FCA Begins Consultation to Strengthen Protections for SPAC Investors


The FCA has begun work to strengthen protections for investors in SPACs, following the recommendations of the Lord Hill listings review earlier this month.

March 31, 2021 | AtoZ Markets – The UK Financial Conduct Authority (FCA) will shortly be consulting on how to strengthen protections for investors in Special Purpose Acquisition Companies (SPACs).

In an announcement on Wednesday, the British watchdog said it planned to issue a discussion on how its listings rules could be amended, and what guidance it should give the sector, as the boom in SPAC interest continues.

New rules could come as early as the summer, as the FCA says it plans to leave the consultation open for just four weeks.

Our proposals will help to ensure that SPACs operate within a framework of high regulatory standards and oversight,” the FCA said.

New measures could include whether greater disclosure, a minimum market capitalization, or giving investors more options to redeem their funds would offer them greater protection.

The FCA says that the consultation will start from the position that, where investors have such protection, companies would not need to suspend their listing when they announce an acquisition target, bringing the UK’s rules more closely into line with other key nations.

The move follows a boom in SPACs – blank cheque companies designed to buy up firms and take them public – in the United States.

A Reuters report last week suggested that the US Securities and Exchange Commission was probing the market amid fears that deal volumes had outstripped the controls banks have to monitor them properly.

Many SPACs are endorsed by celebrities, but investors and regulators alike have expressed concerns the bubble in the sector might be about to burst.

The UK government has tried to open up listings rules on this side of the pond to compete in a post-Brexit environment.

A flagship review by Lord Hill earlier this month released alongside the Budget recommended opening the UK’s doors wider to SPACs, as well as other measures to ensure London is the go-to place for IPOs like allowing dual-class share structures.

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