SEC Staff Urges Investment Cos. To Update Info Despite Virus

By Elise Hansen
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Law360 (April 15, 2020, 4:47 PM EDT) -- Investment companies should make every effort to deliver timely financial information and risk disclosures to investors despite the disruptive effect of the coronavirus pandemic, U.S. Securities and Exchange Commission staff said.

While the SEC has worked to provide selective relief to companies affected by COVID-19, investment companies should remain mindful of their obligations to provide key information to investors, Division of Investment Management staff said in a statement Tuesday.

"In light of the current uncertainties and market disruptions, investors need high-quality financial information more than ever," the statement said. "We are committed to promoting the updating and delivery of such information, which is particularly important to keep Main Street investors up to date about their investments."

Investment companies must update information in their prospectuses, including the underlying financial statements, SEC staff said. Companies should also weigh whether to update their risk disclosures in light of the pandemic, the statement said.

Companies that are struggling to meet their disclosure obligations should communicate with Investment Division staff, the statement said.

"These are unprecedented times raising unique and often previously unconsidered issues," the statement said. "We recognize circumstances may evolve, and some investment companies may encounter particularized obstacles."

At the same time, the agency has to balance accommodations with its commitment to protecting investors, the staff noted.

"While the Division will consider appropriate assistance regarding such challenges, we also remain committed to our bedrock principle of making timely and relevant information available to investors," the statement said.

The message is similar to last week's joint statement from SEC Chairman Jay Clayton and William Hinman, director of the Division of Corporation Finance. Their communication stressed the importance of "high quality" disclosures amid COVID-19, urging SEC-registered public companies to bolster forward-looking statements as they prep for earnings releases.

The SEC has also published detailed guidance about how companies should assess and communicate COVID-19 risks such as liquidity, supply chains and access to credit.

The agency is also providing investment companies with some relief. The SEC has said that sending a prospectus electronically rather than delivering it personally likely wouldn't trigger an enforcement action, and in March, the agency conditionally increased registered funds' short-term borrowing ability.

Representatives for the SEC declined to comment beyond the public statement.

--Additional reporting by Al Barbarino, Tom Zanki and Jack Queen. Editing by Amy Rowe.

Update: this story has been updated to reflect a response from the SEC.

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