NEW YORK - The financial-market casualties of the U.S. government shutdown are piling up. Would-be public companies like Uber Technologies and rival car-hailing outfit Lyft face possible delays to their initial public offerings. More seasoned firms have to make more guesses about compliance. And all but the most pressing fraud is getting a pass right now. All three could quickly store up trouble for later.

The Securities and Exchange Commission has largely been closed for business since Dec. 27. The skeleton staff still working are largely focused on keeping markets running smoothly, stopping ongoing fraud, and conducting existing trial litigation. The rest of its normal activities are on hold.

Companies wanting to go public usually have a back-and-forth with the commission, refining the language of their disclosures. For such firms, the SEC normally must declare filings effective before they can complete capital-raising exercises, although existing issuers can get away without this blessing. There is a method under which new companies can file a prospectus which automatically becomes effective after 20 days, but that is probably too big a risk for most companies to take. Mistakes or omissions would leave them legally vulnerable.

Already-public companies have their own problems. There can be a lot of give and take between regulators and corporations over what to report and how to comply with existing securities laws. The SEC now can’t give this guidance, and that could mean delayed annual reports and proxies. Deals that require governmental approval may also face delays.

While regulators are still focused on stopping ongoing fraud, attempts to bring past perpetrators to justice are on hiatus. Some cases may slip past the relevant statute of limitations, others simply through the cracks. It’s already tough to prosecute white-collar crime successfully – hence, for example, the paucity of financial-crisis convictions. Having fewer people on the job makes that worse.

All of these problems grow worse the longer the shutdown extends. When the SEC’s staffers get back to work, they will have to deal both with the backlog and the continuing flow of new issues, which means delays are likely to persist. Meanwhile, the longer the sheriff is off the job, the more criminals may get away with.

CONTEXT NEWS

- The U.S. Securities and Exchange Commission has been operating with a skeleton staff since Dec. 27 because of the U.S. government shutdown, the result of the refusal of Congress to include money for a border wall, desired by President Donald Trump, in its funding plans. About 95 percent of the SEC’s staff members are on furlough. Working employees are focused on maintaining market integrity, stopping ongoing fraud, and current trial litigation.

- Companies can still file documents on the SEC’s EDGAR system. But the commission cannot declare filings effective, offer guidance to firms on disclosure in filings, or provide advice on how to comply with the law.

(Editing by Richard Beales and Martin Langfield)

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