The SEC is seeking public comments on the Proposed Rules through May 31, 2022, or 30 days after publication in the Federal Register, and given the volume and dynamic nature of the proposals, a vigorous and active comment period is expected. Peirce cited this expansive approach to SPAC transactional liability in particular in her blistering dissent, and found that the sum of the elements of the Proposed Rules, "rather than simply mandating sensible disclosures around SPACs and de-SPACs, something I would have supported - seem designed to stop SPACs in their tracks." The Proposed Rules follow the contours of the Chairman's prior statements and, if adopted, would result in a greatly expanded liability profile for de-SPAC transactions, one more akin to a traditional IPO, including such novel expansions as deeming underwriters in SPAC IPOs to be underwriters in the subsequent de-SPAC transaction if they take any steps to facilitate the de-SPAC transaction. As discussed in past editions of the SPAC Report, Chairman Gensler has long advocated the view that de-SPAC transactions are functionally equivalent to a traditional initial public offering (IPO) by that private operating company, and should be regulated as such.
The Proposed Rules touch on virtually all aspects of the SPAC process and raise concerns for all SPAC market participants, from sponsors, management teams and private company acquisition targets, to underwriting banks, supplementary capital providers such as PIPE investors, and even financial advisory firms that are not providing any direct financial support for a transaction.
D SPAC TRANSACTION FULL
The summary fact sheet and full proposing release (Proposing Release), which was issued by the SEC on March 30 and supported by a 3-1 margin of the SEC's Commissioners, cites "greater transparency and more robust investor protections … could assist investors in evaluating and making investment, voting, and redemption decisions with respect to " as the (purported) rationale for the comprehensive wave of amendments (Proposed Rules). With special purpose acquisition companies (SPACs) continuing to take the US equity markets by storm, the Securities and Exchange Commission (SEC, Commission or Staff) has released long-telegraphed proposals for sweeping new regulations governing SPACs and their related business combinations (de-SPACs), whose broad scope, new disclosure requirements and material liability implications for a wide array of SPAC market participants have, if adopted, the potential to fundamentally alter the regulatory landscape for SPAC and de-SPAC transactions going forward. If adopted, the proposals would represent the most expansive increase in the regulation of SPACs since the investment vehicles emerged in the early 1990s. On March 30, the SEC released comprehensive proposals for rule changes that would materially expand the liability regime for SPAC transactions, including by limiting the availability of a commonly used safe harbor for forward-looking statements and broadening the scope of who may be deemed a statutory underwriter in connection with a de-SPAC transaction, which, alongside many of the other notable changes being proposed by the SEC, may have significant chilling effects on the SPAC market.
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