As the COVID-19 pandemic continues, many SEC deadlines and requirements have been amended or relief has been granted. Most recently, in the “Staff’s Responses to Questions about Custody,” the SEC has granted custody relief for certain requirements, specifically surprise examinations and inadvertent custody.

Surprise examinations might be severely limited by restrictions from the virus. The SEC has stated that it would not recommend enforcement if an independent accountant was not able to complete the examination and certify to it by filing Form ADV-E within the 120-day deadline. That said, this is not relief from having the surprise examination. If relying on the relief, the exam must be completed and filed no later than 45 days after the original deadline.

Firms have been concerned about mail sent to their offices. Namely, they’re worried that clients might be sending checks or securities, but no one is there to collect them. Typically, if the advisor held these assets for longer than three days, it would be deemed to have custody. The SEC has stated that if the office is inaccessible due to COVID-19 restrictions and the implementation of business continuity plans, it would not deem a firm to have custody of those assets.

We have been recommending to our clients that they should only rely on the SEC’s coronavirus-related relief as a last resort and should try to not rely as much as possible. In these two instances, reliance might be unavoidable.

We expect there will be continued guidance and relief from regulators, especially as it seems increasingly likely that the nationwide shutdown will continue longer than initially thought. Greyline is monitoring releases from regulators and will provide updates when needed.