What are the primary concerns regarding the shutdown's impact on financial fraud detection?

Experts suggest that a shutdown will worsen existing delays in the SEC's ability to ferret out fraud within the financial services sector. There is also concern that the disruption may provide staff with further justification for future inaction or decreased productivity.

Which SEC online resources will remain operational if the government closes?

Online resources such as EDGAR and the Investment Adviser Registration Depository (IARD) are expected to continue functioning. However, the SEC has indicated that while these systems remain accessible, the processing of new registrations will be suspended.

What level of staffing will the SEC maintain during the shutdown period?

The SEC's workforce of nearly 10,000 will be reduced to a skeleton crew of approximately 330 essential employees. This reduction will cause most agency business, including the work of the enforcement and compliance divisions, to slow to a crawl.

How will a government shutdown affect ongoing SEC examinations of advisory firms?

Ongoing examinations and audits are expected to be postponed and will resume only after the government re-opens. The SEC's contingency plan mandates that all staff on official travel return home, effectively halting any audits currently in progress.

Government shutdown may wallop SEC to the long-term detriment of RIAs

Audits on hiatus; fraudsters get more of a lead; most of the SEC on skeleton staff

3 min read

By Elizabeth MacBride April 8, 2011Updated: July 14, 2020

Lockdown in Washington may mean a short reprieve for advisors in the midst of exams, but the looming shutdown portends nothing good for the industry in general, say lawyers

Shutdown likely halts SEC advisor exams and slows overall operations.
Expect SEC enforcement and compliance divisions to operate with skeleton crews.
Delays in registrations and other services are anticipated during the shutdown.

AI generated

Advisory-business lawyers say that if the government shuts down at midnight Friday they expect that advisors in the midst of exams will get a hiatus, and that the rest of business at the SEC will slow to a crawl.

“I anticipate that (examinations) will be postponed and continued once government re-opens,” said Brian Hamburger, the founder of the Hamburger Law firm and MarketCounsel. “Perhaps the impending shutdown will allow the SEC staff to take some time to re-prioritize their agenda and return with a renewed motivation to get things back on track. Unfortunately, I suspect that the shutdown will give the staff additional reason for their inaction and lack of productivity.”

Bad to worse

Peter Mafteiu, principal of Sound Compliance Services Gig Harbor, Wash, noted, too, that the SEC is always behind when it comes to ferreting out fraud in financial services. “A government shutdown just make it worse.”

The SEC has put some guidance on its web site as to what to expect if a shutdown happens at midnight Friday – a strong possibility as the minutes tick away with no budget accord amid a poisonous political atmosphere in Washington, D.C.

The government has been operating on various interim funding measures for weeks. The last time the government shut down was 15 years ago. It’s expected, based on what happened then, that workers will eventually be paid for the time that they were laid off – but during the shutdown period, many government services will cease and others be cut back.

The SEC has posted on its site, www.sec.gov, in the upper right corner, information on which services will be staffed. Generally, the online resources, like EDGAR and the IARD, will function, though registrations will not continue. The enforcement division and the division of compliance and inspections will both be reduced to a skeleton staff as the SEC’s staff of nearly 10,000 will be reduced to only about 330 deemed essential.

The SEC’s contingency plan calls for all SEC staff on official travel to return to their offices (and go home), and cancels all pending travel.
That provision would seem to put an end to any audits under way.

SEC mum

An SEC spokeswoman refused to comment further on what would happen to advisors in the midst of exams, or to say how many might be affected.
Advisory industry observers share what seems to be the likely sentiment of many Americans: a sense of irritation-bordering-on-contempt for the inability of politicians to reach a sensible agreement.

“There is so much BS … misinformation and twisting,” said Peter Mafteiu, principal of

Sound Compliance Services

Gig Harbor, Wash, who noted, too, that the

SEC

is always behind when it comes to ferreting out fraud in financial services.

“A government shut down just makes it worse.”

Rely on RIABiz? Tell Google.

Naming us a preferred source puts our reporting first in your Top Stories and AI Overviews. Takes one click, and only you see the difference.

Make us a preferred source on Google