With the clock ticking on the extension of funding for the federal government and no sign of a compromise in sight on the battle over budget cuts, a government shutdown could happen as soon as tomorrow.

So if the budget impasse forces a shutdown on April 8, or after another stop-gap measure, or even in September—given the 2012 deadline—which Securities and Exchange Commission operations would continue and which would grind to a halt? 

It's a difficult question to answer, and certainly not one that the SEC itself, or even the Office of Management and Budget's (OMB), which theoretically mandates that the SEC draw up an emergency shutdown plan, have addressed publicly in any detail.

The SEC would designate essential staff that would continue to work during the shutdown. Steve Crimmins, a partner at the law firm K&L Gates LLP, who was the Chief Litigation Counsel of the SEC's Enforcement Division during the last federal government shutdown in 1995, says the SEC would designate people who are just there to “watch” the agency, and not to do its work. “The senior leadership would undoubtedly be deemed essential, but the senior leadership are not the people who answer the telephone when we need comments on filings, and the senior leadership are not the people who were looking for fraud and unearthing scams and conducting inspections,” Crimmins says. “So the core mission basically shuts down and you have some senior people who are there watching it shut down, effectively.”

There can be isolated situations, if, for example, a case is about to go to trial and the judge has told the SEC that they expect them in court the next day to begin trial, that undoubtedly one or two people would be designated essential and they would show up in court and do their best, but the rest of the team would be nowhere to be found, he says.

“Take enforcement as an example, which involves teams of lawyers working on litigation: if you keep the single lead trial lawyer on board as an essential person, but you ditch the rest of the trial team because of the shutdown as being non-essential, you can imagine what the result will be at trial,” says Crimmins.

With the investigative staff, it is impossible to know which of the junior staff is about to hit “pay-dirt”—in other words, uncovering some on-going fraud where investor money needs to be frozen immediately before it's stolen or shipped out of the country, he says. “So effectively, you shut down hundreds of ongoing investigations, some of which are approaching critical mass, even though people don't know about it,” Crimmins says.

Even SEC employees who might prefer to go into work to keep up even though they have been furloughed are still not allowed by the Commission to do so, since there's a concern that they would ask for the pay anyway, and it's unclear how the rules would then apply, says Laura Anne Corsell, partner at the law firm Montgomery McCracken Walker & Rhoads LLP.

In the case of a government shutdown, enforcement investigations, disclosure operations, and accepted applications would probably not be considered essential, though court cases with a deadline might be, says Corsell.