2022-07189: Special Purpose Acquisition Companies, Shell Companies, and Projections

Summary

The Securities and Exchange Commission ("Commission") is proposing rules intended to enhance investor protections in initial public offerings by special purpose acquisition companies ("SPACs") and in subsequent business combination transactions between SPACs and private operating companies. Specifically, we are proposing specialized disclosure requirements with respect to, among other things, compensation paid to sponsors, conflicts of interest, dilution, and the fairness of these business combination transactions. The proposed new rules and amendments to certain rules and forms under the Securities Act of 1933 and the Securities Exchange Act of 1934 would address the application of disclosure, underwriter liability, and other provisions in the context of, and specifically address concerns associated with, business combination transactions involving SPACs as well as the scope of the Private Securities Litigation Reform Act of 1995. Further, we are proposing a rule that would deem any business combination transaction involving a reporting shell company, including a SPAC, to involve a sale of securities to the reporting shell company's shareholders and are proposing to amend a number of financial statement requirements applicable to transactions involving shell companies. In addition, we are proposing to update our guidance regarding the use of projections in Commission filings as well as to require additional disclosure regarding projections when used in connection with business combination transactions involving SPACs. Finally, we are proposing a new safe harbor under the Investment Company Act of 1940 that would provide that a SPAC that satisfies the conditions of the proposed rule would not be an investment company and therefore would not be subject to regulation under that Act.

The agency’s own summary, as published.

What this changes

Amends 8 parts of the Code of Federal Regulations — the standing rules this notice rewrites.

• 17 CFR 210 Form and Content of and Requirements for Financial Statements, Securities Act of 1933, Securities Exchange Act of 1934, Investment Company Act of 1940, Investment Advisers Act of 1940, and Energy Policy and Conservation Act of 1975
• 17 CFR 229 Standard Instructions for Filing Forms Under Securities Act of 1933, Securities Exchange Act of 1934 and Energy Policy and Conservation Act of 1975—Regulation S-K
• 17 CFR 230 General Rules and Regulations, Securities Act of 1933
• 17 CFR 232 Regulation S-T—General Rules and Regulations for Electronic Filings
• 17 CFR 239 Forms Prescribed Under the Securities Act of 1933
• 17 CFR 240 General Rules and Regulations, Securities Exchange Act of 1934
• 17 CFR 249 Forms, Securities Exchange Act of 1934
• 17 CFR 270 Rules and Regulations, Investment Company Act of 1940