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Government Shutdown Is Making FAs’ Lives Difficult

January 14, 2019

The U.S. government shutdown, now in partial effect for almost a month, is causing a serious disturbance in some parts of the financial advice industry, according to news reports.

For one, the SEC has not been processing new or pending investment advisor registrations, InvestmentNews writes, citing the regulator’s shutdown operations plan.

The SEC typically has 45 days from the filing of a Form ADV to approve an investment advisor’s application or begin a deeper review, the publication writes. Since Dec. 22, when the shutdown began as a result of President Donald Trump’s demand that Congress fund his Mexican border wall and the Democrats’ refusal to do so, the SEC hasn’t been approving or even considering new applications, according to InvestmentNews.

Only around 300 of the SEC’s 4,436 employees are currently working, the publication writes. And the regulator has not said how long it will take to process the applications already submitted once it’s at full operating capacity, according to InvestmentNews.

"Are you going to open your doors tomorrow without approval from the SEC?" David Tittsworth, counsel at Ropes & Gray, tells the publication. "I don't know how people are going to assess that risk. It's confusing. It's frustrating. You shouldn't have to deal with these issues."

Meanwhile, advisors who have a lot of federal employees as their clients have been placed “in the eye of the storm” as a result of the shutdown, ThinkAdvisor writes.

About 90% of the clients of Raymond James advisor Michael Feeley, for example, are federal employees and retirees, the publication writes.

And while those who are 50 and over aren’t too concerned — they typically have three to six months of their income in savings, he says — some of Feeley’s younger clients who may not have those savings “are freaking out a bit more,” he tells ThinkAdvisor.

What’s worse, their first paychecks after the shutdown will have to cover their monthly health insurance premiums they don’t pay during the shutdown, Feeley says, according to the publication.

And while federal employees have always received back pay following a shutdown, some of his younger clients aren’t so optimistic, he tells ThinkAdvisor.

The shutdown may have even further repercussions for investors and their financial advisors.


While the SEC is operating with a skeleton crew, fraudsters get to go on with their business, InvestmentNews writes. The regulator says it’s “available to respond to emergency situations involving market integrity and investor protection, including law enforcement,” according to the publication. But the SEC hasn’t filed an enforcement action since Dec. 26, InvestmentNews writes, citing the regulator’s website.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.
  • To read the InvestmentNews article cited in this story, click here.
  • To read the ThinkAdvisor article cited in this story, click here.