SEC Proposed SPAC Rules: Notable Changes That Could Impact Sponsor Efforts (Part Two of Two)

The SEC has recently proposed several reforms to the private funds industry, the components of which each fall on a spectrum ranging from reasonable to potentially devastating. Much of the attention has been directed toward the most harmful suggestions, but the Commission is anticipated to walk those back to more manageable levels based on industry comments. The reforms that are likely to stay, however, are the ones that have a bend-but-not-break effect on industry participants. As much is certainly true of the new rules and amendments (Proposal) targeting special purpose acquisition companies (SPACs) that the SEC issued mere weeks ago. This second article in a two-part series will consider three impactful provisions of the Proposal: compliance with a safe harbor from the Investment Company Act of 1940, delivery of a fairness opinion and new Regulation S‑K disclosures. The first article explored the three most harmful components of the Proposal: eliminating a safe harbor for forward-looking statements, extending underwriter liability and requiring co‑registration status from target companies. See our two-part series on the appeals and pitfalls of SPACs: “Vehicle Mechanics and Related Trends” (Mar. 16, 2021); and “Conflicts of Interest and Obstacles to PE Involvement” (Mar. 23, 2021).

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