New SEC, CFTC Staff Guidance on Coronavirus-Related Issues

Coronavirus Updates

New SEC, CFTC Staff Guidance on Coronavirus-Related Issues

March 17, 2020


As the coronavirus continues to cause unprecedented challenges, the IAA has aggregated several breaking regulatory updates to keep you informed. These updates detailed below cover the SEC (Form ADV, Custody, Form CRS, comment letters) and the CFTC/NFA (reporting deadlines, BCP, branch office requirements). We continue to be in close communication with regulators to share your concerns and request appropriate relief.

The SEC’s Division of Investment Management has asked the IAA to continue to keep its staff informed of impacts that the coronavirus situation is having on our member firms and potential compliance relief that may be appropriate. We encourage you to continue to share information about how your business operations are being affected by emailing or by calling the Legal Team at (202) 293-4222.

Regulatory Updates:

The SEC staff posted new and modified FAQs yesterday to respond to certain Form ADV and custody questions posed by the IAA and others resulting from the impact of the coronavirus pandemic:

Form ADV. SEC staff added a new FAQ addressing Form ADV Item 1.F and Section 1.F of Schedule D (listing any office, other than your principal office and place of business, at which you conduct investment advisory business):

Q: My firm has employees who are temporarily conducting investment advisory business from a temporary location other than their usual place of business (their homes, for example) as part of the firm’s business continuity plan due to circumstances related to coronavirus disease 2019 (COVID-19). Item 1.F of Part 1A requires information about a firm’s principal office and place of business. Section 1.F of Schedule D requires information about “each office, other than your principal office and place of business, at which you conduct investment advisory business.” Is my firm required to update either Item 1.F of Part 1A or Section 1.F of Schedule D in order to list the temporary teleworking addresses of its employees?

A: No. As long as the employees are temporarily teleworking as part of the firm’s business continuity plan due to such circumstances, staff would not recommend enforcement action if the firm does not update either Item 1.F of Part 1A or Section 1.F of Schedule D in order to list the temporary teleworking addresses. (Posted March 16, 2020)

Custody. SEC staff modified one of its FAQs to address the potential inability to timely handle checks that are received in the mail while teleworking:

Question II.1

Q: If an adviser inadvertently receives securities from a client, under the amended rule may the adviser forward the securities to the qualified custodian instead of returning the securities to the client? 

A [new part only]: We understand that an adviser’s personnel may be unable to access mail or deliveries at an office location due to the firm’s business continuity plan in response to circumstances related to coronavirus disease 2019 (COVID-19). In such circumstances, the Division would not consider the adviser to have received client assets at that office location until firm personnel are able to access the mail or deliveries at that office location. (Modified March 16, 2020.)

Potential Delay in Delivering Audited Financial Statements. In response to concerns that members may not receive audited financial statements from accounting firms in time to deliver audited financial statements to limited partners within 120 days of the end of a partnership’s fiscal year, as required in certain cases under the Custody Rule, SEC staff directed us to the “unforeseeable circumstances” language in the following existing Custody FAQ:

Question VI.9

Q: If a pooled investment vehicle is subject to an annual audit and its adviser is relying on the "audit provision" under rule 206(4)-2(b)(4), would the adviser be in violation of the rule if the pooled vehicle fails to distribute its audited financial statements within 120 days after the end of its fiscal year?

A: The Division would not recommend enforcement action for a violation of rule 206(4)-2 against an adviser that is relying on rule 206(4)-2(b)(4) and that reasonably believed that the pool's audited financial statements would be distributed within the 120-day deadline, but failed to have them distributed in time under certain unforeseeable circumstances. (Modified March 5, 2010.)

Form CRS. The IAA raised concerns with SEC staff about the June 30 Form CRS deadline and members’ concerns relating to their ability to continue with effective preparations. The staff is watching and considering whether relief on this issue may be appropriate.

CFTC/NFA Issues. We understand that CFTC staff in the Division of Swap Dealer and Intermediary Oversight (DSIO) is considering whether relief is appropriate for CPOs to postpone the deadline for filing annual audited financial statements and extend the requirement to furnish monthly or quarterly reports to pool participants under CFTC Regulations 4.7 and 4.22 and related regulations.

The IAA has been informed that firms seeking an extension to file pool financial statements with NFA on Form PFS must individually file extension requests using NFA’s EasyFile system. NFA can only grant a Rule 4.22(f) extension if the firm files the request before the statement’s due date. Otherwise, the firm must obtain relief from the CFTC.

NFA has recently issued notices to members covering (i) business continuity plans, (ii) CFTC regulatory reporting requirements, and (iii) branch office requirements (detailing when a CPO/CTA’s employees, including registered APs, may temporarily work remotely from locations that have not been listed as a branch office on the firm’s Form 7-R and without a branch manager).

CFTC staff in DSIO issued no-action relief on March 17 as part of regulatory relief related to the pandemic caused by COVID-19. In particular, the CFTC’s DSIO granted temporary relief to FCMs, IBs, swap dealers, foreign exchange dealers, floor brokers, designated contract markets and swap execution facilities from CFTC requirements related to recording of oral communications of voice trading and other telephonic communications and time-stamping requirements when located in remote, socially-distanced locations. DSIO also granted a 30-day delay for FCMs and swap dealers from the requirement to provide annual compliance reports to the CFTC.

Comment Letter Due Dates. The SEC Proposed Rules web page includes a new note that the Commission will not take final action on certain pending items – including amendments to the accredited investor definition and use of derivatives by registered investment companies and business development companies – before April 24th, in order to allow commenters additional time.

To keep members up-to-date on regulatory matters arising from coronavirus developments, the IAA has posted a Coronavirus Response Resources page on its website. Industry-related news  developments appear on our online newsletter, IAA Today.


TAGS: Coronavirus, SEC, CFTC

Latest Edition

Issue_September2021.jpgRead our Latest Print Edition


Regulatory Proposals

See Upcoming Regulatory Proposals

Compliance Dates

See Upcoming Compliance Dates

IACCP Certification & Training

See the 2021 Training Schedule








SEC COMMISSIONER PEIRCE KEYNOTE AT 2021 IAA COMPLIANCE CONFERENCE–In her keynote conversation with IAA President & CEO Karen Barr, SEC. Commissioner Hester Peirce discussed her concerns about recent agency initiatives involving climate change and ESG initiatives and other challenges facing the SEC.

MORE IAA VIDEOS – including sessions with SEC officials at our 2021 Compliance Conference and videos on Diversity, Equity & Inclusion – are on our VIDEOS page.