Shutdown Could Endanger Record Year for RIA Approvals
Partner and co-chair of Herrick's Securities Litigation and Enforcement Group, Arthur G. Jakoby, was quoted in WealthManagement.com discussing the impact the government shutdown has had on the Securities and Exchange Commission's ("SEC") approvals of Registered Investment Advisors ("RIAs").
The article noted that "the SEC is operating with a skeleton crew of approximately 9% of its total workforce, with the rest on furlough. According to the agency’s shutdown procedures, the minimal staff is on hand to receive tips and complaints, as well as handle emergency enforcement actions or litigation."
According to Arthur, non-urgent legal cases involving the SEC have “simply gone dark,” with opposing counsel and judges generally granting requests for delays from the agency.
Pre-enforcement action investigations (including subpoenas and investigative testimony) are likely at a standstill. Arthur stressed that if a potential victim faced “irreparable injury,” the SEC would likely act even during the shutdown.
However, even when the government is operating normally, the SEC enforcement staff is limited in pursuing every case they may deem worthy. Arthur warned that the shutdown could exacerbate the situation even further.
“Once the SEC staff goes back, they're behind on deadlines, they're overwhelmed with work, and they may not have the resources to go after every single case that they would've gone after,” he said. “They will continue the existing cases, but there might be cases that would have been started during this time period and will never be started.”