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Law360 (March 4, 2020, 7:59 PM EST ) Companies affected by the new coronavirus can get extra time to file certain regulatory disclosures, the U.S. Securities and Exchange Commission said Wednesday in its latest guidance on businesses' response to the outbreak.
Publicly traded companies affected by COVID-19 will have an additional 45 days to file certain materials that would otherwise have been due between March 1 and April 30, the announcement said. The order may apply to U.S. companies located in areas affected by the virus or those with operations in those areas, the announcement said.
"While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, we recognize that this situation may prevent certain issuers from compiling these reports within required timeframes," SEC Chairman Jay Clayton said in a statement.
The announcement applies to a range of materials covered by the Exchange Act and associated regulations. For example, it could apply to annual reports for companies with different financial calendars, as well as the 6-Ks filed by certain foreign companies and 8-Ks, which signal notable events, said Adele Hogan, a partner at Nelson Mullins Riley & Scarborough LLP.
In order to qualify for the relief, companies must submit a report explaining why the relief is needed within 45 days of the original deadline, the SEC said. The SEC could later decide to extend the timeframe for the relief, the announcement said.
The report must include when the company expects to file the forms and, if needed, a risk factor explaining the impact of the virus on its business, the order said.
Hogan said companies should take care to thoroughly justify the relief since improper requests have been the subject of SEC enforcement actions in the past.
"It's important that companies think through the implications of taking this relief," Hogan said. "Whatever reason they give for needing an extension or conditional relief, they should make sure they have adequate evidence to back it up."
At the same time, officials urged companies to keep investors advised of risks related to COVID-19, including their plans for handling any impacts.
"We also remind all companies to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments," Clayton said. "How companies plan and respond to the events as they unfold can be material to an investment decision," he said.
If companies become aware of material risks related to the coronavirus, they and their executives should hold off on engaging in securities transactions with the public until investors have been informed about the risk, the SEC said. Risk disclosures should also be widely disseminated, the agency said.
While hundreds of public companies have already updated their disclosures to reference COVID-19 risks, businesses may also need to update previous disclosures as events unfold, the announcement said.
The agency urged businesses to reach out to commission staff if they encounter issues during the filing process; for example, if an executive is quarantined and therefore can't sign certain documents.
"The commission staff will address these and any issues on a case-by-case basis in light of their fact-specific nature," the announcement said.
The SEC in mid-February urged U.S.-listed companies with operations in China to consider disclosing coronavirus threats and to work with their auditors to ensure that their financial reporting remains as robust as possible.
Governments around the world continue to weigh their response to the virus's continued spread. The U.K.'s Financial Conduct Authority said Wednesday it is reviewing contingency plans at a wide range of financial companies to assess the operational risks posed by the outbreak. Hong Kong's securities regulator and its stock market exchange said in early February that it would ease some of its disclosure rules for affected businesses.
"I do think companies have to be very careful during times like this, as things are unfolding and the ramifications aren't really known," Hogan said. "You have to be very careful and thoughtful and be very mindful of being compliant with securities laws."
--Additional reporting by Hailey Konnath, Tom Zanki, McCord Pagan and Najiyya Budaly. Editing by Jay Jackson Jr.
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