The U.S. Securities and Exchange Commission (SEC) headquarters is seen in Washington, DC, USA on May 12, 2021. Picture taken May 12, 2021. Portal/Andrew Kelly Acquires LICENSE RIGHTS
Sept 27 (Portal) – A looming government shutdown would reduce the U.S. Securities and Exchange Commission’s (SEC) staffing levels to “skeletal” levels, prevent it from approving stock market debuts of Wall Street companies and hurt its ability to respond to market turmoil said its leader lawmakers on Wednesday.
Hundreds of thousands of federal workers will be furloughed and scores of services suspended unless Congress passes a funding bill that Democratic President Joe Biden can sign into law by midnight Saturday (0400 GMT Sunday).
In questioning SEC Chairman Gary Gensler during a regulatory hearing Wednesday, Democratic lawmakers on the House Financial Services Committee, who are in the minority, sought to highlight the dysfunction they said a shutdown would bring.
Gensler said the agency would lose more than 90% of its workforce to unpaid leave, leaving the agency’s contingency plan with a “skeletal” staff that would perform essential duties that include monitoring U.S. markets.
Other day-to-day functions, such as rule-writing or approving companies’ initial public offerings (IPOs), would be frozen.
“If a company were to decide to go public or make an offering, they would want to do so before Friday if they are willing to do so,” Gensler said. “If not, they may be in some kind of subliminal state where they can’t access the markets because we can’t effectively vet them.”
A series of high-profile IPOs, including chip designer ARM, grocery delivery service Instacart (CART.O) and marketing automation company Klaviyo (KVYO.N), had raised hopes of a resurgence in IPOs after a two-year lull caused by market volatility and rising interest rates the Federal Reserve. But the poor performance of those offerings has since cast doubt on whether that revival would occur.
Notable IPOs in the pipeline include healthcare payments technology company Waystar and KKR-backed BrightSpring Health Services. German premium footwear maker Birkenstock Holding (BIRK.N) will move forward with plans to list on the New York Stock Exchange (NYSE) and expects it can gain approval even if it closes, sources told Portal.
Spokespeople for Birkenstock, NYSE and Nasdaq, the country’s other stock exchange, declined to comment. Spokespeople for Waystar and BrightSpring did not immediately respond to requests for comment.
Under the SEC’s contingency plan, only about 440 of its 4,600 employees would be available to perform essential functions, but investigations and responses to whistleblower complaints would largely come to a halt.
Functions permitted by law include measures to protect life or property, such as: B. certain law enforcement actions and litigation, including injunctions and maintaining a whistleblower complaint portal.
The agency will also monitor market technology activities, keep an eye on broker-dealers that may be in trouble, and conduct monitoring and oversight of money market funds.
But Gensler acknowledged that in the event of a major disruption on Wall Street, “the leadership would be there, but again we would be just a skeleton.”
Separately, the Financial Industry Regulatory Authority (FINRA), an industry-funded brokerage regulator, said on Wednesday that it would continue to operate in the event of a shutdown, including market surveillance and enforcement functions.
Major Wall Street indexes were mixed towards the end, erasing earlier losses on investors’ concerns about the direction of interest rates, with fears of a shutdown also weighing on earlier trading.
The top Democrat on the House committee, Maxine Waters, warned Wednesday that a shutdown threatens U.S. investors, small businesses and working families.
“(A) closure would impact the SEC’s ability to stop fraud, help companies raise money, or set rules that are critical to investors,” she said.
Reporting by Douglas Gillison in Washington and Lance Tupper and Lewis Krauskopf in New York; additional reporting by Laura Matthews, Anirban Sen and Echo Wang; Editing by Michelle Price, Paul Simao, David Holmes and Alistair Bell and Aurora Ellis
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