Partial Federal Government Shutdown Affects SEC Op

Partial Federal Government Shutdown Affects SEC Operations: What You Need to Know
28 December 2018
Firm Thought Leadership
On December 21, 2018, the federal government failed to pass appropriations necessary to fund certain governmental operations, creating a partial government shutdown. The Securities and Exchange Commission (“SEC” or the “Commission”) has now published a plan for the Commission’s operation during the shutdown that went into effect on December 27, 2018.1 In short, the SEC will operate with a limited number of staff members and will accept a range of submissions from corporate securities filings to investor complaints. What will be different during the shutdown is what the SEC will do in response to those submissions.

Highlights of the SEC’s Operations Plan

According to the SEC’s operations plan, the Antideficiency Act2 restricts the conduct of business by agencies during a lapse of appropriations —yet provides that certain functions may continue. Under the SEC’s plan, there will be no impact during the shutdown on the ability to make EDGAR filings. However, the Divisions of Corporate Finance, Investment Management, and Trading and Markets, and the Office of Compliance Inspections and Examinations will be unable to process filings, provide interpretive advice, issue no-action letters or conduct any other normal Division and Office activities. Because of this, new or pending registration statements or applications for exemptive relief will not be processed by the Commission.

Similarly, the SEC’s Investment Adviser Registration Depository (“IARD”) system will remain functional during the shutdown and will continue to accept filings. However, the Office of Compliance Inspections and Examinations will not approve applications for registration by investment advisers. Further, the Division of Investment Management will be unable to provide interpretive advice regarding the Advisers Act, rules, or forms. New or pending investment adviser applications will not be processed during the shutdown.

With respect to the Division of Enforcement, due to the limited number of staff during the shutdown, it will only be able to respond to certain critical matters. Perhaps most importantly in terms of regulatory enforcement, ongoing litigation and investigative work will be discontinued by the Division of Enforcement except for certain emergency situations, including issuing temporary restraining orders “necessary to protect public and private property,” monitoring of the tip and referral system, and performing emergency examinations and inspections to protect public and private property.

Finally, the Commission’s non-emergency rulemaking will be discontinued. While the SEC will continue to accept comment letters, there will be a delay in posting those to its website. Additionally, the Commission will only have a limited number of staff available to review investor complaints, and will be unable to respond to complaints, questions, or requests for information.

Questions?

We will continue to monitor the situation and will provide relevant updates as those are released. In the meantime, if you have any questions about how the SEC’s limited operations during the government shutdown may impact you, please do not hesitate to contact a member of our team so that we can further assist you.

1 Securities and Exchange Commission, Operations Plan Under a Lapse in Appropriations and Government Shutdown (Dec. 2018), https://www.sec.gov/files/sec-plan-of-operati...s-2018.pdf.
2 31 U.S.C. § 1341, et seq.
http://www.bakerbotts.com/ideas/publications/...ient-alert