Gretchen Passe Roin, a Boston-based WilmerHale partner, contributed remarks in a Thomson Reuters article, “INSIGHT: Footnote in SEC Guidance may hold pitfall for some mutual fund sponsors,” authored by Todd Ehret. The piece examines the April 2, 2019 SEC Staff guidance and the potential regulatory risk due to a footnote that requests mutual funds to file a delaying amendment to postpone the effective date of their registration statements if a mutual fund is unable to submit responses to staff comments at least five business days prior to automatic effectiveness.

According to the article, this guidance exposes a flaw in the system that could potentially leave mutual funds without an effective registration leading to a series of problems, including regulatory and civil litigation risk.

Ms. Roin states, “everyone is better served by the Staff working with the industry to develop a more permanent solution if, in fact, investor protections are being compromised by a practice of mutual funds submitting last-minute responses to staff comments.” A recent client alert authored by Ms. Roin and Senior Associate Seth Davis is quoted by Thomson Reuters regarding takeaways from the SEC guidance; the alert notes that such request could help in resolving late responses for registration of a new series fund. However, when the SEC’s request to file a delaying amendment effects existing funds, “it could require halting the fund’s continuous public offering.”