SEC Grants Section 17a No-Action Relief to Open-End Funds
The SEC has taken many actions in the past month to provide relief to registrants and the financial services industry during the COVID-19 national emergency. Another recent action is the relief granted by the SEC to open-end investment companies that are not exchange-traded funds and are not considered money market funds (“Funds”). The relief, granted in a no-action letter to the Investment Company Institute (ICI), allows a Fund’s affiliated persons to purchase debt securities from a Fund under Section 17(a) of the Investment Company Act of 1940, as amended (the “Act”), and the rules thereunder. The ICI requested the relief to address the short-term market dislocation that has occurred with respect to debt securities held in Funds because of the COVID-19 pandemic. In essence, the relief broadens the scope of Rule 17a-9 benefits beyond money market funds to Funds.
The relief provided is conditioned upon:
- Purchase price is paid in cash;
- Price of the debt security purchased is the instrument’s fair market value;
- Purchaser promptly paying the Fund the difference between the sale price and subsequent sale of the security if the Purchaser subsequently sells the security for a higher price than the purchase price;
- Public notification on the Fund’s website and via email to the SEC within one day of the purchase of a security; and
- The relief is effective during the COVID-19 national emergency and will end upon notice from the SEC.
As with all changes in regulatory requirements, CSS encourages Funds’ CCOs to develop policies and procedures to address compliance with these conditions if a Fund intends to avail itself of this relief. Such policies should address additional reporting to a Fund’s Board, monitoring and reporting by a service provider to the Fund and documenting compliance with the no-action relief. The “temporary” nature of this relief shouldn’t be an excuse to not document this component of a Fund’s compliance program.
As always, if you need help navigating this difficult time, reach out to us.
Guidance for State-Registered Advisers Dealing with COVID-19
In addition to the SEC providing relief and support to investment advisers, the North American Securities Administrators’ Association (NASAA) and state regulators have also provided guidance in the form of a very helpful resource page. The page includes information on temporary regulatory relief, as well as updates on the operating status of NASAA members. The resource page provides all available updates from states, and links to the various relief notifications. For example, Maine, New Jersey, California and Massachusetts are just a few states that have provided Emergency Notices to address the disruptions caused by the COVID-19 pandemic. Altogether, more than 30 state securities regulators are providing forms of temporary relief, NASAA noted in a recent update.
The resource page also provides updates on the status of the closing of any state regulatory offices. Thankfully, state regulators seem to be transitioning to work from home protocols to alleviate as much disruption as possible. As for state-registered advisers that were in the process of an examination or received a recent notice of an examination from their regulator, you can expect those to continue though via virtual methods. For example, the Alabama Securities Commission noted that “field examiners are conducting streamlined, remote examinations using phone and email correspondence in lieu of traditional on-site examinations during this time.”
If you find yourself in the midst of a state examination while also juggling working remotely and working closely with your clients as they fear recent market fluctuations, it is reasonable to ask the exam team for an extension if you need it. We recommend providing documents on a rolling basis and then seeking any necessary extension only for the materials you need additional time to gather. Finally, if you need assistance with your request letter or responding to a deficiency letter, reach out! The Ascendant compliance services team at CSS have significant experience helping clients through examinations. You don’t need to feel alone, especially during this very challenging time!
Stay healthy and wash your hands!
SEC Extends Form ADV & Form PF Relief, Modifies Conditions
On March 25, 2020, the SEC issued a new Order extending and relaxing some of the conditions pertaining to the available relief for filing and delivering Form ADV amendments and for filing Form PF. Under the new Order, which replaces the March 13 Order, the relief is extended to applicable filing and delivery obligations on or prior to June 30, 2020.
In the replacement Order, the SEC eliminated requirements that advisers inform the SEC why an adviser is unable to meet a deadline and to provide an estimated date of filing or delivery completion. The SEC maintained requirements that the relief applies only under the following conditions:
- the adviser is impacted by COVID-19 and “unable to meet a filing deadline or delivery requirement due to circumstances related to current or potential effects of COVID-19”, and
- the adviser “promptly notifies the Commission staff via email at IARDLive@sec.gov (or at FormPF@sec.gov pertaining to Form PF filings) and discloses on its public website (or if it does not have a public website, promptly notifies its clients and/or private fund investors) that it is relying on this Order, and
- the adviser files Form ADV or Form PF and makes applicable deliveries “as soon as practicable, but not later than 45 days after the original due date for filing or delivery.”
