Legal Alert

COVID-19: SEC Disclosure Obligations for Investment Companies

by the Investment Management Group
April 17, 2020

As discussed in our previous alerts here and here, over the past several weeks, the Securities and Exchange Commission (the SEC) and its staff (the Staff) have provided guidance and targeted, conditional, and temporary relief to investment companies and investment advisers. To ensure that the investment companies continue to meet their disclosure obligations amid the COVID-19 pandemic, on April 14, 2020, the Staff of SEC’s Division of Investment Management (the Division) issued a statement (the Statement) emphasizing the ongoing importance of updating and delivering required information to investors in a timely manner consistent with investment companies’ disclosure obligations, even during this period of operational challenge. Below are key takeaways from the Statement.

Updating Prospectuses and Financial Statements

The Staff reminds investment companies to update the information in their prospectuses, including the required underlying certified financial statements. In particular, for investment companies with a December 31 fiscal year end, as they approach May 1, 2020, according to the Staff, they may plan accordingly to ensure that they have updated their prospectuses in order to continue to sell shares to new investors and sell additional shares to existing investors.

The Staff also encourages investment companies to consider whether their disclosures, including risk disclosures, should be revised based on how COVID-19-related events may affect the investment company and its investments.

Delivering Information to Fund Investors

As part of its COVID-19 response efforts, the SEC has relaxed certain prospectus delivery requirements as long as certain conditions are met. With respect to sales of investment company shares to new purchasers, however, accord to the Staff, investment companies must continue to deliver the fund’s prospectus or summary prospectus in a timely manner, based on the delivery preferences that have been expressed by the investor. Further, the Staff encourages investment companies to communicate with investors about their delivery preferences.

Division of Investment Management Coronavirus (COVID-19) Response
FAQs provides additional information concerning the Division’s response to COVID-19.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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