Moreover, the SEC clarified that financial projections disclosed before SPAC mergers will not benefit from liability protection under the Private Securities Litigation Reform Act of 1995, leveling the playing field with traditional IPOs.
Navigating the Investment Company Act
The SEC rules also provide guidance on determining whether a SPAC meets the definition of an investment company under the Investment Company Act of 1940. This entails additional regulations and disclosure requirements.
Regulators are also offering guidance on whether underwriters of original blank-check IPOs assume liability for potential disclosures during a merger. The SEC’s move seeks to address concerns that fewer investment banks would participate in SPACs due to increased liability.
Emphasis on Fairness and Shareholder Interests
The rules require disclosures in “de-SPAC” mergers to indicate whether a board of directors or a similar body has determined that the SPAC merger is in the best interests of shareholders. This includes fairness reports issued by third parties to alleviate concerns about potential unfair incentives benefiting insiders over common shareholders.
Stricter SEC Rules Raise The Bar For SPAC Offerings : Countdown to Implementation
The new SEC rules are set to take effect 125 days after publication in the Federal Register, ushering in a new era of heightened scrutiny for SPAC offerings.
