The pandemic and the “new normal” in securities law


The era of the pandemic has been marked by disruption, from family vacation plans to supply chains. The way capital markets work is no different.

At first, the Securities and Exchange Commission had to adapt quickly and issue guidelines and rule changes to help companies cope. Stock trading by individuals has increased, possibly due to remote working and lockdowns. Technology has become more vital than ever.

Now, as the pandemic workplace looks more like a reality than a crisis, most market players seem to be handling it well.

“Frankly, that sounds like the new normal,” said Keir D. Gumbs, general counsel at financial technology firm Broadridge Financial Solutions, Inc., which develops technology solutions for banks, brokers, asset managers. and heritage, and public enterprises. Gumbs is co-chair of PLI’s 53rd annual Institute on Securities Regulation as well as the upcoming Institute of Directors on Corporate Governance.

The situation “does not seem new anymore,” Gumbs continued. “It looks like the status quo.” While Gumbs noted that working in the office and meeting in person can have some benefits, communication hasn’t suffered much. The SEC, for example, hasn’t missed a beat.

“I think the staff has really changed. And what interests me most is when the staff return to the office – I guess they will, at some point – what it will look like. I’m not sure it’s necessarily getting better.

New rules and guidelines

In the months following the official declaration of the Covid-19 pandemic in the spring of 2020, the SEC issued guidance and relaxed the rules to make it easier for entities to meet corporate governance requirements while they were doing so. faced with a difficult situation.

If a company had to change the date, time, or location of a shareholders’ meeting after sending its proxy documents, for example, it didn’t have to start the whole expensive process all over again.

On its website, the SEC said a company scheduled to reschedule would be in compliance if it “issued a press release announcing such a change; files the ad as final additional solicitation material on EDGAR [a publicly accessible database of SEC filings]; and take all reasonable steps necessary to notify other intermediaries in the proxy process (such as any proxy service provider) and other relevant market participants (such as appropriate national stock exchanges) of any such change. “

In addition, the convening rules concerning virtual shareholders’ meetings and the presentation of shareholder proposals have been relaxed. The SEC has assured companies that it recognizes that many disruptions related to the pandemic are beyond their control.

The changes were meant to “essentially give a business a little more flexibility,” Gumbs said. “If a company could not distribute a power of attorney or other documents on time due to Covid and personnel issues, it would not necessarily be held against it as long as the company made reasonable efforts to disseminate this information. . “

Like all businesses last year, Gumbs added, Broadridge balanced the need to protect the health of its workers with the need to process documents. He said the SEC’s advice was helpful.

“In general, we have treated up to 80 to 90 percent of votes in a given proxy season. We’re sort of a hub for corporate governance because a lot of voting takes place using our technology, ”Gumbs said.

And the SEC regularly updated its information as the pandemic progressed. For example, the latest guidelines on shareholder proposals – allowing them to be made virtually or over the phone rather than in person as the rule once required – were released in April of this year. Also in April, an ordinance offering flexibility in short-term funding was withdrawn.

Keeping securities issuers well informed during all these changes has not been an easy task. Gumbs gives the SEC high marks given that the agency itself has been affected by the pandemic.

Staff did not allow downtime despite the need to switch to remote work, Gumbs noted.

“And I felt like it was transparent, from an SEC scrutiny standpoint. The material we submitted was reviewed on time and there was hardly any significant break in the way the SEC has fulfilled its obligations by providing advice, answering questions, reviewing documents and the like. things.


As the economy faltered at the onset of the pandemic, “a lot of advice came from the SEC for companies like us who are helping others with their disclosures,” Gumbs said.

Issuers of securities had to be extremely careful lest they face lawsuits from disgruntled investors claiming that the issuers had not disclosed material facts. To help, the SEC issued guidance in June 2020 regarding the “diverse range of operational adjustments in response to the effects of Covid-19”.

The adjustments noted by the SEC included the transition to telecommuting, changes to the supply chain, health and safety guidelines and a “complex range” of fundraising activities.

The guidelines referred to the use of “credit facilities, access to public and private markets, the implementation of supplier financing programs and the negotiation of new or amended customer payment terms”. Since these financing deals were likely to include “new terms and structures” due to the unprecedented nature of the crisis, the SEC advised companies to “provide solid and transparent information on how they are dealing short- and long-term liquidity and funding. risks in the current economic context.

In the absence of this SEC assistance – which included many suggestions on what kind of details could be considered “important” – Gumbs said many companies in different parts of the financial ecosystem “would have been affected by compliance with their disclosure obligations. . I think the tips have been incredibly helpful.


Of course, the pandemic is not over. “The New Normal” continues, including the transition from paper filing to electronic filing.

For example, on November 4, the SEC released proposed amendments to the e-filing rules, removing the requirement that certain forms must be submitted in paper format.

“E-filing capabilities have been an effective measure to address the logistical and operational issues raised by the spread of coronavirus disease (COVID-19). Electronic submissions would allow the Commission, and those submitting submissions, to navigate efficiently through any disruptive future event that would make the paper submission process unnecessarily cumbersome, impractical or unavailable, ”the SEC announcement said. As of the publication date of this article, the 30-day public comment period for these changes was still open.

Three trends

This move towards electronic filing is one of three major trends that Gumbs sees in capital market operations: digitization, democratization, and pooling.

While it cannot be sure whether these trends were caused or accelerated by the pandemic, “they at least coincided with the pandemic,” he said.

Digitization has perhaps the clearest causal relationship to Covid, as offices have closed and people have sought to avoid handing over documents in person. Gumbs said he has observed an increase in the use of scanned documents and the conversion from paper to electronics.

“The pandemic has accelerated this trend towards digitization and companies like ours have really focused on it,” he said.

By democratization, Gumbs means increased participation in markets.

“Look at platforms like Robin Hood and similar platforms where the number of retail investors has grown dramatically over the past two years. If this was caused by the pandemic, it’s very difficult to say. . . but it is a fact that in 2020 and 2021 we saw record growth in inventory. “

Finally, Gumbs mentioned pooling, a move towards efficiency enabled by technology. This is the kind of service his business provides.

To illustrate, he offered a simplified example of electronic delivery. Suppose an investor uses four different platforms – Morgan Stanley, Schwab, E-Trade, and Merrill Lynch – with a Microsoft share on each.

“Each platform has an obligation to provide a proxy statement for Microsoft,” Gumbs explained. Companies like Broadridge can streamline this process.

“Instead of sending four packages, we’re consolidating that into one, and we’ll say we’re going to send you a package, but you get four votes. It is mutualisation and it is a key aspect of the functioning of our company.

Gumbs touted the environmental benefit of turning four physical packages into one email, a digital boon in addition to reduced person-to-person contact during the pandemic. The “new normal” in the workplace is not without positive aspects.

Elizabeth M. Bennett was a business journalist who entered legal journalism when she covered the Delaware courts, a pace that prompted her to study law. After a few years as a practicing lawyer in the Philadelphia area, she roamed the Pacific Northwest and returned to independent reporting and publishing.


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