(Bloomberg) — Blank-check companies will be required to disclose more information about their sponsors and potential conflicts of interest under a new plan from the U.S. Securities and Exchange Commission, once regulators rein in the red-hot market. Latest attempt to install .
The agency proposed a slew of new rules on Wednesday that include curbing legal protections to special-purpose takeover companies sued by investors over ornate presumptions about the firms they take public, watchdog said. According to a statement of The changes are intended to apply the same protection to SPAC that investors are accustomed to with traditional initial public offerings.
SEC Chairman Gary Gensler has repeatedly raised concerns about blank-check firms listing on public stock exchanges to raise money so they can buy other companies. While SPACs were once one of Wall Street’s hottest markets, the new rules come as deals are increasingly falling out of favor.
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“Investors are entitled to the protection they get from traditional IPOs, with respect to information asymmetry, fraud and conflicts, and when it comes to disclosure, marketing practices, gatekeepers and issuers,” said Gensler, who voted in favor of the plan’s proposal. The agency’s other two Democrats said in a statement.
Hester Peirce, the SEC’s sole Republican commissioner, opposed the rule, saying the proposal “seems to be designed to stop SPAC in their tracks.” Notably, it said the removal of the safe harbor from private litigation represented a “regulatory slight of hand.”
The rules would require firms to disclose information about their sponsors, the effects of stock dilution and the companies targeted for merger. The SEC also wants to limit SPAC’s so-called safe harbor from legal liability in speculating.
The agency will now have public comment on the plan for 60 days before making changes and a second vote to finalize the rules.