New Rules Proposed For SPACs

The SEC is proposing new rules for special purpose acquisition companies (SPACs) — public shell companies formed to acquire a business and take it public without the oversight exercised over a traditional I.P.O.  They would require, among other things, additional disclosures about SPAC sponsors, conflicts of interest, sources of dilution, and business combination transactions between SPACs and private operating companies. In certain circumstances, SPACs would have to register as investment companies, which would subject them to stricter rules. The proposed rules would subject SPAC advisers to liability risks related to due diligence, which they haven’t had to concern themselves with so far. “Investors deserve the protections they receive from traditional IPOs, with respect to information asymmetries, fraud, and conflicts, and when it comes to disclosure, marketing practices, gatekeepers, and issuers,” said SEC Chair Gary Gensler. There is a 60-day comment period before the SEC can act further.