What would an end to the government shutdown mean for the SEC? Once the agency’s appropriations are restored, the furloughed SEC Staff has historically been recalled to their jobs relatively quickly, and full-scale agency operations resume. Even when the agency is fully staffed, however, there is an inevitable delay caused by the backlog of work that has piled up during the time that the government was shut down, and navigating that delay creates uncertainty for issuers and market participants.

In the latest guidance that Corp Fin published on October 8, the Staff included the following two post-shutdown Q&As:

16. If I removed a delaying amendment from a registration statement or filed a new registration statement without a delaying amendment and the Division’s status changes to operational before the end of the 20-day period, may I request effectiveness of that registration statement on a date prior to the end of that period?

We will consider requests to accelerate the effective date of such registration statements if they are amended to include a delaying amendment prior to the end of the 20-day period and acceleration pursuant to Rule 461 is appropriate.

17. If I removed a delaying amendment or filed a new registration statement without a delaying amendment, do I need to add a delaying amendment when the Division’s operating status changes to operational?

In cases where we believe it would be appropriate for a registrant to amend to include a delaying amendment, we will notify that registrant.

As we noted in the blog after the 2018-2019 shutdown, Corp Fin issued a statement back then indicating:

The Division of Corporation Finance is returning to normal operations. In general, we anticipate addressing filings, submissions and requests for staff action based on when an item was submitted. In other words, absent compelling circumstances, we expect to address matters in the order in which they were received.

Our recollection is that, following the 2018-2019 shutdown, all of the issuers who filed registration statements without delaying amendments or amended registration statements to remove delaying amendments subsequently filed amendments to reinstate the delaying amendments once the SEC’s normal operations resumed, either as a result of the Staff’s prompting or out of a hope that the Staff would accelerate the effectiveness of the registration statement once the delaying amendment was restored. In general, the Staff who was still working during the course of that shutdown appeared to be monitoring the registration statements that did not have delaying amendments and acted quickly to reach out once the agency’s appropriations were restored.

The 2018-2019 shutdown also happened during the heart of the shareholder proposal no-action letter season, and the Staff had to dig its way out of a large number of requests. While our recollection is fuzzier on how this played out, we recall that issuer mailing deadlines were generally met by the Staff, despite the need to work through a considerable backlog. For more on the Rule 14a-8 experience during the last major shutdown, check out Meredith’s recent blog on The Proxy Season blog.

Based on our prior experience and the current guidance, here are my tips for navigating what will hopefully be a reopening scenario in the coming days:

1. If you have a registration statement outstanding, file an amendment to reinstate the delaying amendment once the SEC reopens. Absent further guidance from the Staff indicating that no such action is necessary (and anything is possible these days, folks!), it would be better to deal with the Staff with a delaying amendment in place than having to deal with the Staff under a potential stop order scenario.

2. For those situations where a review of a filing was ongoing prior to the shutdown, it is highly likely that the Staff will pick up where it left off on that review, prioritizing pending registration statements and proxy statements. It may take some time to hear from the Staff on the status of the review after reopening, so contact the Staff to let them know your timing considerations.

3. For those registration statements and proxy statements filed during the course of the shutdown that did not go effective or have the 10-day waiting period run, respectively, the Staff is likely going to screen those filings and make a review determination on a first come, first served basis. If a filing is selected for full review, in all likelihood you will still have to wait approximately 30 days for the first round of comments.

4. If you did have a registration statement go effective or mailed a definitive merger proxy during the government shutdown, you still may hear from the Staff about your disclosure, particularly in a situation where there is an offering or solicitation that is still ongoing and the Staff determines that the disclosure should be supplemented.

5. If you submitted a no-action request or interpretive question before or during the shutdown, the Staff will get back to you in the order that the request or question was received, but it may take a little while to hear from them once the SEC’s operations resume. The same timing considerations that apply with respect to the review of filings will continue to apply in the context of no-action requests.

I encourage everyone to be patient with the Staff if and when the SEC’s full operations resume. I am confident that they will do their best to address the backlog as expeditiously as possible and in a professional manner. Remember, it is not their fault that the government was shut down for well over a month and they were furloughed with no pay during that time – this government shutdown disaster was brought to you solely by the duly-elected politicians!

– Dave Lynn