Government shutdown maybe?

Based on the news reports from this morning, it seems unlikely that the threatened government shutdown will come to pass. Nevertheless, although the shutdown appeared doubtful, just this morning, Corp Fin posted an Announcement Regarding Pending Registration Statements and Offering Statements. As a cautionary measure, until the shutdown is fully resolved by a vote, it may make sense for those with pending registration statements to take a look.

New Announcement. The new Announcement advises issuers that would like Corp Fin to consider a request for acceleration of the effective date of a pending registration statement or qualification of a pending offering statement to today, March 14, 2025, to please contact a staff member identified in the letter they received. Alternatively, they may contact the Disclosure Review Program’s main number at (202) 551-2076. According to the Announcement, after 5:30 p.m. today, Corp Fin “will not be in a position to act upon any such requests until the SEC receives appropriations to fund its operations.”

Starting March 17, 2025, a limited number of Corp Fin staff “will be available to answer questions relating to fee calculations and emergency filing relief. If you require assistance in these matters, submit your request and contact information to CFEmergency@sec.gov or IMEmergency@sec.gov, as appropriate.” Corp Fin staff “will not be available to respond to other questions. In all situations, responsibility for complete and accurate disclosure remains with the company and others involved in the preparation of a company’s filings.”

Standard shutdown announcement. The SEC and Corp Fin posted their now-standard shutdown announcements a week ago. The SEC states that it plans to operate in accordance with the agency’s plan, which calls for the continuing operation of certain systems, including EDGAR. Corp Fin’s announcement—have you memorized it yet?—indicates that, in the event of a shutdown, its activities would be “extremely limited.” In particular, Corp Fin “will not be able to accelerate the effectiveness of registration statements.” (Given the current state of the markets—now in correction territory—will that be a big problem?)   In light of the uncertainty related to acceleration, Corp Fin suggests that “registrants with pending registration or offering statements that are substantially complete, and that have met all statutory requirements to request acceleration of the effective date (including the dissemination of any draft registration statement for the required periods under Securities Act Section 6(e) or the related Division accommodations) or qualification, may want to consider requesting effectiveness or qualification while the Division continues its normal operations.”

While Corp Fin is open, it “will conduct ordinary business,” and, in the event of an imminent change in its operating status, Corp Fin “will provide as much advance notice as possible.” Regardless of its operating status, “EDGAR will accept registration statements, offering statements and other filings”; however, as noted above, Corp Fin “will not be able to declare registration statements effective nor qualify Form 1-A offering statements.” As in past shutdown warnings, Corp Fin has posted a series of FAQs as part of the announcement, primarily addressing companies in the registration process (or contemplating offerings) but potentially caught in the shutdown. There are a couple of FAQs about proxy statements and proposals. Corp Fin plans to post updates on operating status on the SEC’s website.

Below is a summary of the FAQs:

Pre-shutdown

• If Corp Fin is closed, the staff will not be able to grant requests for acceleration of the effective date of pending registration statements or for qualification of offering statements. You may want to consider submitting a request for acceleration or qualification while Corp Fin remains open and operating. However, depending on the circumstances, Corp Fin may not be able to act on your request.
• Corp Fin requests that, if you might request acceleration, you let them know as soon as possible so that they can work with you to resolve any outstanding issues. Corp Fin will consider granting requests for acceleration or qualification the day they are submitted.
• The staff will not advise on whether to request acceleration if you don’t know when to commence the offering. That’s up to you.
• If you have not yet obtained the required “no objections” statement from FINRA regarding underwriting compensation arrangements, Corp Fin “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 securities from the registration statement until they receive that statement from FINRA.”  In that case, the SEC recommends that you advise FINRA of your plan to request acceleration as soon as possible. A similar response applies to Form 1-A offering statements.
• Technically, you can file a new registration statement without a delaying amendment in anticipation of a shutdown. However, if Corp Fin is open and operating, they will ask you to amend the filing to include a delaying amendment.

