SEC Grants Temporary Relief to Investment Advisers Impacted by COVID-19

On March 13, 2020, the U.S. Securities and Exchange Commission (“SEC”) issued an exemptive order (the “Order” [1]) granting conditional relief from certain Form ADV and Form PF requirements to investment advisers whose operations may be disrupted by the outbreak of the COVID-19 virus.

In addition, on March 16, 2020, the staff of the SEC’s Division of Investment Management (“Staff”) issued a new frequently-asked-question regarding Item 1.F. of Form ADV, Part 1A, with respect to investment advisers temporarily conducting investment advisory business from a temporary location due to COVID-19 (the “Form ADV FAQ” [2]), and modified an existing frequently-asked-question regarding Rule 206(4)-2 (the “Custody Rule”) under the Investment Advisers Act of 1940, as amended (“Advisers Act”), concerning registered investment advisers (“RIAs”) that inadvertently receive client assets at an office location where mail or deliveries are temporarily inaccessible due to COVID-19 (the “Custody Rule FAQ” [3]).

The Order

The relief specified in the Order as summarized below is limited to Form ADV and Form PF filing or delivery obligations (as applicable) originally due on or after March 13, 2020, but on or before April 30, 2020 (the “Period”).  During the Period, the Order provides for the following relief:

• RIAs are exempt from the requirements: (a) to file an amendment to Form ADV under Advisers Act Rule 204-1, and (b) related to the delivery of a Form ADV, Part 2A amended brochure (or a summary of material changes) and a Form ADV, Part 2B amended brochure supplement to existing clients under Advisers Act Rule 204-3(b)(2) and (b)(4), where the conditions below are satisfied.
• Exempt reporting advisers (“ERAs”) are exempt from the requirement to file reports on Form ADV under Advisers Act Rule 204-4, where the conditions below are satisfied.
• RIAs are exempt from the requirements to file Form PF under Advisers Act Section 204(b) and Rule 204(b)-1, where the conditions below are satisfied.

In order to rely on the relief described above, the following conditions must be satisfied:

1. The investment adviser is unable to meet a filing deadline or delivery requirement due to circumstances related to current or potential effects of COVID-19;
2. An investment adviser relying on the Order with respect to the filing of Form ADV or delivery of its brochure (or summary of material changes) or brochure supplement must promptly provide the SEC via email at IARDLive@sec.gov with, and disclose on its public website (or if it does not have a public website, promptly notify its clients and/or private fund investors of), the following information:

   (i) that it is relying on the Order;
   (ii) a brief description of the reasons why it could not file or deliver its Form on a timely basis; and
   (iii) the estimated date by which it expects to file or deliver the Form.

3. An investment adviser relying on the Order with respect to filing Form PF must promptly provide the SEC via email at FormPF@sec.gov with the following information:

   (i) that it is relying on this Order;
   (ii) a brief description of the reasons why it could not file its Form on a timely basis; and
   (iii) the estimated date by which it expects to file the Form.

4. The investment adviser files Form ADV or Form PF, or delivers the brochure (or summary of material changes) or brochure supplement, as applicable, as soon as practicable, but not later than 45 days after the original due date for the applicable filing or delivery.

The Order indicates that the Period for any or all of the relief may, if necessary, be extended with any additional conditions that the SEC deems appropriate.

The Form ADV FAQ

In the Form ADV FAQ, the Staff indicated that it would not recommend enforcement action if an adviser does not update either Item 1.F. of Form ADV, Part 1A or Section 1.F of Schedule D in order to list the temporary teleworking addresses of its employees as long as the employees are temporarily teleworking as part of the adviser’s business continuity plan due to circumstances related to COVID-19.

The Custody Rule FAQ

The Form ADV FAQ states that where an RIA’s personnel may be unable to access mail or deliveries at an office location due to the RIA’s business continuity plan in response to circumstances related to COVID-19, the Staff would not consider the RIA to have received client assets at that office location for purposes of the Custody Rule until its personnel are able to access the mail or deliveries at that office location.

[1] The Order can be found here.

[2] The Form ADV FAQ can be found here under the heading “Form ADV: Item 1.F.”

[3] The Custody Rule FAQ can be found here under “Question II.1.”