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Government shutdown

What the government shutdown means for advisors

ByTodd Cipperman
January 18, 2019 1:50 PM

Even as financial advisors rush to help clients hurt by the government shutdown, they are grappling with the impact on their own operations.

JPMorgan Chase is waiving fees and offering a call line, and advisors at XY Planning Network are providing free finanical advice to unpaid employees. While some advisors and firms are attmepting to help, they are still suffering from side effects of the shutdown: The SEC has delayed enforcement, stopped approving some new products and insn't reading some reocmmendations.

Scroll through to see how a partial government shutdown affects the entire wealth management industry.

Jay Clayton, SEC Chair nominee, sits at table during a Senate Banking Committee confirmation hearing
Jay Clayton, chairman of U.S. Securities and Exchange Commission (SEC) nominee for President Donald Trump, testifies during a Senate Banking Committee confirmation hearing in Washington, D.C., U.S., on Thursday, March 23, 2017. Trump tapped Clayton to lead the SEC in January, saying the Sullivan & Cromwell partner would ensure that financial companies thrive and create jobs, while still playing by the rules. Photographer: Zach Gibson/Bloomberg
Zach Gibson/Bloomberg

No new product approvals

New products, including registration statements, can't be approved until furloughed workers return. Since asset managers can't launch new products, service providers such as lawyers and fund administrators are also affected, as they need to wait for their clients to go forward.

Stalled exams

The number of OCIE exams went up by 10% in 2018, but now they are delayed. While it is unclear whether the shutdown will reduce the total number of exams this year, the OCIE staff will not resume exams until the shutdown ends.
SEC disgorgement

Reduced enforcement

The SEC continues to conduct market surveillance, but any ongoing litigation that is not time-sensitive has been postponed. This could affect litigation on how advisors can pay solicitors.

No regulatory updates

The SEC is not posting regulatory information or interpretations on its website during the shutdown, soon after the regulator offered a warning on using social media or texting.
sec-headquarters.jpg
Bloomberg News

Unread comments and suggestions

The SEC is not reviewing potential new rule initiatives or comments to current proposals. This could stall revisions of Reg BI, which was on track to be moved to final rulemaking as early as this year.

No-go for certain applications

Requested exemptive applications and no-action letters seeking relief from the black letter rules cannot go forward without SEC staff.

Limited outreach

The SEC will likely defer industry outreach to management, compliance professionals and boards.
Michael Kitces Insite conference

No regulatory guidance

It is unclear whether SEC officials will attend this winter’s industry conferences where they traditionally provide guidance. But even if they do, any guidance necessarily depends on how long the shutdown continues.
Todd Cipperman
Managing Principal, Cipperman Compliance Services
Government shutdown SEC regulations RIAs Wealth management SEC
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