SEC Alerts SPACs to Compliance, Disclosure, and Financial Requirements
The SEC’s Division of Corporation Finance has issued a staff statement warning private companies that merge with a SPAC (special purpose acquisition company) that it must observe several post-merger compliance, internal control, and financial statement requirements.
The staff highlighted books and records rules, which require issuers to maintain books and records in “reasonable detail that accurately and fairly reflect the issuer’s transactions and dispositions of its assets.” The issuer must also implement internal controls to “provide reasonable assurances about management’s control, authority, and responsibility over the issuer’s assets.” Additionally, public issuers must establish adequate internal controls over financial reporting and disclosure controls and procedures. The staff expresses concerns that private companies merging with a SPAC might not have the personnel attuned to the SEC’s reporting, disclosure, and financial requirements. The staff also alerts issuers to listing requirements including corporate governance rules that mandate independent directors and an audit committee.
The SEC is firing a warning shot that it will scrutinize SPAC mergers to ensure that these instant IPOs play by the rules applicable to all public companies. We recommend that SPACs higher lawyers and compi-pros that have experience with public companies and SEC rules.
To read the full Staff Statement, click here.