SEC: Investors Can Sue Over Inaccurate SPAC Forecasts

SEC, SPAC, IPO, regulation

Special purpose acquisition company (SPAC) sponsors embellishing projections about the companies they’re taking public might be seeing harsher ramifications soon, according to a Tuesday (March 29) Bloomberg report.

The U.S. Securities and Exchange Commission (SEC) said it plans to propose curbing legal protections that some SPACs have used in the past to make slightly fantastical statements about the firms they’re taking public.

The regulation is likely to be released Wednesday (March 30) as part of a broader set of SPAC rules, which would make it so investors can sue over inaccurate SPAC forecasts.

Per the report, limiting SPACs’ “safe harbor” from legal liability is in line with the rules currently existing around a traditional IPO, with restrictions usually preventing companies from giving guidance that might not come to be.

According to SEC Chair Gary Gensler, he’s repeatedly raised concerns about the blank check firms, which list on public stock exchanges to raise money to buy other firms. Gensler said the SEC is looking into numerous issues, including disclosure inconsistencies and how investors are informed about fees.

PYMNTS wrote last week that new directives around SPACs might be coming. The March 30 meeting agenda indicates that discussions will include the rules affecting SPACs, the use of projections in SPAC filings and regulations addressing the status of SPACs under the Investment Company Act of 1940.

Read more: SEC to Consider New SPAC Rule Amendments

Last year, regulators said that they might be looking into new rules in order to better govern SPACs. Gensler’s concerns also included the lack of investor protections in opposition to a traditional IPO.

Additionally, investors might not hear about disclosures about potential conflicts of interest with SPAC mergers.

Regulators have signaled their intent to add new rules for some time, with Gensler saying last year that SPAC investors don’t receive the same protections as those who buy shares in normal IPOs.