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COVID-19: Governance: Regulatory and Litigation Developments (United States)

27 March 2020 | United States of America
Legal Briefings – By Contacts Joseph Falcone, James Robinson and Peter Behmke


As COVID-19 continues its spread across the United States, federal, state, and local governments are taking emergency measures on a daily basis to respond to the pandemic.

To keep our clients updated on these developments, below we have provided key considerations, developments, and resources relating to regulatory compliance and litigation (which has been scaled back and even stalled in some jurisdictions). 

Because the situation is constantly evolving, we advise clients to reach out to a member of our  team for any specific questions. Moreover, for global considerations, please visit our region-specific guidance available here

COVID-19 has impacted various federal and state regulatory agencies, including the following:

Securities and Exchange Commission

The Securities and Exchange Commission (SEC) has announced several regulatory relief measures to alleviate the impact of COVID-19 on regulated companies:

  • The SEC provided a 45 day filing extension for publicly traded companies for certain disclosure reports that would otherwise be due from March 1 through April 30.
  • The SEC announced that it will not enforce in-person board voting requirements through June 15, for certain actions – including the selection of independent auditors, board approvals required by Section 15(c), and approval of plans of distribution.

In conjunction with regulatory relief, the SEC has advised companies that it will aggressively investigate and prosecute violations related to COVID-19, including:

  • Making selective disclosures to investors, and failing to update investors on material developments related to COVID-19. 
  • Making misleading or inaccurate statements about the progress or efficacy of vaccines or treatments under development (the SEC has issued trading suspension orders for several biotech firms for making such claims).

Hart-Scott-Rodino Act Pre-Merger Notifications

COVID-19 also has resulted in temporary changes to the procedures required of parties to certain reportable mergers or acquisitions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).  Notification of the Department of Justice (DOJ) and Premerger Notification Office of the Federal Trade Commission (PNO) must now be submitted via Accellion, effective as of March 17, 2020, rather than in hard copy or DVD.

The PNO's announcement of the change indicates that "PNO and DOJ review of filings will continue as normal," as staff of the US antitrust agencies will be reviewing files while working remotely.  Moreover, the announcement does not suggest that the standard 30-day waiting period has been extended.  "All filing parties" are advised that they may be required to submit hard copies of the filing when the US antitrust agencies resume normal operations.

Other Federal Regulators

The independent Financial Industry Regulatory Authority (FINRA) has issued guidance to member firms on complying with FINRA supervision and data security requirements while employees are telecommuting as a result of COVID-19. FINRA has also implemented several temporary relief measures, including:

  • Postponing some on-site inspections of member offices.
  • Suspending certain U4 reporting requirements for employees who have temporarily relocated as a result of COVID-19.

The Federal Trade Commission (FTC) and Food and Drug Administration (FDA) have issued warning letters threatening prosecution for companies making deceptive or scientifically inaccurate claims about products marketed to treat COVID-19.

The Department of Justice (DOJ) has signaled that it will prioritize COVID-19 related crimes, and the Attorney General has directed all US Attorneys to investigate and prosecute COVID-19 related fraud and to appoint a Coronavirus Fraud Coordinator to lead these efforts in each US Attorney’s Office.

State Regulators

COVID-19 also has effected regulatory enforcement actions by state regulators nationwide, with a few exemplars from agencies in California and New York noted below.

In New York, the New York Department of Financial Services (DFS) has required all licensed financial institutions to conduct risk assessments and develop operational response plans for COVID-19, and submit reports to DFS.

DFS has also offered financial institutions regulatory relief, including:

  • Financial institutions may temporarily close or relocate office locations without complying with normal prior notice or application requirements.
  • Authorizing a 45-day extension on certain filing deadlines.
  • Authorizing companies to utilize video or teleconference meetings to satisfy in-person requirements for board meetings.

In California, among other measures, the Attorney General announced that the California Department of Justice will prosecute price gouging in connection with COVID-19, including price gouging by third party sellers on major online marketplaces.

Litigation Developments – Status of US Courts and Civil Proceedings

US federal and state courts are having varied, and in some cases unprecedented reactions to COVID-19.  Generally, federal courts are still operating, but are broadly cancelling in-person hearings and arguments, while state courts throughout the country are taking different approaches in response to COVID-19.  Please note that this is a rapidly evolving situation, and the information set forth below is subject to change.

In New York, for example, no filings are permitted, including e-filings, in state court proceedings until further notice.  This means new cases may not be filed, and no submissions will be accepted in cases that are currently pending, except for a number of matters before the Family and Housing courts, as well as certain limited actions in the Supreme Court (the state civil trial court), including with respect to emergency applications relating to coronavirus.  New York’s Governor Cuomo, on March 20, 2020, issued an order that temporarily suspended the statutes of limitations under various civil, criminal and other rules, until April 19, 2020, in light of prior directives that have limited state court operations to essential matters during the pendency of the COVID-19 health crisis. 

In the federal courts in the New York City region (the Southern District and Eastern District of New York), all jury trials scheduled to begin before April 27, 2020 have been postponed.  Judges may continue to hold hearings, conferences, and bench trials at their discretion, and there are significant restrictions regarding who may enter the courthouse.

In California, the operations of state courts vary significantly from county to county.  Certain state courts are not accepting any filings while others are.  Many courts are postponing trials, limiting access to their buildings, and closing for non-essential functions.  For example, Los Angeles County has suspended all trials through April 16, 2020, and the court is only open for emergency and essential matters.

Similar to the state courts, California federal district courts vary from district to district, with some courthouses temporarily closing, others ending all personal appearances, and still others allowing individual judges to exercise discretion in ordering hearings, conferences, and/or bench trials.

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