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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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On April 27, 2020, the Securities and Exchange Commission’s (SEC) Division of Investment Management provided guidance in its Frequently Asked Questions (FAQ), which addressed disclosure obligations for registered investment advisers (RIAs) with respect to forgivable Paycheck Protection Program (PPP) loans.

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The FAQ states: “As a fiduciary under federal law, you must make full and fair disclosure to your clients of all material facts relating to the advisory relationship. If the circumstances leading you to seek a PPP loan or other type of financial assistance constitute material facts relating to your advisory relationship with clients, it is the staff’s view that your firm should provide disclosure of, for example, the nature, amounts and effects of such assistance.”

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The FAQ cites specific examples of when such disclosure would be required, such as, if PPP loans are used to pay salaries for employees involved in providing advisory services to the RIA’s clients, or if the RIA is experiencing financial hardships that are reasonably likely to impair its ability to meet contractual commitments with its clients. If the RIA is experiencing such financial hardships, the RIA may be required to disclose its financial condition in Form ADV Part 2. The FAQ does not dictate that the use of PPP loans must be disclosed; therefore, RIAs should carefully consider the use of PPP loans and the financial condition of the RIA to determine if disclosure is necessary, consulting with counsel as necessary.

Andrew J. Davalla 614.469.3353 <a href="mailto:Andrew.Davalla@ThompsonHine.com">Andrew.Davalla@ThompsonHine.com</a>

Ryan Wheeler 513.352.6693 <a href="mailto:Ryan.Wheeler@ThompsonHine.com">Ryan.Wheeler@ThompsonHine.com</a>

Additional Resources

We have assembled a firmwide multidisciplinary task force to address clients’ business and legal concerns and needs related to the COVID-19 pandemic. Please see our <a href="https://www.thompsonhine.com/services/covid-19-task-force">COVID-19 Task Force</a> page for additional information and resources.

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhine.com/wp-content/uploads/2022/04/SEC_Provides_Guidance_on_Disclosures_of_RIAs_Using_PPP_Loans.pdf

SEC Provides Guidance on Disclosures of Registered Investment Advisers Using Paycheck Protection Program Loans

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