SEC Coronavirus (COVID-19) Response

In early February, we began assembling a cross-divisional working group to prepare for the possible adverse effects of COVID-19. An initial focus of these efforts was on monitoring the real and potential effects of COVID-19 on public companies, including with respect to potential reporting challenges and the importance of prompt, public disclosures by issuers concerning the effects and risks of COVID-19 on their businesses. Staff across divisions and offices have also expanded their ongoing outreach efforts with clearing agencies, exchanges, issuers, broker-dealers, investment companies, public accounting firms, investor representatives, credit rating agencies, fund sponsors, investment advisers and other market participants, as well as other domestic and foreign authorities. Key areas of ongoing focus and monitoring include:

• Trading, Markets and Securities Infrastructure: Monitoring the functioning, integrity and resiliency of securities markets with a focus on operations, systems integrity and BCPs of U.S. securities clearinghouses, exchanges, other market utilities and key market participants. This involves monitoring and direct communications with these organizations (and other regulators) regarding market conditions, operational challenges, and other issues.

• Large Financial Firm Monitoring: Monitoring and communicating with the largest U.S. broker-dealers to keep abreast of their activities and operations, including BCP matters and capital and liquidity. This includes gathering insights from these firms concerning industry trends and dynamics relating to the impact of COVID-19 on operations (at both a firm and a system level) and continued coordination with FINRA and the MSRB on observations and identification of material risks.

• Retail Investors and Asset Management: Monitoring and outreach to the asset management industry (including mutual funds, money market funds, exchange traded funds (ETFs), private funds and investment advisers), particularly funds and advisers with material exposures in markets and asset classes that have been most affected by recent events. On April 2, the Investment Advisory Committee held a special meeting to focus on market and investment-related issues facing our retail investors.

• Issuers, Corporate Disclosures and Accounting Issues: Monitoring and providing guidance with respect to corporate filings and disclosures (e.g., reporting earnings and financial results, changes in trends and outlook, the addition or modification of risk factors and discussion of supply chain and distribution matters) of U.S. issuers, as well as foreign companies that are listed in the United States, including engaging with issuers and other market participants that may need assistance or conditional relief in complying with their reporting obligations. Providing guidance to municipal market participants on the continuing disclosure obligations of municipal issuers and other obligated persons. We also have ongoing contact with several public accounting firms and their affiliates concerning their global operations, as well as industry and general trends and dynamics.

• Securities Market Macro Trends, Dynamics and Potential Impacts: Monitoring and analyzing real and potential effects of COVID-19 on the functioning of U.S. and global securities markets. Recognizing that global markets are interconnected, this includes assessing potential impacts and spillover effects on industry and company operations and actions taken by governmental authorities and private market participants. This also includes communicating with the largest nationally recognized statistical rating organizations (NRSROs) to keep abreast of how they are considering the impacts of COVID-19 on their credit ratings and operations. As examples, in addition to market price movements and credit ratings, we are monitoring capital flows, funding requirements and the availability of credit and capital.

• Ongoing Coordination with U.S. and Foreign Financial Regulatory Community: Engaging in regular communication, coordination and information sharing concerning risks, trends and impacts with the Department of the Treasury, National Economic Council, Federal Reserve Board, Federal Reserve Bank of New York, FDIC, OCC and CFTC, as well as authorities in Asia and Europe, including through participation in the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO). Remaining in close contact with SROs such as exchanges, FINRA, and the MSRB. Coordinating with Congress on operations, market conditions and Commission actions and authorities, among other things.

• Small Businesses and Investors in Small Business: Engaging in outreach with the small business community to address capital needs in light of business closures, workforce challenges, and declining revenue resulting from the effects of COVID-19. This includes the Office of the Advocate for Small Business Capital Formation hosting a series of virtual events with thought leaders across the small business ecosystem and proactively soliciting feedback on potential solutions. On April 2, the Small Business Capital Formation Advisory Committee held a special meeting to identify the most critical challenges small businesses face accessing capital.

