Regulators Grant Limited Emergency Relief for Investment Advisers

In the recent days of the Coronavirus (COVID-19) outbreak, the four primary regulators of U.S. financial markets – the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA, the securities markets self-regulatory association), the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA, the commodities markets self-regulatory association), have all responded with limited reliefs for market participants under their regulatory authority.

The reason for the limited, piecemeal approach to relief under the crisis could be due to the unpredictability of how long this crisis will last, but it also appears to be due to what the CFTC stated as a fear that roiling in the financial markets is an opportunity for fraudsters to profit from a time of fear and uncertainty. Therefore, the four regulators have shied away from a blanket moratorium of regulatory filings and compliance activities.  As a result, financial markets participants regulated by one or more of the four regulators can avail themselves of the following few options as we monitor further developments on the agencies’ websites and email communications:

  • Securities and Exchange Commission – The SEC’s limited relief for investment advisers is the Investment Advisers Act of 1940 Release No. 5469.  The SEC relief is only good for regulatory form filing and delivery of certain documents, for which the original due date is after March 12, 2020 but no later than June 30, 2020.  The time extensions relate to filing amendments to Form ADV (the base regulatory disclosure form), the delivery of Form ADV Part 2 to their existing clients and the filing of Form PF, provided that the registered investment adviser is unable to meet its duties because of the COVID-19 pandemic.  Investment advisers that are exempt reporting advisers can also claim relief to file reports on Form ADV.  In any event, the forms must be filed “as soon as practicable,” but in no case later than 45 days of their original due date.The investment adviser seeking this relief must nonetheless notify both its investors and the SEC of the delay. ADV filers should notify the SEC by email at while Form PF filers should notify the Commission at far, the SEC has not commented on providing relief for those private fund advisers that rely on the “audit provision” under the custody rules to distribute audited financial statements to their private fund investors within 120 days of an investment fund’s fiscal year end.
  • Commodity Futures Trading Commission – For commodities markets participants, the CFTC issued helpful and wide-ranging reliefs.  Commodity Pool Operators must file and distribute a pool’s annual audited financial statements within 90 days of the pool’s fiscal year end.  On March 20, 2020, the CFTC issued temporary no-action relief for Commodity Pool Operators that file pool annual reports under CFTC Rule 4.7(b)(3) and 4.22(c) that are due on or before April 30, 2020, to be filed with the NFA and distributed to pool participants within 45 days after the due date of the report.   In addition, periodic account statements to pool participants that are distributed on either a monthly or quarterly basis under CFTC regulations 4.7(b)(2) or 4.22(b)(3) that are due on or before April 30, 2020 can also be extended an additional 45 days from the end of the reporting period.
  • National Futures Association – In its March 23, 2020 Notice to Members, the NFA has stated that it is granting the same relief to CPOs as discussed in the CFTC issued temporary no-action letter dated March 20, 2020.NFA Notice 1-20-12 grants limited relief with respect to the NFA rule that NFA Members with branch offices list any branch office on its NFA Form 7-R.  A branch office is any office other than the home office, where Associated Persons (AP) or the AP’s essential staff engage in regulated activities such as market making or similar participation in the commodities markets. NFA was asked by many members for consent to implement contingency plans whereby APs will work at home or other remote locations.  In the convoluted language of such bureaucratic documents, “NFA will not pursue a disciplinary action against a Member that permits APs to temporarily work from [remote locations without a branch manager present] provided that the Member implements alternative supervisory methods . . . and meets its recordkeeping requirements.  Member firms should ensure that these procedures are documented.”  Further, NFA “expects” that APs working remotely will return to the head office or branch office once the Member is no longer operating under its contingency plan.

Our view of the regulators’ responses so far: They have been, as a group, slow off the mark to respond to the crisis.  Their written notices are turgid, full of regulatory jargon and legal references, without any explanations in plain English, as though the target audience was a group of learned law professors specializing in financial regulation.  We hope that the regulators will do better going forward.

For more information, please contact Grassi’s Financial Services Practice Leader, Gregory Zoraian, at or 212-223-5082.

Categories: Advisory