Analysis

SEC set to tighten rules for SPACs

, Yahoo finance

SEC on Wednesday will unveil a proposal to tighten its rules on SPACs after a frenzy of deals in 2020 and early 2021 sparked concerns some investors are getting a raw deal. Over the past year, the SEC has been scrutinizing these deals amid worries over inadequate disclosures, lofty revenue projections, potential fee conflicts and accounting issues, according to Reuters' reports and statements by public officials.

Reuters also reported that the SEC was considering new guidance to rein in SPACs' growth projections. SPAC sponsors say the projections are important for investors, especially when targets are unprofitable startups, but investor advocates say they are frequently wildly optimistic or misleading.

In addition, the SEC is considering guidance aimed at clarifying when a key liability protection for such forward-looking statements applies to SPACs, Reuters reported. Market participants expect Wednesday's rule will address some of these issues, although Reuters could not ascertain more details. Attorneys expect the agency may also consider subjecting some SPACs to investment company fiduciary duty rules, which require disclosure of conflicts of interest.

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