The SEC announced on March 22nd that it is providing further regulatory relief due to the effects of COVID-19, in this case for registered transfer agents and certain other persons with regulatory obligations under the federal securities laws. The impacts of COVID-19 may directly or indirectly present challenges for transfer agents and other persons. To address these challenges, the SEC issued an order that provides registered transfer agents and certain other persons with exemptive relief for certain regulatory obligations under the federal securities laws subject to certain conditions. This relief is applicable through May 30, 2020. Importantly, at all times transfer agents are subject to the requirements of Exchange Act Rule 17Ad-12. This rule requires transfer agents to ensure that they adequately safeguard securities and funds in their possession or custody, and the mandate is unaltered by the current situation.
Exchange Act Section 17A and Section 17(f), as well as Sections 17A and 17(f), contain requirements for registered transfer agents and other regulated persons relating to processing securities transfers, safekeeping of investor and issuer funds and securities, and maintaining records of investor ownership, among other things. As a result of difficulties related to COVID-19, registered transfer agents and other persons directly affected by COVID-19 may have issues complying with some or all of these regulatory obligations. In addition, registered transfer agents indirectly affected by COVID-19 may be unable to conduct business with entities or security holders who themselves have been directly or indirectly affected. This would make it difficult to process securities transactions and corporate actions to be in compliance with Section 17A, Section 17(f) and the rules thereunder.
Among other conditions, persons that wish to take advantage of the exemptive relief must provide written notification to the SEC. The written notification should declare that such person is taking advantage of the relief, provide a description of the specific regulatory obligations with which the person is unable to comply, and a statement of the reasons the person is unable to comply with such obligations. The Commission may extend the time period for the relief beyond May, with any additional conditions it deems appropriate, or provide additional relief as circumstances warrant.
Transfer agents and other regulated entities and financial professionals are encouraged to contact the staff of the Division of Trading and Markets if they have questions or concerns related to current or potential effects of COVID-19 on their operations. This includes any need for regulatory relief or guidance. The Division of Trading and Markets can be reached at (202) 551-5777 or through email at tradingandmarkets@sec.gov.
Sources:
SEC Provides Conditional Regulatory Relief for Registered Transfer Agents and Certain Other Persons Affected by the Coronavirus Disease 2019 (COVID-19) (www.sec.gov)
Order Under Section 17A and Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder (www.sec.gov)
