© 2013 The Texas Lawbook.
By Scott H. Kimpel and H. Campbell Zachry
Contributing Writers for The Texas Lawbook
(September 30) – With the possibility of a US government shutdown looming tomorrow, it is a good time to do some planning for businesses with pending matters before the Securities and Exchange Commission.
Friday evening the SEC posted a notice on its website suggesting it will remain open during a shutdown, but the notice also implied that status may change unexpectedly. At the same time, the SEC also posted its operations plan if the agency does close. During the last government closure in 1996, the SEC remained open.
If the SEC does close due to a lack of appropriation, only a skeleton crew of “essential” personnel are permitted to work. In fact, it is illegal for “non-essential” personnel to do any work whatsoever, including ministerial tasks like checking email or returning voice messages.
For example, the vast majority of the operations group in the Division of Corporation Finance that reviews public company filings will be deemed non-essential during an SEC shutdown.
Routine examinations and inspections of broker-dealers, investment advisers and other registered entities would also be deemed non-essential, as would all non-emergency rulemaking, non-emergency interpretive advice, staff no-action letters and processing new or pending applications for exemptive relief.
Certain of the SEC’s core law enforcement responsibilities will continue after a shutdown, but generally only those involving the safety of human life or the protection of property. Those will include on-going litigation, and obtaining emergency temporary restraining orders.
Other ongoing litigation will be discontinued, as will investigative work, including commencing investigations and conducting investigative testimony except when they are necessary for the protection of property. Additional enforcement activities that will be discontinued include collection efforts and work necessary to distribute funds to harmed investors. Non-emergency examinations, inspections and related follow-up work will also be suspended.
If the SEC does shut down on or after October 1, a public company’s line reviewer will not be able to talk to the company or counsel, even simply to identify who else to call for help.
Accordingly, registrants that have a public offering that will be pricing over the next 7-10 days and will require the staff to accelerate the effectiveness of a registration statement would be well-advised to reach out to SEC staff immediately to discuss contingency plans. It is possible under certain circumstances that assistant directors may still issue notices of effectiveness for registered offerings during a shutdown.
Finally, the SEC’s public company filing system on Edgar will remain functional during an SEC shutdown and filing deadlines are not stayed during a government closure, though it is likely no one will be doing regular reviews as indicated above.
Scott Kimpel is a SMU law grad and former practicing attorney in Dallas. Before joining Hunton & Williams in Washington, D.C., he served on the Executive Staff of the SEC as Counsel to Commissioner Troy A. Paredes.
Cam Zachry is Counsel in the Dallas office of Hunton & Williams and his practice focuses on white-collar criminal defense, civil tax controversies, internal and government investigations, health care fraud and abuse, and complex business litigation.
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