The Securities and Exchange Commission proposed a sweeping new set of rules Wednesday that will effectively flatten the playing field between IPOs and the quicker alternative, SPAC mergers, reports Fortune’s Term Sheet.
The new rules lodged against SPACs will help “ensure that investors in these vehicles get protections similar to those when investing in traditional initial public offerings,” SEC Chair Gary Gensler said in a statement.
The crackdown would essentially strip SPACs of most advantages they enjoy over traditional IPOs.
Here are highlights of the new proposal:
• New disclosure requirements on sponsors, conflicts of interest, target companies, dilution, and other factors
• An update to align financial statement requirements for companies going public via IPO or a SPAC merger
• An amendment to the definition of a blank-check company under SEC rules, so that private investors can sue if they deem a SPAC’s financial projections of its target company are false or have omitted material details
Gensler also said that the lawyers or bankers working on these deals “should have to stand behind and be responsible for basic aspects of their work,” and should be responsible for policing fraud and ensuring that SPAC disclosures are accurate. The proposal will make underwriters, auditors, and lawyers—which the SEC refers to as “gatekeepers”—liable to the documents they sign as part of the deal. Read more.
