The Government is Closed – What That Means for the SEC

Gone fishing (rust)

The impact of the government shutdown on investigations and litigation involving corporate defendants and their executives will be particularly hard felt in certain areas.

For example, more than 1,000 Department of Justice lawyers across the country are home without pay, and government lawyers had to put hundreds—if not thousands—of civil cases on hold while regulatory agencies went dark. Additionally, one-third of the employees of the District of Columbia’s federally funded local court system were furloughed.

SEC Operating Status

The SEC is open and operational during the federal government’s lapse in appropriations. Any changes to the SEC’s operational status will be announced on this website. The operational plan in the event of an SEC shutdown at a later date is available here.

SEC: Business Somewhat as Usual

three-part series on the effectsof the government shutdown

The Government Shutdown

Meanwhile, the U.S. Securities and Exchange Commission (SEC) will be more like business as usual (at least for the present).

In the event of a lapse in appropriations, the SEC plans to retain certain personnel to perform certain functions, including:

  • Law enforcement/litigation
  • Systems for filings by public companies and regulated entities
  • Market monitoring and surveillance
  • Internal systems/functions, human resources and security functions related to shutdown processes.

This means the Commission will continue to handle emergency enforcement matters, monitor their “tips, complaints, and referrals” system and web-based investor complaint system, and to process referrals from self-regulatory organizations to help identify matters that are emergencies and take follow-up steps relating to these emergencies.

Major Functions to be Discontinued

Non-essential functions that will not be performed during the shut-down include but are not limited to:

  • Ongoing litigation:except those matters that cannot be deferred (as described above); investigative work, including commencing investigations and conducting investigative testimony, except as necessary for the protection of property; and non-emergency examinations and inspections and related follow-up.
  • Processing and approving filings and registrations: by registrants and regulated entities, including the applications by investment advisers, broker-dealers, transfer agents, and the like with respect to new financial products; the review and acceleration of registration statements by issuers for securities offerings; review of periodic reports and other filings; and non-emergency support to registrants.
  • International Matters: Non-emergency assistance to foreign authorities under bilateral or multilateral arrangements; and participation in multilateral organizations and working groups, will also be in abeyance.

Current Status

From the outside looking in, yesterday, the 1st day of the government shut down, the SEC announced that it was awarding $14M to whistleblowers under its Dodd-Frank bounty program, and today it announced sanctioning an investment advisor firm and its owner.

So, in the early days, it does look more or less like business as usual. But we are told to stay tuned for further developments.

 

 

-This means that EDGAR and other filing systems will remain functional.

About Ann Longmore

Ann is Executive Vice President of Willis' Executive Risks practice. Based in New York, she has been with the compa…
Categories: Executive Risk, Financial Services | Tags: , ,

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