A partial shutdown of the federal government began at midnight on December 21, 2018. As a result, the SEC Division of Corporation Finance (the “Staff”) announced that the SEC would “remain fully operational for a limited number of days” from the beginning of the federal government shutdown. The SEC will be closed on December 24^th and 25^th in observance of the federal holiday. It is expected to have funding to remain in “open” status through the end of December 26^th. Should the shutdown continue past the 26^th, the SEC’s operating status is expected to change to “closed” and the SEC will begin to operate according to its Operations Plan under a Lapse in Appropriations and Government Shutdown. As currently envisaged, starting on December 27^th 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 27^th 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.

The Staff has provided an FAQ page regarding operations during the shutdown. The processes described in the FAQ will be mainly relevant for issuances by already-public filers on Form S-1 and non-WKSI S-3s. S-3ASRs filed by WKSIs will, of course, still become effective upon filing and offerings under effective shelf registrations can proceed through the filing of prospectus supplements and FWPs.

As is noted in this FAQ, so long as the SEC remains closed there will be no staff members available to act on requests for the acceleration of the effective date of pending registration statements or for the qualification of offering statements. Accordingly, filers are advised that they may wish to consider submitting requests for acceleration or qualification while the SEC is open on December 26^th. The Staff also states that it will consider requests for acceleration or qualification in the absence of a “no objections” statement from FINRA regarding underwriting compensation arrangements; however, underwriters will be required to confirm that they will not execute the underwriting agreement or confirm sales of the registered securities until they have received the “no objections” statement. Additionally, companies are requested to inform FINRA of their plans to request acceleration or qualification.

If not accelerated, registration statements on Forms S-1 and S-3 become effective 20 days after their most recent public filing, unless subject to a “delaying amendment”. An FAQ notes that new registration statements may be filed without delaying amendments during the closure; however, should the shutdown closure not take place the Staff may ask that the filing be amended to include a delaying amendment. Similarly, after the beginning of the shutdown, companies may file an amendment to registration statements to remove delaying amendments in order to allow the registration statement to become effective after the 20-day period. If during the course of the shutdown filers wish to delay the effective date of a registration statement past 20 days they may file another pre-effective amendment. The registration statement would not go effective until 20 days after the latest pre-effective amendment that does not include a delaying amendment. Should SEC operations restart prior to effectiveness, the Staff will consider requests to accelerate to an earlier date or may ask that the registration statement be amended to include the delaying amendment. If a delaying amendment is removed, the Staff notes that the registration statement must be amended to include all information required by the form. Although not addressed in the FAQ, unless accelerated, Form 10s become effective 60 days after initial public filing and are not subject to delay. As a result, Form 10s must be withdrawn prior to the end of the 60-day period if companies wish to avoid going effective.

Additionally, while not addressed in the Staff’s FAQ, we expect that during any shutdown the Staff will cease to process shareholder proposal no-action letters, although companies should continue to timely submit those letters under Rule 14a-8(j).

The SEC has stated that it intends to provide information regarding any imminent change in its operating status with as much advance notice as possible by means of status updates posted to the SEC website.

Special appreciation to associate Michael Mencher for assistance with this post.

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