December 26, 2018

The SEC’s Shutdown: Corp Fin’s 14 FAQs

With the government partially shut down, the SEC will now follow its “operations plan” that it first devised a few years ago. Corp Fin notes on this page:

We understand that the uncertainty regarding the SEC’s operating status in the event of a federal government shutdown raises concerns for registrants that plan to request acceleration of their registration statements or qualification of their offering statements in the near future. Given this uncertainty, you may consider submitting your request while the SEC is open and operating.

We will be closed December 24th and 25th in observance of the holiday. However, the SEC will remain fully operational for a limited number of days beyond the start of a government shutdown. During the time we remain open, we will conduct ordinary business. If a change in our operating status looks imminent, we will provide as much advance notice as possible. Regardless of our operating status, EDGAR will accept registration statements, offering statements and other filings; however, as discussed below, during a shutdown we will not be able to declare registration statements effective nor qualify Form 1-A offering statements.

Here’s an excerpt from this Gibson Dunn blog: “As currently envisaged, starting on December 27th, the SEC “will have only an extremely limited number of staff members available to respond to emergency situations involving market integrity and investor protection, including law enforcement.” Regardless of the SEC’s operating status, the EDGAR filing system will continue to accept reports, registration statements and other filings. Accordingly, public companies must continue to file periodic and current reports when due on Forms 10-K, 10-Q and 8-K; however, from December 27th the SEC will not be able to declare registration statements effective nor qualify Form 1-A offering statements. A prolonged shutdown could create difficulties for the IPO market and for many public companies without an effective shelf registration statement and, in particular, would create a complex calculus for any company thinking about going public in January.”

Unlike one of the prior times that the SEC shut down earlier this year – when a group of 18 law firms issued a memo about how to handle matters due to a dearth of guidance from Corp Fin – Corp Fin has issued a helpful set of 14 FAQs this time around (I wish the Division would number the FAQs; that would assist practitioners to more easily refer to a specific FAQ when in discussion). Here’s a Morrison & Foerster memo – and a Davis Polk memo about the SEC’s shutdown.

Whoa! You May Be Permitted to Remove the “Delaying Amendment”!

One of Corp Fin’s FAQs suggests that companies may want to think about removing the “delaying amendment” from their registration statement if the SEC isn’t open. The registration statement would then become effective automatically 20 days after its removal. That’s pretty wild stuff given the sacred nature of “delaying amendments” to this former Staffer. When you join Corp Fin, the first thing you’re taught is to ensure that a newly-filed registration statement has the delaying amendment on it…

A short history lesson: Back in the “way, way back” old days, the SEC Commissioners themselves would review a registration statement. This was when the SEC was first established and very few securities offerings were happening. The notion of a “delaying amendment” didn’t exist yet (not until Rule 473 of Regulation C was adopted) – so the Commissioners had to conduct their review & resolve any differences with the issuer before the 20-day period – under Section 8(a) of the ’33 Act – when the registration statement automatically became effective had passed…

Poll: When Will the Government Be Open Again…

Please participate in this anonymous poll about when the government will reopen:


Broc Romanek