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Regulation and Compliance > Federal Regulation > SEC

SEC Examiners to Target SPACs

By Melanie Waddell

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What You Need to Know

  • Both broker-dealer and investment advisor examiners will be focused on SPACs.
  • Also on the exam team’s agenda: mutual funds converting to ETFs and nontransparent ETFs.
  • SPACs are “becoming so prevalent now; we’re a little concerned about that,” Driscoll said.

The Securities and Exchange Commission’s Division of Examinations will be looking at special purpose acquisition companies, or SPACs, this year, exam chief Pete Driscoll said Monday.

Also on the exam team’s agenda: mutual funds converting to ETFs and nontransparent ETFs, Driscoll said.

SPACs are “becoming so prevalent now; we’re a little concerned about that,” Driscoll said at the Investment Company Institute’s virtual mutual funds conference.

Amy Doberman, partner at Wilmer Cutler Pickering Hale and Dorr, who spoke on a panel with Driscoll, says she’s been fielding a lot of questions about “co-investing — given the different stages and different levels of the capital structure — in the whole SPACing and de-SPACing process.”

Doberman probed Driscoll on whether the exam division will look at these SPAC-related issues in connection with exams.

Driscoll responded: “Our broker-dealer team is going to be looking at SPACs in terms of how they’re listed and the process of going out.”

On the advisory side, particularly private funds, he said, “we’re looking at the investment side — the conflict associated with it. Like you said, the different levels of investment at the time and co-investments.”

As to mutual funds converting to ETFs, Driscoll said “the process I think we’ll look at, the listing aspects of it but also … there could be some illiquid security issues or valuation issues that may be posed by this. How the transition is done from a timing perspective — will there be any investors or shareholders unable to redeem for a period of time in the transition?”

Melanie Waddell

@Think_MelanieW

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