The Securities and Exchange Commission has proposed rules that seek to improve protection of investors in initial public offerings by requiring additional disclosures about sponsors of special purpose acquisition companies, sources of dilution and conflicts of interest.
The proposal would require disclosures about the fairness of merger transactions between private operating companies and SPACs and address issues with regard to projections made by SPACs and their acquisition targets, SEC said Wednesday.
“Functionally, the SPAC target IPO is being used as an alternative means to conduct an IPO. Thus, 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.
SEC said it would not require registration under the Investment Company Act for SPACs that meet conditions that limit their asset composition, activities, business purpose and duration.
The proposed rules will be open for public comments once published in the Federal Register or on the commission’s website.