The relief applies to registered investment advisers and exempt reporting advisers.
Because the relief applies to amendments to Form ADV, it does not impact the June 30, 2020 Form CRS filing deadline.
If you need help with your filings, reach out and contact us.
Envestnet s'associe au CSS pour aider les conseillers à respecter les exigences de dépôt du formulaire CRS
CHICAGO, 24 mars 2020 — Envestnet, Inc. (NYSE: ENV) has entered into a strategic partnership with Compliance Solutions Strategies (CSS) to offer a comprehensive, fully customizable Form CRS software solution for registered investment advisers (RIAs) and broker-dealers to Envestnet clients. CSS’s Form CRS Automator software is designed to help firms meet the Form CRS filing requirements adopted by the Securities and Exchange Commission (SEC) ahead of the June 30, 2020 deadline.
The customizable, web-based tool gives regulated firms the ability to produce the required Form CRS filings quickly and efficiently. For more information about the CSS Form CRS Automator, please visit https://cssregtech.com/form-crs.
“Our partnership with CSS reinforces our ongoing commitment to putting our customers first by providing them with a unique, efficient, and compliant tool to prepare the newly required Form CRS filing before the deadline,” said Blake Wood, Senior Vice President and Director of Product Strategy at Envestnet. “This is the latest example of how we utilize technology and data to help advisors streamline and adapt to new regulatory requirements.”
On June 5, 2019, the SEC adopted new rules requiring all RIAs and broker-dealers providing services to retail investors to create a new Form CRS (Form ADV, Part 3, also known as a Relationship Summary). Form CRS plays a critical role in the SEC’s broader rulemaking efforts to protect Main Street investors. The new Form CRS regulations require RIAs and broker-dealers to develop and deliver two-page documents to retail investors, or four-page documents for dual registrants and affiliates, which allow current and prospective clients to compare services, fees, conflicts of interest, and other key information in simple, easy-to-understand language. Form CRS materials must be filed with the SEC by June 30, 2020. After July 1, 2020, Form CRS filings must be delivered to new and prospective clients and customers, and they are required to be delivered to all existing clients by July 30, 2020.
“Many regulated firms are understandably concerned about how they are going to digest the SEC’s 524-page Form CRS Adopting Release and 18 pages of instructions,” said Marques Keith, Executive Director of CSS’s Compliance Services. “CSS’s Form CRS Automator software solves this problem by equipping firms with a solution for the efficient production of a Form CRS that fully meets the SEC’s requirements.”
“Facing a fast-approaching deadline, many RIAs and broker-dealers feel under pressure to assemble compliant and accurate information while correctly interpreting the SEC’s strict Form CRS requirements,” said Jacqueline Hallihan, Executive Director of CSS’s Compliance Services. “Our Form CRS Automator has been built in conjunction with CSS’s compliance professionals, and its output is consistent with regulatory guidance and Form CRS requirements—allowing advisors’ compliance teams to eliminate hours of research and troubleshooting.”
To streamline the Form CRS filing process, CSS’s Form CRS Automator extracts data from a firm’s existing SEC filings, including more than 70 data points in Form ADV, Part 1A as well as Financial Industry Regulatory Authority (FINRA) filings—ensuring advisors can produce the correct descriptions applicable to their businesses. The software also gives advisors the option to further customize their Form CRS documents by exporting them to Microsoft Word. In addition, as a web-based application, the Form CRS Automator requires no software implementation.
“We were very impressed with the innovative, thorough compliance solution that CSS developed for RIAs and broker-dealers ahead of the Form CRS filing deadline,” said Debra DeVoe, Chief Compliance Officer and Managing Director of Envestnet. “As the complex regulations for RIAs and broker-dealers continue to evolve, we are partnering with the top compliance professionals in the industry to create a clear path for the advisors we work with to seamlessly comply with the new requirements.”
About Envestnet
Envestnet, Inc. (NYSE: ENV) is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet’s unified technology empowers enterprises and advisors to more fully understand their clients and deliver actionable intelligence that drives better outcomes and improves lives.
