Comment Letters On Proposed Rules On SPACs – Securities

On March 30, 2022, the US Securities and Exchange Commission
(“Commission”) proposed new rules and amendments to
existing rules and forms (the “Proposed Rules,”
see summary) addressing the treatment of initial
public offerings (“IPOs”) by special purpose acquisition
companies (“SPACs”) and subsequent business combination
transactions (“De-SPAC Transactions”) between SPACs and
operating companies (“Targets”). The Proposed Rules were
published in the Federal Register on May 13,
2022 and the comment period has now closed.

The Securities Industry and Financial Markets Association,
through its comment letter filed with the Commission,
expressed support for increased disclosure related to SPAC IPOs and
De-SPAC Transactions, but raised significant concerns about the
newly proposed Rule 140a, which relates to gatekeepers in De-SPAC
Transactions.

The Federal Regulation of Securities Committee
(“Committee”) of the American Bar Association’s
Business Law Section, through its comment letter filed with the Commission,
addressed, among other things, the need to preserve the
availability of distinct capital-raising alternatives for issuers
and investors, while striking the right balance between investor
protection and capital formation. In 71 pages of analysis and
comment, the Committee’s letter raises concerns regarding a
number of aspects of the Proposed Rules, such as the fairness
determination of the De-SPAC Transaction in the Proposed Rules,
making the Target a co-registrant to a merger registration
statement in connection with a De-SPAC Transaction as to which
there is no basis, the overly broad and unsupported interpretation
regarding the entities that may be considered to be statutory
underwriters under the proposed Rule 140a, the amendments that
would remove the current safe harbor under the Private Securities
Litigation Reform Act of 1995 for De-SPAC Transactions, and the
proposed Investment Company Act safe harbor.

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