On March 4, 2020, the US Securities and Exchange Commission provided guidance and issued an order granting regulatory relief to companies that file public reports and are affected by the COVID-19 outbreak. The full text of the order may be found here and the SEC’s release may be found here.
Specifically, the SEC’s order provides that public companies that are unable to meet filing deadlines due to the COVID-19 outbreak will have an additional 45 days to file reports that would have otherwise been due between March 1 and April 30, 2020. Annual reports on Form 10-K, quarterly reports on Form 10-Q and definitive proxy statements are included within the scope of the order.
In addition, the SEC provided guidance to companies assessing the impact of the COVID-19 outbreak regarding their disclosure and trading obligations. The SEC encouraged companies to consider providing public disclosure, where appropriate, of their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus and to evaluate whether to update prior disclosures that have become materially inaccurate. The SEC also reminded companies of their obligations under Regulation FD to avoid selective disclosure regarding the impacts of the coronavirus and the importance of taking steps to prevent company insiders from public trading if they are in possession of material nonpublic information regarding the outbreak’s impact. For additional discussion regarding US public companies’ disclosure and trading obligations, please see our March 3 Client Alert.
The order applies to substantially all filings required under the Exchange Act that would otherwise be due between March 1 and April 30, 2020. Reports and forms within the scope of the order include annual reports on Form 10-K, quarterly reports on Form 10-Q, definitive proxy statements required to be filed within 120 days of a company’s year-end in order to be incorporated by reference into a company’s Form 10-K, current reports on Form 8-K and Schedules 13G. Excluded from the order are Schedule 13D filings (including amendments) and beneficial ownership filings under Section 16 of the Exchange Act, including Forms 4.
Conditions for relief
In order to qualify for relief under the order, a company must:
- be unable to meet a filing deadline due to circumstances related to COVID-19;
- furnish to the SEC on Form 8-K or Form 6-K, as applicable, by the later of March 16, 2020 or the original filing deadline, a statement that the company is relying on the order and which includes (i) a brief description of the reasons why the company cannot file the report on a timely basis, (ii) the estimated filing date of the report, (iii) if material, a risk factor explaining the impact of COVID-19 on the business, and (iv) if the report cannot be filed timely due to the inability of any person, other than the company, to furnish an opinion, report or certification, a statement signed by such person stating the specific reasons why such person is unable to do so;
- file the applicable report no later than 45 days after the original due date; and
- include in the report once filed, disclosure that the company relied on the SEC’s order and the reasons therefor.
If a company relies on the order, including filing the Form 8-K announcing it will be unable to meet the filing deadline, it will not need to file a Form 12b-25 so long as the filing is made within the time period prescribed by the order.
Relief from delivery of proxy solicitation materials
The order also extends to the physicaldelivery of proxy solicitation materials, annual reports and information statements to any security holder if (1) the holder has a mailing address located in an area where, as a result of the COVID-19 outbreak, the common carrier has suspended delivery service of the type or class customarily used by the company or other person making the solicitation and (2) the company or other person making a solicitation has made a good faith effort to furnish the soliciting materials to the security holder.
Impact on registration statement eligibility
The SEC also noted in its press relief announcing its order that:
- For purposes of Form S-3 eligibility and well-known seasoned issuer status (WKSI), as well as Form S-8 eligibility and the current public information requirements of Rule 144(c), a company will be considered current and timely in its Exchange Act filing requirements if it was current and timely as of the first day of the relief period and complies with the terms of the order, including filing any report due during the relief period within 45 days of the filing deadline for the report.
- Companies that receive an extension on filing Exchange Act annual reports or quarterly reports pursuant to the order will be considered to have a due date 45 days after the filing deadline for the report and will be eligible for to rely on the SEC’s existing process for providing notice of an inability to file periodic reports on a timely basis under Rule 12b-25 of the Exchange Act if they are unable to file the required reports on or before the extended due date.
SEC guidance on disclosure and trading obligations
As noted in our March 3 client alert, US public companies evaluating the impact of the coronavirus should remain mindful of their various reporting and trading obligations. In its press release announcing the order, the SEC also encouraged all companies to consider their disclosure obligations in light of the COVID-19 outbreak. For example, the SEC noted that “where a company has become aware of a risk related to the coronavirus that would be material to its investors, it should refrain from engaging in securities transactions with the public and take steps to prevent directors and officers (and other corporate insiders who are aware of these matters) from initiating such transactions until investors have been appropriately informed about the risk.”
Similarly, SEC Chairman Jay Clayton urged all companies to “provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments” and to “work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes are as robust as practicable in light of the circumstances in meeting the applicable requirements.”
The SEC also reminded companies of their obligations under Regulation FD to avoid selective disclosure regarding the impacts of the coronavirus and to disseminate material information broadly. The SEC noted that, depending on their particular circumstances, companies may need to consider whether to update prior disclosures that have become materially inaccurate.
The SEC further confirmed that forward-looking information provided to keep investors informed about material developments regarding the coronavirus, including trends and uncertainties, can utilize the safe harbor in Section 21E of the Exchange Act, which provides public companies making forward-looking statements with certain protections from liability.
Availability of additional relief
The SEC is continuing to monitor the situation and may take additional steps, including providing additional filing extensions, as necessary. In addition, companies that may require additional or different assistance in complying with filing obligations are encouraged to contact the SEC for additional assistance, which may be provided on a case-by-case basis.