A Moment of Focus: IAR & RIA Disclosure Implications under the Cares Act

A brief “heads up” from Focus 1 on SEC compliance matters we believe to be timely and relevant.  Brought to you by Caleb Diaz, the host of “A Moment of Focus.” 

Links referenced in the podcast:


See the Paycheck Protection Program LoansQ&A on Finra’s website that was added on April 13, 2020

Q: The Paycheck Protection Program (PPP) allows eligible individuals and small businesses to obtain loans that can be used during the COVID-19 crisis. A PPP loan is eligible for forgiveness, provided the terms of the loan forgiveness are satisfied. If a registered person or a business they control obtains a PPP loan and the loan or part of the loan is forgiven, will the registered person be required to report that forgiveness in response to Question 14K on their Form U4 as a “compromise with a creditor?”

A: No, provided the PPP loan or part of the loan is forgiven consistent with the original terms of the loan. For purposes of Form U4 Question 14K, a compromise with one or more creditors “generally involves an agreement between a borrower and a creditor in which a creditor agrees to accept less than the full amount owed in full satisfaction of an outstanding debt, unless such an agreement is included in the original terms of the loan.”4 Because a PPP loan contemplates forgiveness of some or all of the loan as part of the original terms of the loan, such forgiveness will not involve a new agreement by the creditor, but will be an event consistent with the loan’s original terms. In those circumstances, the forgiveness of a PPP loan will not be a “compromise with creditors” for purposes of Form U4 Question 14K. Any forgiveness beyond the original terms of the loan would be considered a “compromise with creditors.”


SeeItem 18 Financial Informationon Page 14 of the General Instructions for Part 2 of Form ADV:  “If you have discretionary authority or custody of client funds or securities, or you require or solicit prepayment of more than $1,200 in fees per client, six months or more in advance, disclose any financial condition that is reasonably likely to impair your ability to meet contractual commitments to clients.


“A Moment of Focus” is a podcast produced and distributed by Focus 1 Associates LLC, (“Focus 1”) an SEC compliance consulting firm.  Focus 1 does not provide tax or legal advice.  Opinions and projections  are as of the date of their first inclusion herein and are subject to change without notice to the viewer/listener.  While the information presented is believed to be from reliable sources, we make no representation as to its completeness or accuracy. This podcast is intended for educational purposes only and should not be construed as advice or a guarantee that you will achieve a desired result.

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