In response to the impact the COVID-19 pandemic has had on the global and U.S. economy in recent weeks, Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which was enacted into law on March 27, 2020. The CARES Act is a nearly $2 trillion stimulus package aimed at delivering critical aid to the U.S. economy, including by way of $500 billion in loans and loan guarantees to support a broad range of borrowers, including specific aid directed at certain hard-hit industries. The CARES Act also includes unemployment and other labor-related assistance to businesses and workers, more than $377 billion in federally guaranteed loans to small businesses, and tax provisions aimed at providing much needed liquidity to businesses as the world seeks to address the COVID-19 pandemic. For more details on the CARES Act generally, including a breakdown of the various components thereof, you may wish to refer to Shearman's related client publication. If you wish to read a more detailed analysis of the key provisions Paycheck Protection Program specifically (an allocation of $349 billion under the CARES Act for the U.S. Small Business Association to guarantee loans to small businesses), Shearman's client publication on the topic, available here, may be of interest.

Jay Clayton, Chairman of the U.S. Securities and Exchange Commission (SEC), recently shared his thoughts on the disclosure duties of companies seeking bailouts under the CARES Act, stating that such companies should share with investors their current status and their plans going forward, and in particular, any plans around the payment of dividends, share buybacks and capital preservation. Amidst worries of insider trading relating to the CARES Act stimulus package (spurred on in part by a recent study indicating that instances of insider trading appeared to rise dramatically during the 2008 bailout), Chairman Clayton reiterated earlier SEC warnings to executives to guard against this possibility. He noted that companies should follow good corporate hygiene and announce information as soon as they can but that, until that time, they should keep the information as tight as possible.

Originally published 13 May, 2020

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