On January 24, 2024, the SEC adopted final rules that create substantial reporting and process changes for SPACs.  The rules were originally proposed on March 30, 2022.  The new rules affect both SPAC IPO and de-SPAC  transactions.  (A de-SPAC transaction occurs when a SPAC merges with an operating company.)  In his Statement on the final rules, Chair Gary Gensler said that the new rules would “better align the protections investors receive when investing in SPACs with those provided to them when investing in traditional IPOs.”

You can find an overview of the voluminous new rules, which create a new Subpart 1600 in Regulation S-K, in this Press Release and the related Fact Sheet.  Highlights of the changes for SPAC IPOs include additional disclosures about SPAC sponsors, SPAC sponsor compensation, conflicts of interest and dilution.  For de-SPAC transactions, new disclosures include additional details about the target company and information about whether the board of the SPAC determined the transaction was advisable for the company and shareholders.  The new rules provide that the 1995 Private Securities Litigation Reform Act safe harbors for forward-looking statements will not be available for SPACs and also change underwriter liability in de-SPAC transactions.

The rules will be effective 125 days after publication in the Federal Register.  Certain information will be tagged with Inline XBRL, but this requirement is not effective until 490 days after publication in the Federal Register.

On January 25, 2024, the day after adopting the new rules, the SEC announced settled charges against Northern Star Investment Corp II, a SPAC, for failing to disclose discussions with a potential acquisition target in its IPO registration statement and de-SPAC transaction Form S-4.  As you can read in the SEC’s Order, the company entered into a cease and desist order and paid a fine of $1.5 million.

You can learn more about the new rules and SPACs in general at two upcoming programs:

A One-Hour Briefing about the final rules on February 14, 2024 – SPAC Developments: SEC Amendments to SPAC IPO and de-SPAC Related Rules, and

Our SPAC Life Cycle: Business, Legal, and Accounting Considerations Forum on April 15, 2024, will discuss the new rules in depth.

As always, your thoughts and comments are welcome.