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SEC releases agenda for Small Business Capital Formation Committee meeting
On April 28, the SEC released the agenda for the May 8, 2020, meeting of its Small Business Capital Formation Advisory Committee, which will be hosted via video conference. The committee will discuss the capital formation proposal and how small businesses are coping with Covid-19, among other topics.
SEC charges company and CEO for misleading statements concerning N95 masks
On April 28, the SEC announced that it filed suit in the U.S. District Court for the Southern District of Florida against a company and its CEO (defendants) for violating the Securities Exchange Act of 1934 by making false and misleading statements concerning their ability to source and supply N95 masks for the Covid-19 virus. The SEC alleges that the defendants’ actions sought to mislead investors because they “never had either a single order from any buyer to purchase masks, or a single contract with any manufacturer or supplier to obtain masks, let alone any masks actually in its possession.” Following regulatory inquiries (and an SEC March 26 order that temporarily suspended trading in the securities of the company), the SEC alleges in the complaint that the CEO issued a press release stating that the company never had masks available to sell. The SEC seeks injunctive relief and civil penalties against the defendant, as well as an officer-and-director bar against the CEO.
SEC’s Investor Advisory Committee to hold remote meeting
The Investor Advisory Committee of the Securities and Exchange Commission will hold a remote public meeting on May 4 via a live webcast. The meeting will focus on public company disclosures in light of the Covid-19 outbreak and on public company shareholder engagement and meetings by virtual means.
SEC announces formation of internal Covid-19 Market Monitoring Group
On April 24, the SEC announced the formation of an internal, cross-divisional Covid-19 Market Monitoring Group, which will assist the commission with (i) commission and staff actions and analysis related to the effects of Covid-19 on markets, issuers, and investors, and (ii) responding to requests for information, analysis and assistance from other regulators and public sector partners.
SEC Division of Corporate Finance issues statement on submission of filings by email
On April 23, the SEC Division of Corporate Finance announced that it will permit certain documentation to be submitted via email from April 23 to June 30, 2020. The statement also provides that the division will not recommend enforcement action to the SEC if specific filings listed in the announcement are submitted via email in lieu of mailing or delivering the paper documents to the SEC if the filer attaches a complete document, including any required exhibits, as PDF attachments. The division also will not recommend enforcement if a filer is unable to provide a manual signature on a document submitted via email, provided certain steps set forth in the announcement are followed.
SEC announces EDGAR filing window extension for registered investment companies and business development companies
On April 22, the SEC Division of Investment Management announced that it is extending the EDGAR filing window on April 29, 2020, from 5:30 p.m. to 10:00 p.m. EDT for registered investment company and business development company filings. Ordinarily, a filing submitted after 5:30 p.m. EDT would be considered to be filed the next business day but the division is providing a one-day extension only. Any registered investment company or business development company requiring a subsequent filing window extension should submit a request.
SEC issues multiple whistleblower awards
On April 20, the SEC announced a $5 million award to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower “provided critical evidence of wrongdoing, which helped save time and resources in the SEC’s investigation.” The formal order also states that the whistleblower “promptly reported the information” and “suffered a unique hardship” by being terminated shortly after raising concerns internally.
Earlier on April 16, the SEC announced an award of more than $27 million to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower provided “critical investigative leads,” tied in part to misconduct occurring overseas, that “advanced the investigation and saved significant Commission resources.” The formal order also stated that the whistleblower, among other things, provided substantial assistance and cooperation, relayed information that “helped the Commission further significant law enforcement interests,” and “repeatedly and strenuously” raised concerns about internal misconduct within the whistleblower’s organization. The award is the sixth largest overall award since the program began.
According to the SEC, as of April 20 it has awarded 80 individuals a total of approximately $430 million in whistleblower awards since its first award in 2012.
SEC issues a statement on the importance of disclosures to investment company investors
On April 14, the SEC Division of Investment Management issued a statement on the importance of delivering timely and material information to investors of investment companies. Investment company issuers are reminded of their statutory obligations to update the information in their prospectuses, including the required underlying certified financial statements. Investment companies also are encouraged to consider the impact of Covid-19-related events when drafting their disclosures, including risk disclosures. The statement also includes the SEC’s expectations regarding timely delivery of disclosures to fund investors.
SEC issues statement regarding requirements for Form 144 paper filings in light of Covid-19
On April 10, the SEC Division of Corporation Finance issued a statement regarding requirements for Form 144 paper filings in light of Covid-19. For those who submit Forms 144 for the period from and including April 10, 2020, to June 30, 2020, the Division staff will not recommend enforcement action if Forms 144 are submitted via email in lieu of mailing or delivering the paper form to the SEC (as required under Rules 101(b)(4) or 101(c)(6) of Regulation S-T) if the filer or submitter attaches a complete Form 144 as a PDF attachment to an email sent to the SEC. The division also will not recommend enforcement action if the filer or submitter provides a typed form of signature in lieu of the manual signature, provided certain requirements are met.
SEC announces temporary, conditional relief for certain business development companies
On April 8, the SEC announced an order providing temporary, conditional exemptive relief for business development companies (BDCs) to enable them to make additional investments in small and medium-sized businesses, including those with operations affected by Covid-19. Among other things, the relief will provide additional flexibility to BDCs to issue and sell senior securities to obtain capital. The relief is subject to certain investor protection conditions.