SEC Bars SPACs From Blanket Disclaimers About Accounting Risks

, Bloomberg Tax

SPACs can’t put disclaimers in their financial statements that their financial reporting could run afoul of U.S. accounting rules, market regulators are warning.

At issue is just how far SPACs can go in issuing catch-all warnings to investors. The SEC in letters to some SPACS warned against broad disclaimers that long-standing SPAC accounting practice could change and lead to future errors. The letters come on the heels of a top SEC accountant saying the agency would object to such disclaimers.

The SPAC warnings—and the SEC’s admonishment against them—follows a turbulent year in SPAC accounting, coupled with increased regulator scrutiny of the market.

Twice in 2021, the SEC flagged pervasive accounting errors with SPAC financial statements. Hundreds of SPACs had to restate, or redo, their past financial statements in the spring because of how they accounted for key money-raising tools and again in the fall because of problems with how they classified shares they offer to investors.

In both cases, auditors and SPACs themselves were taken aback because even though the accounting was wrong, the accounting methods were ingrained in practice and hadn’t been questioned in the past.

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