SIFMA Says SEC SPAC Proposal Exceeds Statutory Authority

SIFMA asserted that the SEC lacks the authority to enact proposed regulation requiring additional disclosure for special-purpose acquisition companies ("SPACs") concerning (i) SPAC compensation, conflicts of interest and sources of dilution; (ii) the business combination transactions between SPACs and private operating companies; and (iii) projections made by SPACs and their target companies (see previous coverage).

In a comment letter, SIFMA stated that the statutory authority to enact certain provisions of the proposal, specifically the proposed Securities Act Rule 140a ("Definition of 'distribution' in Section 2(a)(11) for certain parties"), would improperly expand the definition of the term "underwriter." SIFMA expressed concern that the proposed rule treats a SPAC IPO and de-SPAC transaction as one continuous distribution of securities, despite the fact that the first distribution may occur months before the second and the two distributions involve fundamentally different securities, investment decisions and purchasers. Additionally, SIFMA stated that proposed Rule 140a should not hold the underwriter of the IPO liable for both distributions as most underwriters that are involved in the IPO do not participate in the de-SPAC process.

SIFMA noted that proposed Rule 140a is inconsistent with other proposed rules, and conflicts with numerous other proposals and policies.

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