While more than 90% of the Securities and Exchange Commission's staff has been furloughed — the agency is working with a skeleton crew of 393 staff members — exams are on hold, but this doesn't mean advisors should be complacent, industry watchers say.
Examiners "had to turn in their laptops so they cannot work from home," Amy Lynch, president of FrontLine Compliance, said Tuesday in an email.
"For those registrants currently under exam, the exam is on hold until the government reopens," Lynch said. "However, SEC systems are still operational which means that filings and document uploads to portals will still work."
If an advisor "has an exam deadline to meet that occurs during the shutdown, it’s in their best interest to still meet that deadline and upload the documents," Lynch advised. "Even though there is no one there to see it now, when the examiners get back in the office, they will see that the firm met the deadline. This will score goodwill with the examiners."
Cari Hopfensperger of Outsourced Compliance Group in Pittsburgh, agreed in a LinkedIn post that while most exams are stalled, advisors should "prep requested docs now if mid-exam so you are ready when work resumes."
M. Lance Jasper, a partner at Akin Gump, noted in another LinkedIn post last week that the shutdown would lead to "a (further) slowdown in enforcement and exams activities, due both to a pause in the ongoing work and a pause in opening new matters, sending new subpoenas, etc."
That said, "for those who are opposite the SEC in exams and investigations right now, an important point to remember is that, unless told explicitly otherwise, the staff will expect the work responding to their requests and subpoenas to continue during the interregnum."
While compliance pros can take a breather, as the SEC won't be calling for an exam, "RIAs should note that they must continue to do their part to complete timely filings, continue to enforce the rules in their compliance programs and understand that examinations are retroactive so the firms activities during the government shutdown could fall in scope of exams once they resume," according to Portia Amato, U.S. practice lead at Ocorian.
Amato also notes that Edgar, IARD and CRD filing systems "remain operational" during the shutdown but "the review and processing of such fillings will be suspended."
The Financial Industry Regulatory Authority, for its part, is a self-regulatory organization, not a government agency, and remains fully operational.
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