SEC Provides Regulatory Relief To Hurricane Victims
On September 28, 2017, the SEC announced interim final temporary rules (“Exemptive Order”) to provide relief to publicly trading companies, investment companies, accountants, transfer agents, municipal advisors and others affected the Hurricanes Harvey, Irma and Maria. In addition to the interim rules, the SEC urges others not covered by the relief but affected in their ability to provide information to the SEC or shareholders to contact the SEC to seek relief on a case-by-case basis.
Interim Final Temporary Rules
Generally the due date for Exchange Act reports for companies relying on the Exemptive Order shall be October 10, 2017 for those affected by Hurricane Harvey, October 19, 2017 for those affected by Hurricane Irma, and November 2, 2017 for those affected by Hurricane Irma. As such, companies with such extended due dates may also file an additional extension on Form 12b-25 on those dates, and benefit from an additional five days for a Form 10-Q and 15 days for a Form 10-K. As long as the subject report is filed within the time specified in the 12b-25, such company will still be considered timely and current in its reporting requirements.
The filing extensions apply to all Exchange Act reports, including under Sections 13(a) such as Forms 10-Q, 10-K and 8-K; 13(d), (f) and (g) for reports of ownership in excess of 5%; Section 14 proxy, information, and tender offer filing; Section 15(d) filings, including Forms 10-Q, 10-K and 8-K; and 16(a), Regulations 13A, 13D-G, 14A, 14C and 15D, and Exchange Act Rules 13f-1, 14f-1 and 16a-3.
Where the company is seeking relief from a requirement to deliver a report or information to shareholders, such as proxy or tender offer information under Section 14 of the Exchange Act, in addition to the time periods, the company must show that the shareholders had a mailing address located in the zip codes affected by Hurricanes Harvey, Irma or Maria and that mail service was suspended.
For purposes of the eligibility to use Form S-3, a company relying on the Exemptive Order will be considered current and timely in its Exchange Act filing requirement during the relief period, if such company was current and timely prior to the first day of the period specified in the Order. As a reminder, among other requirements, to qualify to use an S-3 registration statement a company must have filed all Exchange Act reports in a timely manner, including Form 8-K, within the prior 12 months. Any delayed reports need to be filed by October 10, 2017 for those affected by Hurricane Harvey, October 19, 2017 for those affected by Hurricane Irma and November 2, 2017 for those affected by Hurricane Irma.
For purposes of Form S-8 eligibility and the current information requirements under Rule 144(c), a company relying on the Exemptive Order will be considered current in its Exchange Act filing requirements if such company was current and timely prior to the first day of the period specified in the Order. Again, any delayed reports need to be filed by October 10, 2017 for those affected by Hurricane Harvey, October 19, 2017 for those affected by Hurricane Irma and November 2, 2017 for those affected by Hurricane Irma.
Registered transfer agents either in areas affected by the Hurricanes, or unable to provide services to security holders in the affected areas, were also granted relief. Registered transfer agents unable to provide services under Sections 17A and 17(f) of the Exchange Act are granted temporary exemptive relief from compliance from August 25, 2017 through November 2, 2017 if: (i) they notify the SEC in writing by November 2, 2017 that they are relying on the Exemptive Order; (ii) the notification provides a statement of the reasons why, in good faith, the transfer agent was unable to comply with the rules; (iii) if the transfer agent knows or believes that the books and records it is required to maintain were lost, destroyed or materially damaged, the extent of such loss, the affected issuers, and steps taken to rectify the damage; (iv) if the transfer agent knows or believes that funds or securities belonging to either an issuer or security holder that were within its possession were lost, destroyed or materially damaged, the extent of such loss and steps taken to rectify the damage; and (v) the transfer agent must take steps to protect remaining books, records, funds and securities.
The Exemptive Order also allows independent auditors to provide books and records to issuer clients to assist in the reconstruction of accounting records, without infringing on such auditors’ independence. In particular, Exchange Act rules and Regulation S-X prohibit an independent auditor from “maintaining or preparing the audit client’s accounting records” or “preparing or originating source data underlying the audit client’s financial statements.” Relief under the Exemptive Order is conditioned upon limiting services by the independent auditor to reconstruction of previously existing accounting records that were lost or destroyed as a result of the hurricanes and that such services cease as soon as the audit client’s lost or destroyed records are reconstructed, its financial systems are fully operational and the client can effect an orderly and efficient transition to management or other service provider. In addition, the company’s audit committee must specifically approve the auditor’s services.
During the period from August 25, 2017 to November 1, 2017, a registered open-end investment company and a registered unit investment trust will be considered to have satisfied the requirements of Section 5(b)(2) of the Securities Act to deliver a summary or a statutory prospectus to an investor, provided that: (1) the sale of shares to the investor was not an initial purchase by the investor of shares of the company or unit investment trust; (2) the investor’s mailing address for delivery, as listed in the records of the company or unit investment trust, has a ZIP code for which the common carrier has suspended mail service, as a result of Hurricanes Harvey, Irma, Maria, of the type or class customarily used by the company or unit investment trust, to deliver summary or statutory prospectuses; and (3) the company, or unit investment trust, or other person promptly delivers the summary or statutory prospectus, either (a) if requested by the investor, or (b) by the earlier (i) of November 2, 2017 or (ii) the resumption of the applicable mail service. The same dates and parameters apply to registered investment advisers for the delivery of written disclosure statements to advisory clients.
A registered investment advisor affected by Hurricane Harvey will be considered to have satisfied their Form ADV filing requirements under the Advisors Act, if: (i) their Form ADV filing deadline was between August 25, 2017 and October 6, 2017; and (ii) they filed by October, 10, 2017.
A registered investment advisor affected by Hurricane Irma will be considered to have satisfied their Form ADV filing requirements under the Advisors Act, if: (i) their Form ADV filing deadline was between September 6, 2017 and October 18, 2017; and (ii) they filed by October, 19, 2017.
A registered investment advisor affected by Hurricane Maria will be considered to have satisfied their Form ADV filing requirements under the Advisors Act, if: (i) their Form ADV filing deadline was between September 20, 2017 and November 1, 2017; and (ii) they filed by November 2, 2017.
The Author
Laura Anthony, Esq.
Founding Partner
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Corporate, Securities and Going Public Attorneys
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Securities attorney Laura Anthony and her experienced legal team provides ongoing corporate counsel to small and mid-size private companies, OTC and exchange traded issuers as well as private companies going public on the NASDAQ, NYSE MKT or over-the-counter market, such as the OTCQB and OTCQX. For nearly two decades Legal & Compliance, LLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions as well as registration statements on Forms S-1, S-8 and S-4; compliance with the reporting requirements of the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; Regulation A/A+ offerings; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers, ; applications to and compliance with the corporate governance requirements of securities exchanges including NASDAQ and NYSE MKT; crowdfunding; corporate; and general contract and business transactions. Moreover, Ms. Anthony and her firm represents both target and acquiring companies in reverse mergers and forward mergers, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. Ms. Anthony’s legal team prepares the necessary documentation and assists in completing the requirements of federal and state securities laws and SROs such as FINRA and DTC for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the OTC Market’s top source for industry news, and the producer and host of LawCast.com, the securities law network. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Las Vegas, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
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