Federal lawmakers are ramping up scrutiny of special purpose acquisition companies, or SPACs, with a hearing set for Monday as they consider legislation aimed at curbing liability protections for the industry.
The Securities and Exchange Commission has heightened its focus on SPACs in recent months through a series of public statements, new guidance and a Wall Street bank inquiry led by the agency’s enforcement team. Republican Sen. John Kennedy from Louisiana last month introduced a bill aimed at boosting transparency for investors in SPACs.
SPACs are shell companies that raise money via a listing to acquire a private company with the purpose of taking it public, sidestepping a traditional initial public offering process. Critics say banks and SPAC sponsors have reaped big payoffs at a cost to later-stage investors.
Monday’s hearing in a House Financial Services subcommittee is aimed at SPACs, direct listings and IPOs, according to a hearing notice published on Wednesday. The House is considering legislation that would redefine “blank check company” from a key 1995 law to include special purpose acquisition companies, according to the notice.
The law created a safe harbor that protects listed companies from shareholder litigation provided forward-looking statements are made in good faith, identified as such and couched in