Happy holidays and happy new year everyone!

Here’s the latest from the SEC:

In the event of a federal government shutdown, the SEC will follow the agency’s plan, which contemplates focusing on “market integrity and investor protection.” Starting Thursday, December 27, 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. In addition, certain Commission systems, including EDGAR, will be operating. Additional information is available from the Division of Corporation Finance and the Division of Investment Management.”  Corp Fin has provided some FAQs (summarized below) that may be helpful for those in the registration process or contemplating offerings.

In light of the uncertainty for companies that plan to request acceleration of their registration statements or qualification of their offering statements in the near future, Corp Fin suggests that these companies consider submitting their requests while the SEC is operating. The SEC will be open and “fully operational for a limited number of days beyond the start of a government shutdown. During the time we remain open, we will conduct ordinary business. If a change in our operating status looks imminent, we will provide as much advance notice as possible. Regardless of our operating status, EDGAR will accept registration statements, offering statements and other filings; however, as discussed below, during a shutdown we will not be able to declare registration statements effective nor qualify Form 1-A offering statements.”  On the website, Corp Fin has a list of contacts identified for questions about individual filings.

Corp Fin has also  provided a set of FAQs about operations during the shutdown.  In summary:

  • If the SEC’s operating status changes to closed, there will not be anyone available to act on a request for acceleration or qualification. As a result, companies may wish to consider submitting requests for acceleration or qualification while the SEC is open and operating.
  • The SEC will post updates on the SEC website about operating status.
  • If a company thinks it might request acceleration or qualification during this period, it would be helpful to let the SEC know as soon as possible, which would allow the SEC to work with the company to resolve any outstanding issues. The SEC will consider granting requests for acceleration or qualification the day they are submitted.
  • If the company doesn’t know when it will commence its offering, it will be up to the company and its representatives to determine how to proceed with regard to whether to go ahead and request acceleration or qualification now.
  • If the UWs have not yet obtained the required “no objections” statement from FINRA, the SEC will consider granting acceleration requests “if the underwriters confirm in their request for acceleration that they will not execute the underwriting agreement or confirm sales of the registered securities until they receive that statement from FINRA.” UWs in this situation should advise FINRA of the plan to request acceleration.  Same applies to requesting qualification of pending offering statements.
  • While the SEC’s normal procedure is to consider all requests for acceleration or qualification, as always, there may be circumstances that arise that cause the SEC to refuse to grant the request.
  • If the company has an effective registration statement and determines that it needs to update information in the prospectus before commencing the offering, the SEC advises that the company not proceed with offering prior to updating.  “The company and its representatives will have to decide whether the company can update the prospectus without filing a post-effective amendment.  If the SEC is not open, the company can file a post-effective amendment on EDGAR but the staff will not be in a position to declare that amendment effective.” A similar response applies under the same circumstances with regard to a previously qualified Form 1-A: “If the SEC is not open, the company can file a post-qualification amendment on EDGAR but the staff will not be in a position to qualify that amendment.”
  • If the company doesn’t price its offering within the 15-day time period provided in Rule 430A, the company can file post-effective amendments under Rule 462(c) to restart the 15-business-day period so that, at the time of pricing, the company can include the pricing information in a 424(b) prospectus supplement. Post-effective amendments filed pursuant to Rule 462(c) are effective upon filing. Alternatively, at the time of pricing, the company could file a post-effective amendment under Rule 462(c), prior to the time confirmations are sent or given, to include the information omitted under Rule 430A. However, the company cannot rely on Rule 462(c) to include the pricing information if the post-effective amendment includes substantive changes from, or additions to, the prospectus in the effective registration statement.
  • The company can file an amendment to remove the delaying amendment while the SEC is open and operational, but if the SEC has not yet cleared outstanding comments, the SEC may ask the company to amend to include the delaying amendment.
  • If the SEC shuts down, it will still be possible to file to remove a delaying amendment. In that event, the registration statement will be effective once 20 days have passed. If the shutdown continues, the company can further delay the effective date by filing another pre-effective amendment during the 20-day period.  The registration statement would not become effective until 20 days after the latest pre-effective amendment that does not include a delaying amendment. If the shutdown ends and the SEC becomes operational and the registration statement is not yet effective, the SEC would then consider a request to accelerate to an earlier date.  The SEC may, however, request an amendment to restore the delaying amendment. The SEC cautions that, if a company amends to remove the delaying amendment, the company must also amend to include all information required by the form, including the price of the securities it will sell.  Rule 430A is not available in the absence of a delaying amendment.
  • Regardless of operating status, EDGAR  will accept registration statements, offering statements and other filings (presumably so long as the funding for the outside contractor that operates EDGAR continues).
  • A company could file a new registration statement without a delaying amendment in anticipation of a shutdown, but if it turns out that there is no shutdown, the SEC may ask for an amendment to  include a delaying amendment.



Posted by Cydney Posner