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Capital Markets

Living without the SEC: how IPOs tried to beat a record shutdown

On January 25, after a record-breaking 35-day shutdown, a deal was finally struck to fund US government activity until February 15, but without another agreement, state agencies will again close down on that day. Equity capital markets bankers could face further disruption and precious few options for getting IPOs out of the door.


This is an extended version of a story originally published on January 24.

January was a quiet time at the US Securities and Exchange Commission. Since the shutdown of the country’s government began on December 22, the SEC, like other government agencies, had been operating on a skeleton staff. Of its roughly 4,400 employees, probably not more than about 300 – most of whom are in critical law enforcement or protection roles – were working.

Contrary to what you might imagine, implementing a shutdown is a remarkably quick process at the SEC. Internal guidance is that it should take no more than four hours to close down most of its systems. The next business day after a government shutdown becomes effective, SEC staff have to attend their workplaces to start powering down. They are allowed to set up out-of-office voicemails and emails, but can’t do a whole lot more.

They cannot work for free even if they want to. As the SEC reminded its staff in a memo, doing so would violate the Antideficiency Act, which restricts what government agencies are allowed to do in the event of there being no appropriations to fund them – the technical definition of a shutdown.

Anyone who happens to be travelling for work as a shutdown hits must return immediately and all planned travel is cancelled. Training is stopped; anything scheduled is put on hold. Paid leave is scrapped. Almost all staff are placed on furlough. 

For all those staff stuck without earnings, it is a miserable existence. But it also doesn’t add up to a great mix for any companies looking to complete securities offerings. They can still file if they wish: the mighty Edgar – as the SEC’s Electronic Data Gathering Analysis and Retrieval system is known – hums along relentlessly.

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