The U.S. Securities and Exchange Commission broadens its crackdown on special purpose acquisition companies which critics say has allowed the shell companies to issue overly optimistic earnings projections
The move by the U.S. Securities and Exchange Commission is part of a broader crackdown on special purpose acquisition companies after a frenzy of deals in 2020 and early 2021 sparked concerns that some investors are getting a raw deal.
The rule would require SPACs to disclose more details about their sponsors, their compensation, conflicts of interest and share dilution. The SEC has stepped up oversight of SPACs amid worries of inadequate disclosures and lofty revenue projections. Reuters reported last year that the SEC was considering new guidance to rein in SPACs' growth projections.
If SPACs do not meet certain conditions they may have to register as investment companies, subjecting them to a slew of other rules, the SEC said.
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