On October 5, 2020, the SEC published a staff report titled U.S. Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock, which focuses on the origination, distribution and secondary market flow of credit across U.S. credit markets. The staff report also addresses how the related interconnections in our credit markets operated as the effects of the COVID-19 pandemic took hold.

The Commission and staff are working to promptly provide guidance to market participants and targeted regulatory assistance and relief where necessary or appropriate. Below is a chronological list of certain of the more significant actions we have taken to date:

April 2021

• Commission and staff relief and guidance includes (in reverse chronological order):

  • Division of Investment Management Staff Statement Regarding Termination Notice for Exemptive Relief and Withdrawal of Staff Letters Related to COVID-19 Response (4/15/2021)

  • Updated Staff Guidance: Conducting Annual Meetings in Light of COVID-19 Concerns (updated 4/9/2021)

December 2020

• Commission and staff relief and guidance includes (in reverse chronological order):

  • Public Statement: An Update on the Commission’s Targeted Regulatory Relief to Assist Market Participants Affected by COVID-19 and Ensure the Orderly Function of Our Markets (updated 12/7/2020)

August 2020

• Commission and staff relief and guidance includes (in reverse chronological order):

  • Temporary Amendments to Regulation Crowdfunding; Extension (8/28/2020)

  • Conditional Exemptive Order: Granting Exemptions from Certain Rules Related to the Sale and Delivery of Physical Securities under Regulation SHO Related to COVID-19 (8/25/2020)

June 2020

• Commission and staff relief and guidance includes (in reverse chronological order):

  • Public Statement: An Update on the Commission’s Targeted Regulatory Relief to Assist Market Participants Affected by COVID-19 and Ensure the Orderly Function of Our Markets (6/26/2020)

  • Staff Statement: Regarding Temporary International Mail Service Suspensions to Certain Jurisdictions Related to the COVID-19 Pandemic (6/24/2020)

  • Updated Staff Statement: Regarding Requirements for Certain Paper Submissions in Light of COVID-19 Concerns (replaces the April 2, 2020 Staff Statement) (6/18/2020)

  • Temporary Conditional Exemption: Certain Activities of Registered Municipal Advisors (6/16/2020)

May 2020

• On May 4, Chairman Jay Clayton published a statement together with Rebecca Olsen, Director, Office of Municipal Securities: The Importance of Disclosure for our Municipal Markets
• Commission and staff relief and guidance includes (in reverse chronological order):

  • Extension of Conditional Exemptive Order: Relief for Registered Transfer Agents and Certain Other Persons Affected by COVID-19 (5/27/2020)

  • Division of Investment Management Frequently Asked Questions Regarding COVID-19 Response (5/8/2020)

  • Temporary, Conditional Relief to Allow Small Businesses to Pursue Expedited Crowdfunding Offerings (5/4/2020)

April 2020

• April 2, 2020, Chairman Jay Clayton published a statement: Investors Remain Front of Mind at the SEC: Approach to Allocation of Resources, Oversight and Rulemaking; Implementation of Regulation Best Interest and Form CRS. The statement discusses:
  • (1) the Commission’s approach to allocation of resources, oversight, and rulemaking in the face of various challenges caused by COVID-19, and
  • (2) the June 30, 2020 compliance date for Reg BI, Form CRS, and other requirements which remains in place based on the staff’s extensive engagement with market participants and the significant benefit for Main Street investors these conduct and transparency initiatives provide.
• Commission and staff relief and guidance includes (in reverse chronological order):

  • Staff Guidance: New Frequently Asked Questions Concerning the COVID-19 Pandemic and the Broker-Dealer Financial Responsibility Rules (4/22/2020)

  • Division of Investment Management Frequently Asked Questions Regarding COVID-19 Response (4/14/2020)

  • Division of Investment Management Staff Statement on Importance of Delivering Timely and Material Information to Investment Company Investors (4/14/2020)

  • Division of Corporation Finance Statement Regarding Requirements for Form 144 Paper Filings in Light of COVID-19 Concerns (4/10/2020)

