March 13, 2020
On March 4, the SEC announced conditional regulatory relief for U.S. companies that are based in, or have operations in, areas hit by the coronavirus.
The announcement states that the SEC “will continue to closely track developments, and, if appropriate, consider additional relief from other regulatory requirements for those affected by the coronavirus.” As is evident in the news coverage, the issue is rapidly evolving and creating significant volatility in the financial markets.
What the order provides: According to the published order, publicly traded companies will have an additional 45 days to file certain disclosure reports that would otherwise have been due between March 1 and April 30, 2020. The specific filings affected include proxy statements and annual reports.
Relief conditions: Companies must detail the specific circumstances and rationale for seeking relief. In addressing the unfolding crisis, Chairman Jay Clayton stated, “We also remind 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.” However, he also noted that if companies provide forward-looking statements to keep investors informed about material developments, they can access the safe harbor provisions in Section 21E of the Exchange Act.
SEC’s next steps: The Commission may extend the time period for the relief, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant. As of March 12, the SEC had not provided additional information.
Why this matters: The coronavirus is causing hour-by-hour impacts on the financial markets as well as public and government response. It leaves companies open to sharp criticism if they appear to be taking insufficient steps in protecting employees and customers and planning for severe disruptions in their business operations. The statement and order indicate the SEC is taking important steps to provide real-time guidance and relief. Further, it indicates the SEC is sympathetic to the high degree of uncertainty currently impacting public companies.