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On February 28, 2019, the Chief Counsel’s Office of the SEC’s Division of Investment Management issued a letter (“Relief Letter”) to the Independent Directors Council stating that they would not recommend enforcement action for violations of Section 12(b), 15(c) or 32(a) of the Investment Company Act of 1940 (the “Act”) or Rules 12b-1 or 15a-4(b)(2) under the Act, if fund boards do not adhere to certain in-person voting requirements for renewals of certain advisory agreements, auditor and 12b-1 plan approvals, subject to certain conditions. The Relief Letter allows Fund directors subject to in-person voting requirements to do so telephonically, by video conference or by other means which allow all participants to communicate simultaneously; provided such directors cannot meet in person due to unforeseen or emergency circumstances.

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On March 4, 2020, the SEC issued a statement extending the relief it previously granted to ease certain corporate governance obligations in light of travel concerns related to COVID-19. Registered investment management companies and business development companies seeking to approve or renew (1) an investment advisory agreement, (2) a principal underwriting agreement, (3) selection of the Fund’s independent public accountant, or (4) renewal of a fund’s 12b-1 Plan, normally do so at an in-person meeting of directors. The SEC’s statement grants board’s relief from this requirement. Previously, the Relief Letter only covered (1) renewals of such agreement or plans, provided that there were no proposed material changes; and (2) approvals or renewals of such agreement or plans, provided that all relevant and material factors were previously discussed and considered at a prior in-person meeting.

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The SEC’s Division of Investment Management extended the relief granted under the Relief Letter to include the renewal and approval of all contracts, plans and arrangements, including material changes, and the selection of a fund’s independent public accountant. The SEC’s relief applies to board meetings through June 15, 2020 and is conditioned on board ratification of such actions at the Fund’s next in-person board meeting.

Fund directors who believe that COVID-19 will have a material impact on their ability to hold an in-person meeting should consider whether such impact could cause a material breach of any contractual obligations and include appropriate risk disclosures in their filings. In addition, the SEC reminds funds to work with their audit committees and auditors to ensure that their auditing and review processes are practicable in meeting the applicable requirements.

In its statement, the SEC considers that some companies may require additional assistance in their efforts to comply with the requirements of the federal securities laws and are therefore encouraged to contact the SEC’s staff if they face any additional issues. Because of the fact-specific nature of some potential issues, the SEC will address these issues on a case-by-case basis.

We have assembled a firmwide multidisciplinary task force to address clients’ business and legal concerns and needs related to the COVID-19 pandemic. Please see our COVID-19 Task Force page for additional resources, including a checklist to help employers review workplace policies and procedures and a link to a recording of our recent webinar, “COVID-19: Planning Considerations for Employers.”

Andrew J. Davalla 614.469.3353 <a href="mailto:Andrew.Davalla@ThompsonHine.com">Andrew.Davalla@ThompsonHine.com</a>

Tashia Love 614.469.3284 <a href="mailto:Latashia.Love@ThompsonHine.com">Latashia.Love@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhinestaging.contentpilot.net/wp-content/uploads/2022/05/COVID-19_Update_-_SEC_Extends_Relief_Overriding_In-Person_Board_Meeting_Requirements.pdf

SEC Extends Relief Overriding In-Person Board Meeting Requirements

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