  • Division of Investment Management Staff Statement on Hearing Requests on Applications Filed Under the Investment Company Act of 1940 and Investment Advisers Act of 1940 (4/8/2020)

  • Conditional Exemptive Order: Providing Temporary Relief for Business Development Companies Making Investments in Small and Medium-sized Businesses (4/8/2020)

  • Staff Guidance: Conducting Annual Meetings in Light of COVID-19 Concerns (4/7/2020)

  • Staff Guidance: Exchange Act Forms, Section 112. Form 40-F (Question 112.02) (4/6/2020)

  • Staff Guidance: Exchange Act Forms, Section 104. Form 10-K (Question 104.18) (4/6/2020)

  • Statement from the Chief Accountant: The Importance of High-Quality Financial Reporting in Light of the Significant Impacts of COVID-19 (4/3/2020)

  • Staff Guidance: New Frequently Asked Questions for Investment Advisers on: Qualified Custodian Service Disruptions Due to COVID-19 (Question VII.4) (4/2/2020)

  • Staff Statement: Regarding Requirements for Certain Paper Submissions in Light of COVID-19 Concerns (4/2/2020)

March 2020

• March 24, 2020, Chairman Jay Clayton published a statement: The Deep and Essential Connections Among Markets, Businesses, and Workers and the Importance of Maintaining those Connections in our Fight Against COVID-19. The statement provides Chairman Clayton’s personal views on addressing the effects of COVID-19 and, among other things, recognizes that
  • (1) our health care, pharmaceutical, manufacturing, transportation, telecommunications and many other private-sector industries are critical to our collective response to COVID-19, and
  • (2) the thousands of firms and entrepreneurs in these industries — and the millions of employees and contractors — that are working around the clock to fight COVID-19 depend on continued access to payments and credit. In addition, many companies and individuals will depend on our markets to bridge the funding gap until we fully recover from COVID-19. In short, preserving the flows of credit and capital in our economy – to businesses and individuals alike — will help us better fight COVID-19, as well as speed and strengthen our recovery.
• Additional Statements from Chairman Jay Clayton

  • Public Statement of SEC Chairman Jay Clayton for FSOC Open Meeting (3/26/2020)

  • Statement on the SEC’s Coronavirus Response Efforts – Facilitating the Continued Orderly Operation of Our Capital Markets Consistent with Health and Safety Directives and Other Measures (3/20/2020)

  • Update on Consolidated Audit Trail; Temporary COVID-19 Staff No-Action Letter; Reducing Cybersecurity Risks (3/17/2020)

• The Commission and staff have provided assistance and relief to various classes of market participants and certain specific entities. In many cases, the relief is conditioned upon public disclosure of the reasons the issuer, registrant or other entity is availing itself of the relief. Commission and staff relief and guidance includes (in reverse chronological order):

  • Staff Guidance: New Frequently Asked Questions for Investment Advisers on: Timely Completion of a Surprise Exam When Faced with Logistical Disruptions Due to COVID-19 (Question IV.7) (3/30/2020)

  • Staff No Action Letter: Affiliated Purchases of Debt Securities under Section 17(a) of the Investment Company Act (3/26/2020)

  • Conditional Exemptive Order: Providing Conditional Regulatory Relief for Registered Municipal Advisors Affected by the Coronavirus Disease 2019 (3/26/2020)

  • Temporary Final Rule: Providing Temporary Relief for the Form ID Notarization Process and for Issuers Subject to Reporting Obligations Pursuant to Regulation A and Regulation Crowdfunding (3/25/2020)

  • Exemptive Relief: Granting Application by The Financial Information Forum and Security Traders Association for a Temporary Exemption Pursuant to rule 606(c) of Regulation NMS (3/25/2020)

  • Staff Guidance: Providing Guidance Regarding Disclosure and Other Securities Law Obligations That Companies Should Consider With Respect to COVID-19 and Related Business and Market Disruptions (3/25/2020)

