How Might a Government Shutdown Impact the SEC?

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In the event of a government shutdown, the implications for the financial industry are varied.     However, the threat of a shutdown forced the Securities and Exchange Commission (SEC) to prepare its contingency plan for operating without funding.

According to the SEC’s website, the SEC contingency plan would have stopped a great number of its regulatory functions and oversight responsibilities.   While financial markets won’t be left completely to themselves, the SEC will be forced to reduced operations to a minimum, becoming unable to provide interpretive advice, issue no-action letters or conduct any other normal Division and Office activities.    

The SEC would designate essential staff that would continue to work during the shutdown; however, many law enforcement and litigation actions as well as processing and approval of filings and registrations would have been halted.    As a result, new or pending registration statements or applications for exemptive relief will not be processed regardless of the status of any review of those filings.

The showdown would also mean a reduction of the SEC personnel from the usual 3,969 to 174 engaged in law enforcement and 158 engaged in the protection of life or property.

Essentially this means that the SEC will mainly focus on its Enforcement division, where it will continue to monitor tips, complaints, and referrals, along with market watch activities and monitoring market technology operations and broker-dealers possibly in distress.

Moreover, the SEC would have discontinued non-emergency examinations and inspections, and non-emergency rulemaking also would have been put on hold in the event of a shutdown.

According to some experts, a government shutdown of a few days likely would not have impacted a regulator already burdened with fast -approaching rulemaking deadlines and added oversight responsibilities.     But a drawn-out shutdown would not only have impacted the SEC, it would have hurt firms that count on a functioning regulator to get their own work done.

Anna Timone (195 Posts)


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