The Securities and Exchange Commission has published guidance to assist companies with their obligation to hold annual shareholder meetings in light of coronavirus (COVID-19) pandemic. The SEC also announced regulatory relief for funds and investment advisers whose operations may be affected, which covers in-person board meetings and certain filing and delivery requirements.
Many public companies and investment companies are required to hold annual meetings of security holders, with the federal securities laws requiring the delivery of proxy materials to the voting shareholders. The spread of COVID-19 has affected the ability to hold in-person meetings due to health, transportation, and other logistical issues.
The SEC guidance provides regulatory flexibility to companies seeking to change the date and location of the meetings and use new technologies, such as “virtual” shareholder meetings that avoid the need for in-person shareholder attendance.
“The SEC staff recognizes that many public companies and other market participants are transitioning to teleworking, virtual meetings and other contingency measures to address health concerns,” said SEC chairman Jay Clayton. “Our staff stands ready to facilitate these transitions and we encourage market participants to contact us with requests for guidance or relief. The SEC has itself moved to teleworking and virtual meetings and remains fully operational.”
Under the guidance, affected parties can announce changes to the meeting date/location or the use of “virtual” meetings without incurring the cost of additional physical mailing of proxy materials.
The SEC is providing the following temporary exemptive relief:
Relief Related to the Investment Company Act of 1940
- Registered management investment companies, business development companies, and any investment adviser or principal underwriter of such companies from Investment Company Act sections and rules requiring certain agreements, plans or arrangements be approved by the company’s board of directors by an in-person vote due to circumstances related to the current or potential effects of coronavirus;
- Registered management investment companies and unit investment trusts affected by coronavirus from Form N-CEN and Form N-PORT filing deadlines;
- Registered management investment companies and unit investment trusts affected by coronavirus from annual and semi-annual report transmittal deadlines; and
- Registered closed-end investment companies and business development companies from the requirement to file Form N-23C-2 at least 30 days prior to calling or redeeming securities.
Relief Related to the Investment Advisers Act of 1940
- Registered investment advisers and exempt reporting advisers affected by coronavirus to file an amendment to Form ADV or file reports on Form ADV part 1A, respectively;
- Registered investment advisers affected by coronavirus from requirements to deliver amended brochures, brochure supplements or summary of material changes to clients where the disclosures are not able to be timely delivered because of circumstances related to coronavirus; and
- Private fund advisers affected by coronavirus from Form PF filing requirements.
Statement of Delivery of Fund Prospectuses
“The Commission also takes the position, as described in the orders, 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 coronavirus, subject to the conditions described in the orders.”
The SEC said that it will continue to monitor the impact of COVID-19 on investors and the capital markets.