With a government shutdown looming, the Division of Corporation Finance of the SEC has updated its guidance outlining the “extremely limited” functions it will perform in the event of a shutdown. Notably, the SEC will not be available to review filings or declare registration statements effective (although EDGAR will remain open).
Below are practical tips for navigating the shutdown based on the SEC’s operations plan.
EDGAR Remains Open!
As in the most recent federal government shutdown in late 2018, EDGAR will remain “fully functional as long as funding for the contractor remains available through permitted means.” In other words, companies can – and should – continue to timely file periodic and current reports. Even if the government is closed for business, a “business day” for purposes of SEC filing deadlines means any day other than a Saturday, Sunday or federal holiday and will not be impacted by an SEC shutdown. Similarly, definitive proxy statements may be filed two weeks after the filing of preliminary proxy statements, but the SEC may review preliminary proxy statements once the shutdown has concluded. Also, the SEC will continue to answer questions regarding fee-bearing EDGAR filings and process requests for EDGAR codes (and address password reset requests) even in the event of a shutdown.
In the event of a government shutdown, the SEC will not:
- review filings or declare registration statements effective;
- grant companies’ requests for acceleration;
- provide interpretive advice including reviewing and responding to Rule 14a-8 requests; or
- issue no-action letters.
- respond to comment letters (companies can obtain additional time to respond to comments letters by submitting a letter (filed as EDGAR correspondence).
What does this mean for you? Until the conclusion of the shutdown, any existing filings under SEC review at the time of the shutdown and any new filings made after the shutdown will not be reviewed by the SEC, registration statements which do not automatically become effective will be at a standstill, filings with outstanding comment letters and response letters will not be progressed and there will be no exemptive relief. For instance, as we enter shareholder proposal season, during a shutdown, the SEC won’t be available to respond to requests for no action relief and therefore companies will need to decide whether to exclude form their proxy statements shareholder proposals without having received a no-action letter from the SEC.
Going Effective (or Not)
It’s a good time to be a well-known seasoned issuer (“WKSI”) since WKSI shelf registration statements will continue to be automatically effective without SEC review.
Non-WKSI issuers with effective shelves will continue to be able to conduct takedowns and file prospectus supplements during a SEC shutdown.
Non-WKSI issuers seeking an effective registration statement during the shutdown can elect to file registration statements which omit the customary “delaying amendment” legend and include the additional disclosure required by Rule 473 of the Securities Act, causing such registration statement to become automatically effective 20 calendar days after its filing. Such automatic effectiveness can also be achieved by filing an amendment to an existing registration statement which removes such legend and includes the additional disclosure required by Rule 473 of the Securities Act. However, the SEC has cautioned companies to “consider carefully the risks of this course of action and… evaluate their particular facts and circumstances before doing so… and ensure that the registration statement does not contain any material misstatements or omissions of material information required to be stated therein or necessary to make the statements therein not misleading.” Factors for companies to consider include, but are not limited to, whether the registration statement is subject to review and whether significant unresolved staff comments remain outstanding.
Companies with registration statements already having been declared effective that are seeking more time to price an offering may restart the 15-day period provided in Rule 430A by filing a post-effective amendment to the registration statement which includes the additional disclosure required by Rule 462(c), which becomes effective upon such filing. Issuers cannot rely on Rule 462(c) if the post-effective amendment includes substantive changes from the prospectus in the effective registration statement.
Please feel free to get in touch with us if you would like to further discuss how a SEC shutdown may affect your company.