قالب وردپرس درنا توس
Home / Insurance / Proposed SPAC rules can dampen the market, encourage insurers

Proposed SPAC rules can dampen the market, encourage insurers



Proposed rules for disclosure by the U.S. Securities and Exchange Commission for special purpose acquisition companies may discourage certain SPAC-related transactions but make board members and responsible insurers more comfortable offering risk coverage, experts say.

SPACs, also called blank check companies, are listed shell companies formed to raise capital to acquire private companies, which they usually have two years to do after their IPO.

A deSPAC transaction occurs when a private company merges with a SPAC. In the next step, the merged entity functions as a public company.

The transactions are often seen as less expensive alternatives to traditional IPOs, although some critics say they can also be used to circumvent regulatory scrutiny.

The growth of SPAC last year was explosive, with 61

3 formations completed, but has since declined dramatically. This is relates at least in part to the expected SEC proposal and over-issue. But there are still hundreds of SPACs looking for a target company, observers say.

The 372-page SEC proposal, published in late March, would require further disclosures and remove the liability of SPACS under the Private Securities Litigation Reform Act of 1995 for making forward-looking statements that traditional IPOS has not had available to them. The proposed new rules would require additional information on SPAC sponsors, conflicts of interest, sources of dilution and additional information on business acquisition transactions between SPACs and private operating companies.

Most observers say they do not expect the final rules, which will be issued sometime after the comment period closes at the end of this month, to be very different from the proposal.

“It’s unlikely that it will go through exactly as it is,” but the SEC “can not be easily influenced” to make big changes, “said Larry Fine, New York-based liability insurance manager for Willis Towers’ Watson PLC.

The proposed rules “add significant disclosure and transaction complexity for SPACS and could discourage potential SPAC sponsors and could throw some cold water on all deSPAC transactions,” said Kevin LaCroix, vice president of Beachwood, Ohio, for RT ProExec, a division of RT Specialty LLC.

Removing the safe harbor regulations would “strongly discourage private companies from going the deSPAC route compared to going the traditional IPO route,” said Derek Lakin, New York-based senior vice president and national SPAC practice leader for Lockton Cos. LLC. It will “remove one of the biggest benefits of doing SPAC,” he said.

But strong proposed transactions will still be able to move forward, says Machua Millett, Boston-based SPAC leader at Marsh LLC.

Many believe that the rules can encourage D&O insurers to write coverage for SPAC-related companies.

Tim Fletcher, Los Angeles-based CEO of Aon PLC’s financial services group in the United States, said that “in the long run, you will see better deals come to market,” which will “give insurance companies comfort when it comes to using capital.” in the segment.

If the insurance companies see that the rules have a positive effect on the quality and level of disclosure in the business, they may be more comfortable with signing SPAC, says Anton Lavrenko, New York-based regional manager, financial institution and private equity North America, with Allianz Global Company and Specialty.

Andrew Doherty, New York-based national executive and professional risk management leader for USI Insurance Services LLC, said that more disclosure could result in increased liability for errors and omissions for investment banks.

“It’s always been a difficult line of coverage,” he said.

Henry P. Van Dyck, a partner with Faegre, Drinker, Biddle & Reath LLP in Washington and a former Attorney General for Economic Crime at the Department of Justice, who often worked in parallel with the SEC, said the proposal “likely increases future enforcement action” by the SEC.


Source link