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How is the Government Shutdown Affecting Plan Advisors?

Regulatory Agencies

The federal government shutdown, now entering its 14th day with no end in sight, is beginning to affect investment and retirement plan advisors who interact with the SEC and IRS.

Some may assume the shutdown is affecting all government agencies, but that is not the case. In fact, many agencies are fully funded for fiscal year 2019, which runs through Sept. 30. For example, the Labor Department – including the Employee Benefits Security Administration – is fully funded and operational.

The IRS and the SEC, however, are mostly closed as of Dec. 22, 2018, but that doesn’t mean the agencies have fully ceased operations.

Overall, Congress still needs to approve the remaining seven (Agriculture; Commerce, Justice, Science; Financial Services & General Government; Interior, Environment; State, Foreign Operations; and Transportation, HUD) out of 12 annual spending bills, including the Homeland Security appropriations bill that has been the sticking point in the shutdown debate.

The Securities and Exchange Commission

The SEC will retain certain excepted personnel to perform functions relating to emergencies, including certain law enforcement functions. The SEC’s contingency plan explains that privatized functions or contracts that have a continued source of funding may continue to operate.

According to the agency’s plan, major functions that will continue to operate include:

EDGAR and Filer Support: The EDGAR system will remain fully functional as long as funding for the contractor remains available. SEC personnel will be able to process requests for EDGAR access codes and password resets, and answer questions about fee-bearing EDGAR filings and other emergency questions regarding EDGAR submissions.

However, the Divisions of Corporation Finance, Investment Management, and Trading and Markets, as well as the Office of Compliance Inspections and Examinations, will be unable to process filings, provide interpretive advice, issue no-action letters or conduct any other normal Division and Office activities. As a result, the SEC notes that new or pending registration statements or applications for exemptive relief will not be processed regardless of the status of any review of those filings.

IARD: The IARD system is operated pursuant to a contract and will continue to accept filings as long as funding for the contractor remains available. However, the Office of Compliance Inspections and Examinations will be unable to approve applications for registration by investment advisers.

In addition, the Division of Investment Management will be unable to provide interpretive advice regarding the Advisers Act, rules or forms, or consider applications for exemptive relief under the Advisers Act. As a result, the SEC says that new or pending investment adviser applications will not be processed.

The IARD system will continue to accept annual and other-than-annual amendments to Form ADV, Form ADV-W and Form ADV-E filings.

CRD and Transfer Agent Registration System: The CRD system will remain fully functional and continue to accept filings. The Transfer Agent Registration System will also continue to accept filings. However, as noted above, the Division of Trading and Markets and the Office of Compliance Inspections and Examinations will not be able to review pending filings, consider new or pending applications or registrations, provide interpretive advice, or issue no-action letters, nor will the staff be available to conduct any other normal Division and Office activities, the SEC contingency plan states.

Market Monitoring and Surveillance: The agency will perform market watch activities and monitor market technology operations, broker-dealers reported as being in financial distress and international market developments, as well as conduct money market fund surveillance and monitoring.

Major functions of the SEC that will be discontinued during the shutdown include:

  • all non-emergency rulemaking, interpretive advice, staff no-action letters and processing new or pending applications for exemptive relief;

  • review and approval of applications for registration by entities (e.g., investment advisers, broker-dealers, transfer agents, nationally recognized statistical rating organizations, investment companies and municipal advisors) and with respect to new financial products;

  • review and approval of self-regulatory organization rule changes;

  • review and acceleration of effectiveness of registration statements by issuers for securities offerings;

  • review of periodic reports and other filings; and

  • non-emergency support to registrants.




According to the IRS’ contingency plan, most IRS operations are closed, affecting nearly 80,000 employees. Like the SEC, the IRS will retain certain excepted personnel to perform certain key functions, including activities related to emergencies or the protection of government property.

The publicly available contingency plan only runs through Dec. 31, 2018, however, so it’s not clear what the agency plans to do should the shutdown continue for an extended period. The plan does explain that during a shutdown, agencies may continue performing activities to the extent such activities are supported by funding that does not require enactment of annual appropriations legislation.

For example, in enacting the Tax Cuts and Jobs Act, Congress provided the Treasury Department with funds that will remain available until Sept. 30, 2019; thus, some implementation activities are not impacted by the lapse in appropriations. Though it’s not clear, the tax filing season and the processing of tax returns and refunds may be impacted depending on how long the shutdown continues.