During a Shutdown

• If you have an effective registration statement that you determine you need to update before commencing the offering, the staff advises that you “not go forward with your offering before updating your prospectus.” You will need to decide whether you can update the prospectus without filing a post-effective amendment, but if you determine that you need to file a post-effective amendment on EDGAR, “the staff will not be in a position to declare that amendment effective.” A similar answer applies to Form 1-A offering statements.
• If your registration statement was declared effective prior to the shutdown, but you don’t price within the 15-day time period provided in Rule 430A, the staff advises that, because post-effective amendments filed under Rule 462(c) are effective upon filing, even if the SEC is not operating, you may still file post-effective amendments under Rule 462(c) to restart the 15-business-day period so that, at the time of pricing, you will be able to include the pricing information in a Rule 424(b) prospectus supplement. However, the staff cautions that you “cannot rely on Rule 462(c) if the post-effective amendment includes substantive changes from, or additions to, the prospectus in the effective registration statement.”
• Technically, you may file an amendment to a current registration statement to remove the delaying amendment so that the registration statement will be effective in 20 days.
  • However, the staff cautions that all companies, especially those conducting IPOs, “should consider carefully the risks of this course of action and should evaluate their particular facts and circumstances before doing so. Factors to consider may include, but are not limited to, whether the company is Form S-3 eligible, whether it is a repeat issuer, whether the registration statement is subject to review, and whether significant unresolved staff comments remain outstanding.”
  • The liability and antifraud provisions still apply, and you should ensure that the registration statement does not contain any material misstatements or omissions.
  • If you remove the delaying amendment, the registration statement will not become effective until 20 days have passed, and if you further amend before effectiveness, the 20-day period will restart.
  • The staff advises that just omitting the delaying amendment from an amendment will not begin the 20-day period. Rather, the company would need to amend its registration statement to include the following language provided by Rule 473(b): “This registration statement shall hereafter become effective in accordance with the provisions of section 8(a) of the Securities Act of 1933.”
  • The registration statement must also be final: you must amend to include all information required by the form, including the price of the securities to be sold.
  • If SEC remains on shutdown but you want to further delay the effective date, you may file 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. You may also replace the delaying amendment by filing the appropriate language from Rule 473(a).
  • If the SEC becomes operational and the registration statement is not yet effective, the staff may ask you to amend to include the delaying amendment.
  • Rule 430A is not available in the absence of a delaying amendment because Rule 430A is available only with respect to registration statements that are declared effective by the SEC or the staff.
  • Even during the shutdown, the SEC may issue a stop order under Section 8(d) or take other emergency actions if necessary. Once operations resume, the staff may ask you to amend your registration statement even if it has become effective by operation of Section 8(a).

• Technically, you can amend to remove the delaying amendment while there are still outstanding, unresolved staff comments, but the staff advises that, in that event, you “should carefully consider the material issues raised by the staff and not remove their delaying amendments prior to making the necessary changes to the registration statement.” You should also consider the risks and factors described above. If you remove the delaying amendment and the SEC becomes operational prior to the effective date, the staff may ask you to amend your filing to include the delaying amendment so that you can resolve outstanding comments.
• You can file a new registration or offering statement during a shutdown because EDGAR will still accept filings.
• Technically, you can file a new registration statement without a delaying amendment during the shutdown, but if the SEC becomes operational during the 20-day period, the staff may ask you to amend  to include a delaying amendment. You should also consider the risks and factors described above.
• In an emergency where Rule 3-13 may provide relief for registrants, Corp Fin may consider a request where consistent with the limitations of the Anti-Deficiency Act.  That Act “generally prohibits agencies from continued operation in the absence of appropriations, but contains narrow exceptions, one of which is for emergencies involving the protection of property. Thus, an agency may act where there is some reasonable likelihood that the protection of property would be compromised, in some significant degree, by delay in the performance of the function in question.” Requests should be submitted to CFEmergency@sec.gov, including a description of  the emergency and the significant property interest to be protected.
• You do not need to hear from the staff regarding a preliminary proxy statement or preliminary information statement before filing the definitive materials.  Rules 14a-6 and 14c-5 require only that the preliminary proxy or information statement be filed at least 10 calendar days prior to the date definitive copies are first sent or given to security holders. The staff may review the preliminary proxy statement or preliminary information statement after it becomes operational.
• You can do a shelf takedown during the shutdown from an already effective shelf registration statement. A prospectus supplement does not need to be declared effective by the staff.
• Days during which the government is shut down are still considered  “business days” for purposes of rules involving the counting of days. The term business day means any day other than a Saturday, Sunday, or federal holiday.
• Corp Fin will not provide a response to Rule 14a-8 no-action requests during the shutdown.  Corp Fin requests that “companies and proponents work together to resolve questions to the best of their ability. It is important to note that the staff’s no-action responses to Rule 14a-8(j) submissions reflect only informal staff views.”
• Corp Fin will not respond to other requests for written or oral guidance on legal and interpretive questions during a shutdown, including any written requests for no-action, interpretive and exemptive letters.

Post-Shutdown

• If you removed a delaying amendment from a registration statement or filed a new registration statement without a delaying amendment and Corp Fin becomes operational prior to the end of the 20-day period and you request effectiveness on a date prior to the end of that period, the staff advises that it will consider requests to accelerate the effective date of these registration statements if they are amended to include a delaying amendment prior to the end of the 20-day period and acceleration pursuant to Rule 461 is appropriate.
• If you removed a delaying amendment or filed a new registration statement without a delaying amendment, Corp Fin will notify you if they believe it would be appropriate to amend to include a delaying amendment. The staff adds a reminder that Rule 430A is available only with respect to registration statements that the SEC declares effective and is not available for registration statements that go effective as a result of the passage of time.