COVID-19: Notable Investment Company Regulatory Changes

Posted by Rajesh Misra on Apr 17, 2020 5:10:15 PM

In recognition of the operational challenges caused by COVID-19 for funds and their Trustees/Directors, the Securities and Exchange Commission (“SEC”) and the Internal Revenue Service (“IRS”) have both issued exemptions relating to filing due dates and other requirements.

Notable SEC Exemptions


The SEC noted that there may be circumstances that do not allow personnel to timely prepare, complete and file with the SEC certain filings due to COVID-19. In addition, the SEC has recognized the difficulty and/or impossibility of travel for Trustees/Directors who are normally required to meet in-person for certain approvals. Resulting exemptions are noted below, along with BBD’s observations.

Covid resized

Boards of Trustees/Directors for either registered investment companies or business development companies do not need to cast votes in person, provided that reliance of the SEC relief is necessary due to circumstances related to current or potential effects of COVID-19. 

Votes are taken via a method that allows each Trustee/Director to hear one another other at the time of voting.  Additionally, a majority of independent Trustees/Directors will approve the actions taken based on the SEC relief at the next in-person meeting. Boards of Trustees/Directors can rely on this SEC relief until August 15, 2020.

BBD Observation: BBD is observing various fund Boards utilize this SEC relief and has participated in many telephonic Trustee/Director meetings since the advent of the COVID-19 pandemic that traditionally would have been conducted in-person. In addition, BBD has spoken to various Trustees/Directors who are utilizing virtual meeting options due to social distancing measures and travel restrictions currently in place.

Registered funds required to file FORM N-CEN and N-PORT and unable to meet the deadlines due to COVID-19 can rely on the SEC relief if the fund promptly notifies the SEC via email at IM-EmergencyRelief@sec.gov and states that it is relying on the SEC relief.  The email must include a brief description of the reason why the filing(s) could not be completed on a timely basis and when the filings may be completed and filed with the SEC.

Registered funds relying on this SEC relief should also include a statement on their fund website noting reliance on this relief as well as why the filing could not be completed in a timely manner. The registered fund relying on the SEC relief must file the required report as soon as possible, but not more than 45 days after the original due date. Finally, when the filing does occur, the registered fund should also note in the filing the reliance on the SEC relief as well as why the registered fund could not file in a timely manner.

This relief is currently available for filings that are due through June 30, 2020.

BBD Observation: Currently, BBD is not aware of any clients that have utilized this SEC relief. BBD has spoken with several administrators/service providers, and each of them noted no expectation of utilizing this relief. Each administrator/service provider has noted that they have controls and processes in place to continue timely preparation/completion/submission of client SEC filings.

Administrators have noted additional work to be completed as part of the daily net asset value calculation due to current volatility in the securities markets. One administrator noted that they have amended their daily pricing process to adjust for swings in the securities markets in an effort to streamline the valuation review process for clients. Another administrator noted that they have increased price tolerance levels to reflect current volatility.  

If Semi-Annual and Annual Reports to Shareholders cannot be prepared or sent to shareholders due to COVID-19, funds can temporarily delay the mailing and related filing.  Again, the registered investment company must notify the SEC via email at IM-EmergencyRelief@sec.gov noting the following:

  • State that the registered investment company is relying on this SEC relief
  • Explain briefly why the report could not be sent timely to shareholders
  • Detail when it expects to send the report to shareholders
  • Include a statement on the registered fund’s website noting reliance on the SEC relief and why the report could not be sent to shareholders
  • The registered fund must complete the transmittal within 45 days after the original due date as well as filing within 10 days with the SEC

This relief is currently available for filings due through June 30, 2020.

BBD Observation: Currently, BBD is not aware of any clients that have utilized this SEC relief.

Filing FORM N-23C-2 with the SEC for closed-end funds and business development companies that make repurchase offers pursuant to Rule 23c-3 also received some temporary relief from the SEC.  The closed-end fund or business development company relying on this SEC relief must:

  • Notify the SEC that it is relying on this relief, including a brief description as to why there is a need to file a notice fewer than 30 days in advance of the date set by the closed-end fund or business development company for calling or redeeming securities
  • Ensure that the filing in the abbreviated timeframe is in compliance with relevant state law and closed-end fund or business development company legal documents
  • File the appropriate notification that contains the information required under Rule 23c-2 before call or redemption of existing securities, before commencement of any offering of replacement securities, and provides notification to the existing shareholders whose securities are being called or redeemed

Relief is available for filings due through August 15, 2020

BBD Observation: Currently, BBD is not aware of any clients that have utilized this SEC relief.

The SEC staff noted that they took the position 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 when the prospectus could not be delivered due to the COVID-19 outbreak. In the event a registered fund needs to rely on this SEC relief, the fund must:

  • Notify the SEC at IM-EmergencyRelief@sec.gov , detailing reliance on this SEC relief and include a brief description as to why the prospectus could not be provided timely to shareholders and the estimated timing of when the distribution of the prospectus would be completed.
  • Note on the registered investment company website that it is relying on this SEC relief, make available via the fund’s website the current prospectus, and deliver the prospectus as required as soon as possible but not any later than 45 days after the original due date.

This relief is currently available for filings due through June 30, 2020.

BBD Observation: Currently, BBD is not aware of any clients that have utilized this SEC relief.

Notable IRS Exemptions

Registered investment companies generally file their annual tax return on Form 1120-RIC, which is due nine and one-half months after the fiscal year end of the fund (after extension) which would make June 30, 2019 fiscal year end 1120-RIC filings due to the IRS on or around April 15, 2020. This deadline has been extended.

BBD Observation: Currently, BBD is not aware of any clients that have utilized this extension granted by the IRS. We expect that there is consideration of pushing the filing requirements for July and August fiscal year-end funds as well.

BBD continues to communicate with our clients, Boards of Trustees/Directors, fund administrators and other service providers as we collectively navigate the COVID-19 pandemic. We did not observe any significant delays as fund administrators shifted to working remotely as a result of various states issuing stay-at-home mandates. From our perspective, clients and fund administrators appear to have transitioned to this work from home scenario seamlessly, with little disruption in client experience and service. As a result, we have not witnessed much reliance on the relief noted above, with the exception of the ability to conduct meetings remotely and through the use of technology. This fairly seamless transition likely speaks to the quality of the contingency plans administrators have in place for situations like pandemics.

If we can be of any assistance during these challenging times, please reach out.



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