On March 23, 2020, the Securities and Exchange Commission (“SEC”) issued a relief order (the “Order”) granting temporary short-term lending and borrowing flexibility to open-end funds and insurance company separate accounts (each, a “fund”) to assist such funds in dealing with market disruptions caused by the COVID-19 pandemic. The Order temporarily permits a fund to borrow from its affiliated persons. It also expands such fund’s flexibility for lending or borrowing under an existing interfund lending exemptive order (“IFL Order”); a fund without an IFL Order will be permitted to participate in an interfund lending arrangement under similar conditions. Lastly, a fund may temporarily engage in borrowing or lending arrangements that may deviate from its fundamental investment policies. The Order covers transactions involving second-tier affiliated persons as well (first and second tier affiliated persons are referred to as “fund affiliates”).
This temporary relief is in effect until at least June 30, 2020. After the effective period, funds will have two weeks to cease activities carried out in reliance on the Order, once the SEC issues a public notice terminating the Order. Before relying on this temporary relief, a fund will need to comply with the various conditions in the Order.