Investment Management Firms May Be Considered Essential Financial Businesses Under Federal Guidance and State Orders.

The Cybersecurity and Infrastructure Security Agency (CISA) lists asset management as a vital component of our nation’s critical infrastructure. As the federal risk advisor, CISA created guidance to help state and local governments ensure that employees essential to operations are able to continue working. In consideration of CISA’s guidance, whether investment management firms would be considered essential financial businesses may depend upon each State’s directives. Generally, the best practice for firms moving forward is to require workers to telework or work-from-home if possible, but allow supporting personnel to continue selective operations in the office if necessary to ensure the firm’s continued operation.

CALIFORNIA

• California Executive Order N-33-20 orders “all individuals living in the State of California to stay at home or at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors” as outlined by CISA. As discussed earlier, asset managers are included under CISA’s guidance and should be permitted to allow supporting personnel to continue operations in their California offices.

CONNECTICUT

• Connecticut Executive Order No.7H orders that “non-essential businesses or not-for profit entities shall reduce their in-person workforces at any workplace locations by 100% not later than March 23, 2020 at 8:00 p.m. Any essential business or entity providing essential goods, services or functions shall not be subject to these in-person restrictions.” The order defines “essential businesses” as those that, “include, but not be limited to, the 16 critical infrastructure sectors as defined by the Department of Homeland Security” and as outlined by CISA. Asset managers are included under CISA’s guidance and should be permitted to allow supporting personnel to continue operations in their Connecticut offices.

DELAWARE

• Delaware Fourth Modification of the Declaration of a State of Emergency defines “essential businesses” as those that employ or utilize workers in financial services who support financial operations, such as those engaged in the selling, trading, or marketing of securities, those engaged in giving advice on investment portfolios, and those staffing data and security operations centers.” Under this definition, asset managers should be permitted to allow personnel to continue operations in their Delaware offices. 

ILLINOIS

• Illinois Executive Order 2020-10 orders that “all Essential Businesses and Operations are encouraged to remain open. To the greatest extent feasible, Essential Businesses and Operations shall comply with Social Distancing Requirements as defined in this Executive Order, including by maintaining six-foot social distancing for both employees and members of the public at all times.”  Under the order, Essential Businesses are defined as including financial institutions. Accordingly, it is reasonable to take the position that asset managers should be permitted to allow personnel to continue operations in their Illinois offices. 

NEW JERSEY:

• New Jersey Executive Order No. 107 allows flexibility for businesses with employees that are unable to work-from-home or perform telework. In such situations, the order requires businesses to use its best efforts to allow the minimum number of workers necessary to ensure that essential operations can continue. Accordingly, it is reasonable to conclude that asset managers have the discretion to decide which, if any, personnel can continue selective operations in their New Jersey offices in order to ensure the firm’s continued operations. 

NEW YORK

• New York Executive Order No. 202.6 orders that employers “reduce the in-person workforce at any work locations by 100%…” with exception to “an entity providing essential services or functions.” In a release expanding on the definition of “Essential Businesses” for the purposes of Executive Order 202.6, such essential financial institutions include “services related to financial markets.” Accordingly, it is reasonable to take the position that asset managers should be permitted to allow personnel to continue operations in their New York offices.

For general questions or concerns related to impacts of coronavirus on the operations or compliance of funds and advisers, please contact us.

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Bart Mallon is a founding partner of Cole-Frieman & Mallon LLP. Cole-Frieman & Mallon is a boutique law firm focused on providing institutional quality legal services to the investment management industry. For more information on this topic, please contact Mr. Mallon directly at 415-868-5345.