With this Administration moving fast to deeply cut the federal workforce, you may be wondering what a trimmed-down SEC might look like. This is just conjecture – but here are five thoughts on how that might impact you:
- Loss of Institutional Knowledge? – The biggest risk in my opinion is that the cuts are so deep that it would be difficult to get things done on a timely and professional basis. If you cut too far, it could be challenging to reverse course and get things back to near where they used to be.
Certain people are key on the SEC Staff for training newer and younger staffers. There are only a finite amount of those old-timers that we unknowingly rely upon to perform this important task. - Delay in Processing IPO Filings? – On a daily basis, the biggest risk is that we experience delays in getting registration statements declared effective – particularly for IPOs trying to time the market.
I imagine this isn’t too big of a risk since the SEC under this Administration seems ready to facilitate capital markets and smaller companies based on recent statements from Acting Chair Mark Uyeda (see his speech about primary shelfs for unlisted issuers and Cydney Posner’s blog about Uyeda’s speech about cost-effective regulations).
If Corp Fin experienced deep cuts, I would guess that the registration statement review process would be streamlined in some way to enable the Staff to still process filings timely. - Delay in Reviewing ’34 Act Filings? – Corp Fin reviews ’34 Act filings on a regular basis as mandated by Section 408 of Sarbanes-Oxley. Maybe this Congress will amend the securities laws to reduce that burden for Corp Fin. Maybe Corp Fin doesn’t meet its Congressional mandate. Companies would welcome fewer – and/or less intensive – reviews.
- Slower Enforcement Proceedings? – Word is that this Administration’s SEC is likely to focus more on individual – rather than corporate-wide – accountability (among other changes such as the removal of the SEC’s Administrative Law Judges). How would a deep cut to the SEC’s Enforcement impact companies?
I imagine that investigations would move slower and there would be fewer of them. That probably is welcome for companies. Although it also can be frustrating for a publicly-known investigation to move at a snail’s pace and not get wrapped up. So this could be a mixed bag. - Low Morale? – Any organization that feels like it’s under siege experiences low morale (“under siege” includes the SEC no longer being considered an “independent” agency). That can impact performance and customer service. This could be a short-term issue. This could be a long-term issue.
And there could be other unintended consequences that are hard to foresee…
Authored by
Broc Romanek