Envestnet Wealth Solutions enables enterprises and advisors to better manage client outcomes and strengthen their practices through its leading Wealth Management Operating System and advanced portfolio solutions. Envestnet | Tamarac provides portfolio management, reporting, trading, rebalancing and client portal solutions for registered investment advisers (“RIAs”). Envestnet | MoneyGuide provides goals-based financial planning applications. Envestnet Data & Analytics enables innovation and insights through its Envestnet | Yodlee data aggregation platform.
More than 100,000 advisors and more than 4,700 companies including: 16 of the 20 largest U.S. banks, 43 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of internet services companies, leverage Envestnet technology and services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences and help drive better outcomes for enterprises, advisors and their clients.
For more information on Envestnet, please visit www.envestnet.com and follow us on Twitter at @ENVintel.
À propos des Compliance Solutions Strategies
Compliance Solutions Strategies (CSS) is a global RegTech platform—driven by data and backed by service—providing a comprehensive set of software solutions supported by a highly-targeted managed service capability. CSS solutions and services are aligned to the multiple regulatory compliance requirements of global fund reporting, global transaction reporting and global threshold management. The company currently serves over 600 software clients in the financial services vertical comprising of hedge funds, traditional asset managers and fund administrators, including Tier-1 buy-side and sell-side institutions. CSS is uniquely positioned within the market in terms of its size and the breadth of its regulatory compliance offerings. These factors vest the company with the capital and product range to support the broadest possible spectrum of regulatory requirements, while retaining the agility to work in partnership with individual clients to develop and support a comprehensive and longstanding program of regulatory compliance on a global scale. CSS maintains a global footprint across both North America and Europe with customer-facing offices in New York, London, Dublin, Amsterdam and Stockholm. For more information or to purchase Form CRS Automator, please visit www.cssregtech.com/form-crs. For more information on CSS, please visit: www.cssregtech.com
OCIE Now Conducting Exams Off-Site Unless Necessary
On March 23, 2020, the SEC’s Office of Compliance Inspections and Examinations posted an announcement on its website that “in light of health and safety concerns and other circumstances, OCIE has moved to conducting examinations off-site through correspondence, unless it is absolutely necessary to be on-site.”
Similarly, over recent weeks, CSS has arranged with clients to replace its on-site compliance reviews with video conferencing and the secure exchange of data through its encrypted compliance tool, ACM. CSS has full capability to continue risk assessments, annual reviews, mock examinations, due diligence reviews and cybersecurity reviews through this difficult situation.
The SEC announcement also sought to reassure advisers impacted by COVID-19 that relying on the recent exemptive relief that may cause delays in filing Form ADV or delivering material amendments to clients “will not be a risk factor utilized in determining whether OCIE commences an examination.” Be sure to reach out to CSS Client Service teams for questions that you may have. Stay safe and be well.
CTFC Issues No-Action Letters for Temporary Relief in Response to COVID-19 Pandemic
During the last week, the CFTC issued several no-action letters aimed at providing temporary relief from certain recordkeeping, operations requirements, and some reporting deadlines as summarized in the table below.
In addition, the CFTC offers a coronavirus-focused webpage, cftc.gov/coronavirus, which includes eight of the nine No-Action letters as well as a Customer Advisory to raise awareness of potential scams during this turbulent time.
Finally, CFTC Chairman Heath Tarbert recently published an op-ed covering his thoughts on the pandemic and market volatility. It can be read by clicking here.
