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SEC Will Keep Its Doors Open (For Now)

Even if Congress lets the U.S. government shut down, the Securities and Exchange Commission plans to continue to operate and stay fully staffed.

Editor’s note: The SEC released a statement Monday afternoon specifying that it will be able to stay open for “a few weeks” during a government shutdown.

Unless the United States Congress can agree on a budget before the end-of-day Monday, a long list of government agencies will shut down almost entirely — including the Environmental Protection Agency, the Centers for Disease Control and Prevention and the National Park Service. Certain “essential” services, such as air traffic control, law enforcement and emergency assistance, will be exempt from the shutdown.

Though the Securities and Exchange Commission is not exempt, it will keep its doors open anyway and stay fully staffed, at least temporarily. On the SEC homepage, a statement says that, “The SEC will remain open and operational in the event the federal government undergoes a lapse in appropriations on October 1.”

If the SEC doesn’t get new appropriations, how can it continue to operate? It likely has some money left over from last year, says David Lynn, partner at Morrison Foerster and former chief counsel at the SEC’s Division of Corporate Finance. “At the end of the day today, a lot of agencies will have run out of funding because they no longer have an appropriation, and tomorrow they’ll wake up and not be able to continue operations,” Lynn says. “For some of the agencies, and the SEC is one of them, just given the way their funding structure works and whatever funding they might have available from prior continuing resolutions or appropriations, they can stay open and keep the lights on as long as that money lasts.”

If that money dries up, the SEC will fall back on its operational plan, released last week. Under that plan, only 252 of its more than 4,100 employees would keep working full-time. During that time, the commission would not be able to approve registration statements, and companies that filed an initial public offering would have to wait to go to market. “Initial public offerings would shut down because they need the SEC to declare their registration statements effective,” Lynn says.

Lynn worked at the SEC during the last government shutdown, from December 1995 to January 1996. The commission stayed open and fully staffed during the entire 21-day period.

For now, many companies are trying to resolve comments with the SEC before the shutdown, because they are worried that the commission will run out of money before they can get to market. An SEC spokesperson declined to comment on how much the agency had left in its coffers and how long it might stay open. Even during a shutdown, companies would be responsible for meeting their filing deadlines under the Securities Exchange Act of 1934 (including Form 10-Ks, 10-Qs and  8-Ks), Lynn says.

Slightly smaller companies would be worse off during a government shutdown. The majority of the Small Business Administration’s lending programs, including its 7(a) loan guarantees, 504 certified development loans and microloans, would shut down along with other government agencies on Tuesday.

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