U.S. financial firms push back on SEC bid to rein-in blank check company deals
Chair of Herrick's Corporate Department, Morris F. DeFeo, was quoted in Reuters in an article discussing a draft SEC rule that would further regulate and increase the liability for parties involved in Special Purpose Acquisition Companies (SPAC) deals, and the reaction of finance groups in the space.
The article outlined the growing popularity of SPACs and how financial firms employ them to raise funds and take a private company public without many of the regulations encountered in the traditional IPO process. It explained, "That draft rule aims to offer SPAC investors protections similar to those they would receive during the IPO process. It would increase the liability for parties involved in such deals, remove a legal safe harbor for earnings projections, and boost investor disclosures."
Morris reflected, "If you add up all of that, it's going to certainly make people a little bit more skittish in using SPACs[.]"
The article goes on to note that the proposed rule would "enhance disclosures about the target takeover, known as the 'de-SPAC' transaction, including by requiring the sponsor to explain whether the proposed deal is fair to investors and has been vetted by third parties."