The continuing resolution funding the federal government is set to expire at midnight, and if Congress does not take action today, a lapse in appropriations will directly impact the operations of the SEC. The last time that a government shutdown occurred for a significant period of time was in 2018, when the lapse in appropriations lasted for 35 days. In the event of a lapse in appropriations beginning tomorrow morning, the SEC will operate under its Operations Plan under a Lapse in Appropriations and Government Shutdown.
In anticipation of a potential government shutdown, the SEC’s Division of Corporation Finance recently republished its announcement titled Division of Corporation Finance Actions in Advance of a Potential Government Shutdown, which provides guidance on the Division’s operations during a government shutdown. This guidance closely tracks the guidance that was issued by the Staff in past government shutdown situations. The Division of Corporation Finance also published an announcement regarding pending registrations statements and offering statements earlier today. A government shutdown can create significant complications for companies seeking to raise capital, because the SEC Staff will be furloughed during a lapse in appropriations and will generally not be available to process registrations statements and other required SEC filings.
While the EDGAR system will continue to accept registration statements, offering statements and any other required SEC filings, once the SEC’s operating status changes during a government shutdown, the Staff is not able to declare registration statements or post-effective amendments to registration statements effective, and the Staff will not be able to qualify Form 1-A offering statements. The Staff suggests that issuers should consider submitting a request for acceleration or qualification while the SEC is open and operating if that issuer has a pending registration statement or Form 1-A offering statement that is substantially complete, and that has met all the statutory requirements to request acceleration of the effective date or qualification. The Staff indicates that, in a situation where the required “no objections” statement from FINRA has not yet been obtained, the Staff will consider granting requests for acceleration or qualification if the underwriters confirm in their request that they will not execute the underwriting agreement or confirm sales of the registered securities until they receive that statement from FINRA.
If an issuer does not price an offering within the 15-day time period provided in Rule 430(a), the Staff indicates that the issuer may file post-effective amendments, as necessary, under Rule 462(c) to restart the 15-business-day period so that, at the time of pricing, the issuer will be able to include the pricing information in a Rule 424(b) prospectus supplement. The Staff also notes that an issuer can elect to amend to remove a delaying amendment while the SEC is open or while the SEC is not operating, but the Staff may request that the issuer amend the filing to include the delaying amendment if and when the SEC is operational.
With respect to preliminary proxy statements, an issuer does not need to receive any notification from the Staff regarding a preliminary proxy statement during the ten-day period before the issuer may file definitive proxy materials, but it is possible that the Staff could still review the preliminary proxy statement when the SEC reopens after the government shutdown ends.
Further, the Staff will not be in a position to respond to any written or oral guidance for legal or interpretative questions, including Rule 14a-8 no-action letters. The Staff may consider a request for emergency relief under Rule 3-13 of Regulation S-X.
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