  • Conditional Exemptive Orders: SEC Extends Conditional Exemptions From Reporting and Proxy Delivery Requirements for Public Companies, Funds, and Investment Advisers Affected By Coronavirus Disease 2019 (COVID-19) (3/25/2020),

    • Order Under Section 36 of the Securities Exchange Act Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, which extended and superseded the exemptions provided in Conditional Exemptive Order: Providing Conditional Regulatory Relief and Assistance for Companies Affected by COVID-19 (3/4/2020)
    • Order Under Section 206A of the Investment Advisers Act Granting Exemptions from Specified Provisions and Order Under Section 6(c) and Section 38(a) of the Investment Company Act Granting Exemptions from Specified Provisions and Commission Statement Regarding Prospectus Delivery, which extended and superseded the exemptions provided in Targeted Action to Assist Funds and Advisers, Permit Virtual Board Meetings and Provide Conditional Relief From Certain Filing Procedures for Funds and Investment Advisers Affected by COVID-19 (3/13/2020)

  • Staff Statement: Regarding Rule 302(b) of Regulation S-T in Light of COVID-19 Concerns (3/24/2020)

  • Conditional Exemptive Order: SEC Provides Temporary Additional Flexibility to Registered Investment Companies Affected by Coronavirus (3/23/2020)

  • Conditional Exemptive Order: Relief for Registered Transfer Agents and Certain Other Persons Affected by COVID-19 (3/20/2020)

  • Immediate Effectiveness of Proposed Rule Change: Facilitating NYSE Electronic Auctions in Light of Temporary Closure of Physical Trading Floor (3/20/2020)

  • Staff No Action Letter: Affiliated Purchases under Rule 17a-9 of the Investment Company Act (3/19/2020)

  • Staff Guidance: New and Updated Frequently Asked Questions for Investment Advisers on: Conducting Investment Advisory Business from a Temporary Location (Form ADV Item 1.F) (3/16/2020)

  • Staff Guidance: New and Updated Frequently Asked Questions for Investment Advisers on: Inadvertent Adviser Custody During a Temporary Office Closure (Question II.1) (3/16/2020)

  • Staff No Action Letter: Consolidated Audit Trail Reporting (3/16/2020)

  • Immediate Effectiveness of Proposed Rule Change: Facilitating Continued Operations of the Cboe Options Exchange In Light Of Temporary Suspension of Cboe Physical Trading Floor (3/14/2020)

  • Staff Guidance: Conducting Annual Meetings in Light of COVID-19 Concerns (3/13/2020)

  • Conditional Exemptive Order: Targeted Action to Assist Funds and Advisers, Permit Virtual Board Meetings and Provide Conditional Relief From Certain Filing Procedures for Funds and Investment Advisers Affected by COVID-19 (3/13/2020)

  • Order Granting Exemptions From Specified Provisions of the Investment Company Act and Certain Rules Thereunder; Commission Statement Regarding Prospectus Delivery (3/13/2020)

  • Order Granting Exemptions from Specified Provisions of the Investment Advisers Act and Certain Rules Thereunder (3/13/2020)

  • Staff Statement: Fund Board Meetings and Unforeseen or Emergency Circumstances Related to COVID-19 (3/4/2020)

  • Conditional Exemptive Order: Providing Conditional Regulatory Relief and Assistance for Companies Affected by COVID-19 (3/4/2020)

February 2020

• In February, it became apparent that the effects of COVID-19 could impact the ability of certain companies (particularly those with operations in China) to meet their reporting obligations. In connection with the PCAOB, we issued a Joint Statement: Effects of the Coronavirus on Financial Reporting (2/19/2020) that

  • Urged issuers to work with their audit committees and auditors to ensure that their financial reporting, auditing and review processes meet the applicable requirements in light of their obligations and the unforeseen circumstances.

  • Emphasized the need to consider potential disclosure of subsequent events in the notes to the financial statements in accordance with guidance included in Accounting Standards Codification 855, Subsequent Events.

