The commission adopted the final rule in a 3-2 vote, as Republican Commissioners Hester M. Peirce and Mark T. Uyeda voted against it.
SPACs, also called blank-check companies, are companies without commercial operations that form solely to raise money through an IPO to acquire a private company to take it public. In a de-SPAC transaction, a type of Private Investment in a Public Equity Issuance, or so-called PIPE, the SPAC issues new securities to institutional accredited investors contingent upon the closing of the merger.
Originally proposed in March 2022, the rule will require additional disclosures about SPAC sponsors, sponsor compensation, dilution, conflicts of interest, the target company and other information, according to an SEC fact sheet. The rule also demands more disclosures in de-SPAC transactions, including any determinations made by a board of directors as to whether the de-SPAC is advisable, in the best interests of the SPAC and its shareholders, and any outside opinions or reports received related to the transaction.
In addition, the rule states there is no safe harbor for companies that make misleading projections during a SPAC's initial public offering, and requires target companies in a de-SPAC transaction to register with the SEC, increasing their liability.
Both Republican commissioners said the new rules would have a detrimental effect on the development of SPACs.
"The commission has failed to identify a problem in need of a regulatory solution," Peirce said at the meeting. "To the contrary, the rule will exacerbate a problem — the shrinking pool of public companies — by closing down one road into the public markets."
Uyeda said the commission may be imposing new requirements on SPACs because they "simply don't like them."
"In order to achieve this desired outcome, the commission seeks to impose crushingly burdensome disclosure regulation on SPACs as a form of merit regulation in guise," Uyeda added.
The American Securities Association, a trade association representing regional financial firms, echoed the commissioners' concerns.
"While ASA welcomes efforts to increase transparency and investor protections in the SPAC market, effective policy should achieve these goals while allowing the market to function efficiently," ASA President and CEO Christopher A. Iacovella said in a Jan. 24 statement. "The rules adopted today do the opposite; instead, they will chill participation in the SPAC market and reduce the ability of private companies to access public capital markets,"
As Uyeda noted, SPAC launches saw a major jump in 2020 and 2021, and the commission first introduced its SPAC-focused rule proposal in March 2022.
However, Gensler pushed back on claims that the rule would diminish the number of SPACs in the market, making reference to Peirce's comments earlier in the meeting, when she compared companies to chickens.
"We're merit neutral," Gensler said. "If somebody wants to go public and they're a chicken, or they want to go public and they're a canary, or a puma, or a greyhound, then I think that investors benefit from the similar disclosure, marketing and gatekeeper obligations."