
By Oyster Consulting LLC
Subscribe to our original industry insightsPPP loans, which are intended to support company payrolls during the COVID-19 shutdown, have been a source of great debate in the Registered Investment Advisor space. Are they material? If my RIA applies for and receives a loan, do we have to disclose it as a material event on our Form ADV Part 2A?
The SEC has been less than helpful on this front. In their April 27 FAQ, the SEC passed on the opportunity to make a definitive statement one way or another. Their language included the kind of “may” language that they caution advisers to avoid in disclosure statements and regulatory filings.
At Oyster, we’re having the same discussions and arguing the same points. Some of us compare the loans to insurance policies and argue that they’re only material if you would have been in peril without them. Some say it’s just a prudent measure to guard against uncertainty. There’s also an argument that if you take the loan and really end up needing it, it’s still not material because the loan itself kept you out of peril (though none of us are eager to go that far).
On the more conservative side, some of us believe that, by definition, applying for and receiving the loan is probably a material event because applicants must certify that due to uncertainty, the loan is necessary to the stability of the company. Some of us point to the “necessary” language in the PPP application and say that if something’s necessary, then it’s clearly material.
The difference really hinges on a semantic argument- if something is “necessary” to protect against the uncertain possibility of a material event, is that in itself material? Most of us don’t know, and those who do know don’t necessarily agree with each other.
Here, however, are a few things we do agree on:
Helping firms during their time of need is what we do best. Oyster provides free resources such as podcasts and blogs, as well a team of consultants and software to help you organize and automate your compliance program. Oyster Consulting has the knowledge and experience to support your efforts to achieve compliance.
If you have any questions about Oyster’s services or would like to discuss how to keep your firm safely operating during this time, please do not hesitate to contact us by calling (804) 965-5400 or completing our contact form, and a Relationship Manager will be glad to connect you with an Oyster expert.
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