SEC to Consider New SPAC Rule Amendments

New directives governing special purpose acquisition companies (SPACs) could be recommended by the U.S. Securities and Exchange Commission (SEC) at its open meeting on Wednesday (March 30).

An agenda released by the SEC indicated that the agency will consider proposing rules that would affect SPACs, the use of projections in SPAC filings and regulations addressing the status of SPACs under the Investment Company Act of 1940, according to Law 360.

Regulators including the SEC indicated last year that new rules were necessary to better govern SPACs. SEC Chair Gary Gensler raised concerns about the lack of investor protection in comparison to a traditional initial public offering (IPO). Investors also might not get disclosures about potential conflicts of interest embedded in SPAC mergers.

See also: SEC’s Gensler Sees Need for Investor Protections in SPACs

Regulators signaled their intent to propose rules governing SPACs last year. In a December speech, Gensler expressed concern that SPAC investors don’t receive the same protections as those who buy shares in a typical IPO.

Guidance issued last spring by the SEC suggested that SPAC warrants should be classified as liabilities, not equity instruments, PYMNTS reported. SPACs, also known as blank-check or shell companies, raise money through IPOs with the intent of merging with a private firm to take public within two years.

In a speech on Dec. 9, 2021, Gensler expressed his trepidation about the proliferation of SPACs in the capital markets and his concerns that investors weren’t adequately protected. He has asked the staff for rule proposals to “mitigate information asymmetry, conflicts, and fraud in SPAC transactions, the American Bar Association reported last month.

Related: SPAC Listing Activity Picks Up As September Draws to Close

SPAC activity took off in 2020 and cooled a bit in 2021 but this year activity has totally fallen off. The last few months of 2021 saw a pick-up in activity, but traditional IPOs were dominant.

So far this year, an estimated 13 SPAC deals have fallen apart outpacing the 18 deals that fell through in all of 2021, PYMNTS reported. This year in the payments space, seven firms dropped their listings, with an average would-be market cap of an estimated $425 million.

Read more: SPAC Efforts to Keep Investors Aboard May Not Be Enough to Calm Turbulence

The SEC makes new rule proposals available for public comment for 30 to 60 days. Final regulations could go for a vote later in 2022.