| REGISTRANT | SUMMARY* | CITATION |
| DCMs and SEFs | Relief from time-stamps until June 30, 2020 if responsible personnel is absent. A recording of date/time is still required to be maintained. | CFTC Letter No. 20-02 |
| FCMs and IBs | Relief from recording oral communications until June 30, 2020 if personnel required to use recorded lines are absent from their normal business site. A written record of the communication, with date/time and other key information must be maintained. | CFTC Letter No. 20-03 |
| FCMs and IBs | Relief from time-stamps until June 30, 2020 if responsible personnel is absent. A recording of date/time is still required to be maintained. | CFTC Letter No. 20-03 |
| FCMs and IBs | Relief of CCO Annual Report to the Commission no later than 30 days after the report was due, for any report due to the Commission prior to September 1, 2020. | CFTC Letter No. 20-03 |
| FBs | Relief from recording oral communications until June 30, 2020 if personnel required to use recorded lines are absent from their normal business site. A written record of the communication, with date/time and other key information must be maintained. | CFTC Letter No. 20-04 |
| FBs | Relief from time-stamps until June 30, 2020 if responsible personnel is absent. A recording of date/time is still required to be maintained. | CFTC Letter No. 20-04 |
| FBs | Relief to FB from physical location provided by contract market if FB’s written BCP requires FB’s absence. | CFTC Letter No. 20-04 |
| FBs | Relief from Introducing Broker’s registration solely due to FB’s absence if FB’s written BCP requires FB’s absence. | CFTC Letter No. 20-04 |
| RFEDs | Relief from recording oral communications until June 30, 2020 if personnel required to use recorded lines are absent from their normal business site. A written record of the communication, with date/time and other key information must be maintained. | CFTC Letter No. 20-05 |
| RFEDs | Relief from time-stamps until June 30, 2020 if responsible personnel is absent. A recording of date/time is still required to be maintained. | CFTC Letter No. 20-05 |
| SDs | Relief from recording oral communications until June 30, 2020 if personnel required to use recorded lines are absent from their normal business site. A written record of the communication, with date/time and other key information must be maintained. | CFTC Letter No. 20-06 |
| SDs | Relief from time-stamps until June 30, 2020 if responsible personnel is absent. A recording of date/time is still required to be maintained. | CFTC Letter No. 20-06 |
| SDs | Relief of CCO Annual Report to the Commission no later than 30 days after the report was due, for any report due to the Commission prior to September 1, 2020. | CFTC Letter No. 20-06 |
| SEFs | Relief until June 30, 2020, for the failure to comply with the following Commission regulations: 37.205(a)-(b), 37.400(b), 37.406, 37.1000(a)(1), and 37.1001 to the extent that non-compliance arises from the inability of SEFs to record voice communications as a result of the displacement of voice trading personnel from their normal business sites in connection with the COVID-19 pandemic response. Seven conditions accompany this relief in the letter. | CFTC Letter No. 20-07 |
| SEFs or SEF CCOs | Relief for a 60-day period for failure to submit an ACR pursuant to regulation 37.1501(f)(2), if ACR is due prior to September 1, 2020 and ACR is submitted no later than 120 days after the end of SEFs fiscal year. | CFTC Letter No. 20-08 |
| SEFs or SEF CCOs | Relief for a 60-day period for filing fourth-quarter financial reports pursuant to regulation 37.1306(d), due prior to September 1, 2020 and no later than 120 days after the SEF’s fiscal year. | CFTC Letter No. 20-08 |
| DCMs | Relief until June 30, 2020, from certain audit trail requirements pursuant to CEA sections 5(d)(4) and (10). Three conditions accompany this relief in the letter. Further, relief is subject to self-regulatory functions and compensating controls should be implemented. | CFTC Letter No. 20-09 |
| CPOs | Relief until May 15, 2020, for filing an annual report on form CPO-PQR pursuant to regulation 4.27 for Small or Mid-Sized CPOs; and,
Relief until July 15, 2020, for filing Q1 2020 report on form CPO-PQR pursuant to regulation 4.27 for Large CPOs. |
CFTC Letter No. 20-11 |
| CPOs | Relief for 45 days after the due date for filing Pool annual reports with the NFA and distributing certified financial statements to pool participants, pursuant to regulations 4.7(b)(3) and 4.22(c), for reports due on or before April 30, 2020. | CFTC Letter No. 20-11 |
| CPOs | Relief for 45 days after the end of the reporting period for distributing monthly or quarterly participant pool statements, pursuant to regulations 4.7(b)(2) or 4.22(b)(3), due on or before April 30, 2020. | CFTC Letter No. 20-11 |
*This summary is a quick highlight of the No-Action letters published this week. Not all details are included in this summary. Please review the entire corresponding No-Action letters for complete additional details. If you have any questions about how these CFTC actions are affecting your firm, reach out and contact us.