On March 25, 2020, the Securities and Exchange Commission (SEC) granted wide-ranging temporary exemptive relief to fund boards, funds and investment advisers as the COVID-19 pandemic caused significant disruption to all sectors of the U.S. economy. Since then, each state and the District of Columbia has begun to relax restrictions imposed to limit the spread of COVID-19.
On June 19, 2020, the SEC issued a press release stating that, based on staff outreach to fund and adviser representatives, it would not further extend most of the relief granted on March 25.1 However, the SEC stated that “[t]he health and safety of all participants in the securities markets is of paramount importance, and the Commission recognizes that boards of directors of registered management investment companies and BDCs continue to face challenges traveling in order to meet the in-person voting requirements under the Investment Company Act and rules thereunder.”2 Therefore, the relief from in-person board meeting requirements was extended at least through December 31, 2020. The precise date that the relief will expire will be specified in a public notice from SEC staff stating that the relief will terminate – that date will be at least two weeks from the date of the notice.
Relief for Fund Boards
|
Issue |
Date |
Relief/Time |
Conditions |
| In-person Investment Company Board meetings | 3/25/20; as amended 6/19/20 | Exempt from holding in-person Board meetings Covers March 13 – > December 31, 2020 | (a) Necessary or appropriate due to COVID-19; (b) Votes are cast at a meeting in which all participating directors/trustees can hear each other simultaneously during the meeting; and (c) The Board, including a majority of the independent directors/trustees, ratifies the action at the next in-person meeting. |
Key Takeaway
The SEC and its staff continue to engage with funds and advisers about the impact of COVID-19 upon their operations. While many fund and adviser personnel continue to work remotely, the SEC apparently believes that funds and advisers have been able to adjust successfully to remote working environments and no longer need a continuation of the relief provided. However, the SEC and its staff apparently believe that there continue to be significant obstacles to conducting in-person board meetings, and consequently, is willing to extend the relief it previously provided with respect to funds conducting board meetings in person.
1 A summary of the relief provided by the SEC, its staff, the CFTC and the NFA is available at https://dev.practus.com/covid-19-relief/.
2 Order Under Section 6(c) and Section 38(a) of the Investment Company Act of 1940 Granting Exemptions from Sections 15(c) and 32(a) of the Investment Company Act and Rules 12b-1(b)(2) and 15a-4(b)(2)(ii) Thereunder, Investment Company Act Rel. No. 33897 (June 19, 2020).
