Continued Remote Working Issues and Considerations for Investment Managers

June 22, 2020

As state and local governments begin to allow businesses to reopen, our investment manager clients have a host of issues to consider including how and when employees will return to the office. In order to reopen their offices, managers will need to navigate relevant guidance and mandates from all levels of government, and those located in New York, New Jersey and Connecticut should review our client alert “Office Reopening Guidelines for the Tri-State Region During the COVID-19 Pandemic.” The continued need to reduce interactions among individuals and the successful use of remote working by many firms will likely result in the continued practice of telework throughout the industry and the delayed reopening of many offices, even after it is permissible under applicable law. In addition to the points set forth in our client alert “Coronavirus Considerations for Investment Managers,” below are some practical considerations for managers that expect to continue to allow their employees to work remotely.

Review and revise policies and procedures. Managers should review current policies and procedures and consider whether they need to be amended to reflect extended remote working by some or all of their employees and in light of other operational changes to their businesses.

  • Remote working. Managers should update their policies and procedures related to remote working and set forth clear guidelines regarding how certain activities are to be managed remotely (e.g., client communication and meetings).
  • Business continuity. Managers should review the ongoing effectiveness of their business continuity plans and make adjustments as needed to take into account the operational practicalities of long-term remote working.
  • Cybersecurity, privacy and recordkeeping. Managers should consider whether policies and procedures related to cybersecurity, privacy and recordkeeping need to be modified to address continued remote working and access to systems. See our client alert “Cybersecurity Considerations in a Work-From-Home Environment.”
  • Other supervisory policies and procedures. Managers should evaluate whether extended work-from-home practices will impact their regulatory obligations to supervise employees and should adjust relevant policies and procedures as needed.

Any revisions to existing policies and procedures, or new policies and procedures adopted by the manager, should be clearly communicated to employees.

Consider regulatory and tax implications. Managers must remain vigilant in terms of compliance with their regulatory and tax-related obligations including any possible new obligations that may arise as a result of continued remote working by some or all of its employees. For example, long term work-from-home arrangements by employees (particularly those in states outside the state of the manager’s permanent office location) may raise a host of new issues such as whether these locations will be deemed a separate or branch office and whether activities of the manager’s personnel in these locations will trigger any new state filing or tax obligations. The Securities and Exchange Commission staff and the National Futures Association have each issued guidance related to temporary telework by a manager’s personnel pursuant to its business continuity plan due to circumstances related to COVID-19, however it is unclear whether this guidance will be applicable to managers that voluntarily institute long-term remote working policies. See our client alerts “SEC Staff Issues New FAQ on Form ADV and Modified FAQ on the Custody Rule Related to the Coronavirus” and “NFA Grants Temporary Relief From Branch Office Requirements.”

Communicate with service providers. Managers should communicate with key service providers such as accountants, lawyers, prime brokers and administrators regarding the manager’s anticipated plans related to remote working and to confirm any return-to-office plans of the service provider. Managers should continue to work with service providers to implement procedural changes that may be needed to ensure that there are as few disruptions to client service as possible in connection with continued remote working.

Seward & Kissel has established a COVID-19 Resource Center on our web site to access all relevant alerts that we distribute. If you have any questions regarding the foregoing, please contact any of the partners or counsel listed below or your primary attorney in Seward & Kissel’s Investment Management Group.