Yesterday, the Securities and Exchange Commission (SEC) announced that the agency was concurrently issuing an Order that provides relief, subject to certain conditions, for publicly traded companies affected by the coronavirus (COVID-19). The relief is necessitated by the fact that COVID-19 may impede certain companies’ timely communication to the trading markets, the SEC and shareholders. Chairman Clayton observed that, “The health and safety of all participants in our markets is of paramount importance. While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, [the SEC] recognize[s] that this situation may prevent certain issuers from compiling these reports within required timeframes.”
As a result, the SEC has announced that, where appropriate, certain persons and entities will be exempt from selected requirements under the Exchange Act of 1934 (Exchange Act). Subject to meeting specified conditions, certain publicly traded companies will have an additional 45 days to file certain reports normally scheduled to be filed between March 1, 2020 through April 30, 2020. The SEC is closely monitoring the situation and may extend the duration of the relief period, the conditions required or the relief offered as the SEC deems appropriate.
As stated in the joint statement issued last month with other SEC leaders and the Chairman of the Public Company Accounting Oversight Board (PCAOB), which we discussed, Chairman Clayton made the point that, “[h]ow companies plan and respond to the events as they unfold can be material to an investment decision, and [he] urge[s] companies 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.” He also reminded companies of the safe harbor in Section 21E of the Exchange Act for forward-looking statements. In addition, he noted the importance of a company’s exercising care, such as limiting participation in securities transactions particularly with the public prior to making material disclosures related to the effect of the coronavirus on the company and, when communicating information, complying with the Fair Disclosure rules, which prohibit public companies from selectively disclosing material nonpublic information.
Subject to meeting certain conditions, the press release explains the SEC’s position with regard to a company’s eligibility to use Forms S-3 and S-8, and for a 45-day extension for filing certain annual and quarterly reports under the Exchange Act. Moreover, according to the Order, companies that are unable to make the regular Exchange Act filing deadlines, such as under Regulation 14A (the proxy solicitation rules), may be eligible for a 45-day extension. The company must meet a number of conditions, including that the company’s inability to file in a timely fashion is related to the coronavirus. Also, the company must furnish the SEC with a Form 8-K (or Form 6-K, if applicable) stating: (1) that the company is relying on the SEC’s Order; (2) the reason for the filing delay; (3) when the company expects to make the filing; (4), if appropriate, the risk factor explaining, if material, the impact of the virus on the business; and (5) certain other information if the company’s inability to file or furnish information is caused by a specific person. In addition, the filed or furnished document must state that the company is relying on the SEC’s Order and the reason for the delay. Lastly, the Order states that companies may be exempt from certain delivery requirements, such as providing hard copies of proxy-related materials to shareholders.
The SEC invites companies to contact the agency for additional information or with questions.