  • Articulated the Commission’s general policy to grant appropriate relief from filing deadlines in situations where, in light of circumstances beyond the control of the issuer, filings cannot be completed on time with the appropriate level of review and attention.

January 2020

• Statement from Chairman Clayton: Impact of the Coronavirus (1/30/2020)

  • Reminded issuers that the effects of COVID-19 and their response could, depending on a number of factors, be material to an investment decision; and directed staff to monitor issuer disclosures and provide guidance and assistance to issuers and other market participants.

The Commission and staff stand ready to continue to assist and, where necessary or appropriate, provide relief to market participants who are facing operational or reporting hardships relating to the effects of COVID-19.

Like the rest of the agency, the Division of Enforcement and the Division of Examinations continue to execute on their mission of protecting investors and remain fully operational. The agency is actively monitoring our markets for frauds, illicit schemes and other misconduct affecting U.S. investors relating to COVID-19—and as circumstances warrant, will issue trading suspensions and use enforcement tools as appropriate.

Enforcement has dedicated significant resources to quickly responding to COVID-related matters. The Commission has suspended trading in issuers where there are issues regarding the adequacy and accuracy of the information in the marketplace in connection with COVID-19. Over the last few months, the SEC has suspended trading in the securities of dozens of issuers. The Commission has also brought a number of enforcement actions against issuers and individuals alleging fraud based on COVID-19 related claims.

Recent enforcement actions in connection with COVID-19 include:

• SEC v. Aron Govil (7/19/21) – Settled action charging CEO of entity that supposedly developed mobile phone applications with, among other things, making material misrepresentations to investors regarding the company’s products, including allegedly falsely stating the company was developing an app to detect COVID-19.  

• SEC v. Parallax Health Sciences, Inc. et al (7/7/2021) – Charges against public company, its CEO, and another senior executive for making misleading statements about its efforts to fight COVID-19

• SEC v. Arrayit Corporation and Rene Schena (2/11/2021) - Biotechnology company and its CEO charged in connection with alleged false and misleading statements to investors about the company’s development of a COVID-19 test.

• SEC v. Berman, et al. (12/17/2020) - Biotechnology company and its CEO charged with making false and misleading claims in numerous press releases that the company had developed a working, break-through technology that could accurately detect Covid-19 through a quick blood test.

• In the Matter of The Cheesecake Factory Inc. (12/4/2020) - Charges settled against a restaurant company for making misleading disclosures about the impact of the COVID-19 pandemic on its business operations and financial condition.

• SEC v. Schena (9/25/20) - President and Chief Science Officer of biotechnology company charged with making allegedly false and misleading statements concerning development of a COVID-19 blood test.

• SEC v. Gomes, et al. (6/9/2020) – Emergency action against five individuals and six offshore entities for an alleged fraudulent scheme that generated more than $25 million from illegal sales of multiple microcap companies’ stock, including four companies that were the subject of recent SEC trading suspension orders.

• SEC v. Nielson (6/9/2020) – Penny stock trader charged with conducting an alleged fraudulent pump-and-dump scheme in the stock of biotechnology company Arrayit Corporation by making hundreds of misleading statements in an online investment forum, including an alleged false assertion that the company had developed an “approved” COVID-19 blood test.

• SEC v. Applied Bioscience (5/14/220) – Company charged with alleged false claims that it had begun offering and shipping supposed finger-prick COVID-19 tests.

• SEC v. Turbo Global et al. (5/14/2020) – Company and its CEO charged with alleged false and misleading press releases about a purported “multi-national public-private-partnership” to sell thermal scanning equipment to detect individuals with fevers.

• SEC v. Praxsyn Corporation et al. (4/28/2020) – Company and its CEO charged with alleged false claims the company was able to acquire and supply large quantities of N95 or similar masks to protect wearers from the COVID-19 virus.

Recent trading suspensions issued in connection with COVID-19 are listed below. Learn more information on trading suspensions.

