The CFA Institute is taking a closer look at special purpose acquisition companies.
The global association of investment professionals created a working group to address the recent surge in SPACs and to see what changes might be needed in the areas of investor protection, corporate governance and market integrity.
Regulators in the U.S. and elsewhere have already signaled increased scrutiny of the SPAC structure and related disclosure issues, and "we want to make sure the issues of investor protection and market fairness are fully examined," said Margaret Franklin, president and CEO of the CFA Institute, in a statement.
The SPAC working group aims to have quarterly discussions over the coming year with various market participants, including SPAC practitioners, exchange representatives, academics and legal experts. It plans to present findings and possible policy recommendations in early 2022.
The group is to focus on SPAC structural features and disclosures, relevant listing standards, marketing practices, inherent conflicts of interests and potentially misleading performance claims. The working group plans to also consider the popularity of SPACs globally, as other jurisdictions move to introduce the SPAC structure into their own public markets.
Some concerns highlighted in the announcement include SPAC sponsors' experience, particularly those driven by celebrities, the potential for "no deal" SPACs returning less money than invested, disclosure compared to a traditional IPO; the potential for overpayment when competing with other SPACs and private equity funds; and post-deal dilution when private capital is added.