Publication

January 14, 2019Client Alert

Navigating Federal Securities Laws as the Federal Government Shutdown Continues

As the federal government shutdown continues, the U.S. Securities and Exchange Commission (SEC) has been operating with minimal staffing since December 27, 2018. The SEC’s plan of operations provides for fewer than 300 of the SEC’s nearly 4,500 staff to continue working. The SEC has alerted on its website that staff members are only “available to respond to emergency situations involving market integrity and investor protection, including law enforcement.” The SEC’s EDGAR system remains operational and issuers should continue filing periodic reports and current reports on Form 8-K as normal. Similarly, the IARD and CRD systems for investment advisors and broker-dealers will be accepting filings but not acting on them or providing guidance.

The SEC Division of Corporation Finance, which reviews filings made under the Securities Act of 1933 and the Securities Exchange Act of 1934 and provides interpretive assistance to issuers with respect to SEC rules and forms, has minimal staff available. It will attempt to answer questions relating to filing fee calculations, but will generally not be available to answer other questions. The Division has posted a set of questions and answers focused on registration statements. They note that during the shutdown, the SEC will not declare registration statements effective or qualify Form 1‑A offering statements. Issuers can file new registration statements (or amend existing registration statements) during the shutdown without delaying amendments, which would allow them to become automatically effective after 20 days; however, if the SEC becomes fully operational before the 20 days have run, the SEC staff may request that a registration statement be amended to include a delaying amendment. 

With no end to the shutdown in sight, there are growing concerns about how the lack of an operating SEC will impact capital formation, merger and acquisition activity, and the upcoming proxy season. Michael Best’s Securities & Capital Markets team will be monitoring these issues closely going forward. If you have questions or concerns about the impact of the federal government shutdown and the implications of a minimally staffed SEC, please contact a member of our Securities & Capital Markets team.

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