• Corporate Universe, Inc. (2/9/2021)

• View Systems, Inc. (1/19/2021)

• BoxVn Inc. f/k/a Vaccex Inc. (12/16/2020)

• Rising Biosciences, Inc. (8/25/2020)

• Lord Global Corp. (8/20/2020)

• EastWest Bioscience Inc. (7/8/2020)

• Blackhawk Growth Corp. (6/22/2020)

• Micron Waste Technologies Inc. (5/26/2020)

• WOD Retail Solutions Inc. (5/20/2020)

• Custom Protection Services, Inc. (5/5/2020)

• CNS Pharmaceuticals Inc. (5/1/2020)

• Moleculin Biotech, Inc. (5/1/2020)

• WPD Pharmaceuticals, Inc. (5/1/2020)

• Nano Magic Inc. (4/30/2020)

• Kleangas Energy Technologies, Inc. (4/27/2020)

• Decision Diagnostics Corp. (4/23/2020)

• Predictive Technology Group, Inc. (4/21/2020)

• SpectrumDNA, Inc. (4/21/2020)

• SCWorx Corp. (4/21/2020)

• PreCheck Health Services, Inc. (4/16/2020)

• Bravatek Solutions, Inc. (4/15/2020)

• BioXyTran, Inc. (4/15/2020)

• Signpath Pharma, Inc. (4/15/2020)

• Applied BioSciences Corp. (4/13/2020)

• Arrayit Corporation (4/13/2020)

• Solei Systems, Inc. (4/10/2020)

• Roadman Investments Corp. (4/10/2020)

• Parallax Health Sciences, Inc. (4/10/2020)

• Turbo Global Partners, Inc. (4/9/2020)

• BioELife Corp. f/k/a/ U.S. Lithium Corp. (4/9/2020)

• Key Capital Corporation (4/7/2020)

• Prestige Capital Corp. (4/7/2020)

• Wellness Matrix Group, Inc. (4/7/2020)

• Sandy Steele Unlimited Inc. (4/3/2020)

• No Borders, Inc. (4/3/2020)

• Praxsyn Corporation (3/25/2020)

• Zoom Technologies, Inc. (3/25/2020)

• Eastgate Biotech (2/24/2020)

• Aethlon Medical, Inc. (2/7/2020)

Those interested can keep track of enforcement actions at SEC.gov.

On March 23, 2020, the Co-Directors of Enforcement released a statement highlighting market participants’ obligations with respect to material non-public information, including importance of maintaining controls and procedures to keep material nonpublic information confidential unless and until it is appropriately disclosed. The statement emphasizes the need for market participants to be mindful of the prohibitions on illegal securities trading, and to follow related controls and procedures, during times such as these where material nonpublic information may be more prevalent and arise in less common contexts. The statement also discusses our commitment to Main Street investors and our focus on those who would seek to prey on them in uncertain times.

On March 19, 2020 the Commission issued an order in pending Administrative Proceedings to encourage parties to file and serve documents electronically.

The Division of Examinations remains fully operational nationwide and, with adjustments to take into account health and safety measures, business continuity plans, firm-specific operational matters and other factors, continues to execute on its investor protection mission. More specifically, in light of health and safety concerns and other circumstances, the Division of Examinations has moved to conducting examinations off-site through correspondence, unless it is absolutely necessary to be on-site. The Division of Examinations is working with registrants to address the timing of its requests, availability of registrant personnel, and other matters to minimize disruption. the Division of Examinations will work with registrants to ensure that its work can be conducted in a manner consistent with maintaining normal operations, and importantly, necessary or appropriate health and safety measures.

Learn more about the Division of Examinations statement on its operations and examinations.

The Office of Investor Education and Advocacy continues its work to educate investors while the staff adheres to guidance from our nation’s public health officials. In April, the Office issued an investor alert outlining the types of frauds Main Street investors should be especially wary of during this time. The Office also issued an alert in February to educate investors, “Look Out for Coronavirus-Related Investment Scams.”