitholders is limited to reports with an original due date on or after March 13, 2020, but on or prior to April 30, 2020.

Notices of closed-end funds and BDCs to call or redeem securities

The Order temporarily exempts closed end funds and BDCs from filing notices of their intent to call or redeem securities at least 30 days in advance (required by Section 23(c) for closed-end funds and Section 63 for BDCs), provided the fund complies with the following conditions:

  • The closed-end fund or BDC relying on the Order:
    • promptly notifies Commission staff via email at IM-EmergencyRelief@sec.gov stating:
      • that it is relying on this Order; and
      • a brief description of the reasons why it needs to file a Notice fewer than 30 days in advance of the date set by the fund for calling or redeeming the securities of which it is the issuer;
    • ensures that the filing of the notice on an abbreviated time frame is permitted under relevant state law and the fund's governing documents;
    • files a notice that contains all the information required by Rule 23c-2 prior to:
      • any call or redemption of existing securities;
      • the commencement of any offering of replacement securities; and
      • providing notification to the existing shareholders whose securities are being called or redeemed.

The notice of call or redemption exemption is limited from March 13, 2020 until June 15, 2020. 

Prospectus delivery requirements

The Order temporarily exempts registered funds from the prospectus delivery requirements due to COVID-19 circumstances, as long as the sale of shares was not an initial purchase of shares, provided that the fund complies with the following conditions:

  • The fund:
    • Notifies Division of Investment Management staff via email at IMEmergencyRelief@sec.gov stating:
      • that it is relying on the Commission position;
      • a brief description of the reasons why it or any other person required could not deliver the prospectus to investors on a timely basis; and
      • the estimated date by which it expects the prospectus to be delivered;
    • Publishes on its public website that it intends to rely on the Commission position and briefly states the reasons why it could not deliver the prospectus on a timely basis;
    • Publishes its current prospectus on its website; and
  • Delivery was originally required on or after the date of this Order but on or prior to April 30, 2020, and the prospectus is delivered to investors as soon as practicable, but not later than 45 days after the date originally required. 

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