The Financial Conduct Authority is to consult on the strengthening of investor protection around Special Purpose Acquisition Companies (SPACs).
This will consider the structural features and enhanced disclosure functions required to protect investors using these, the regulator said this morning (March 31).
Proposals from the regulator will include a minimum market capitalisation and a redemption option for investors.
“Our proposals will help to ensure that SPACs operate within a framework of high regulatory standards and oversight,” said the FCA in a statement.
“Where such protections are in place, we consider that the existing presumption of suspension of the listing for such companies at the point of announcement of an acquisition target is no longer required and we therefore intend to consult on this basis, aligning this element of our rules more closely with other major jurisdictions.”
The consultation will be open for four weeks with the regulator aiming to introduce new rules and guidance by early summer.
Special purpose acquisition companies are listed shell companies that have no commercial operations and are formed strictly for the purpose of acquiring an existing company.
SPACs have been around for decades but they have become more popular in the US and Europe during the past year.
The companies were part of Lord Hill’s review into London’s listing rules.
Lord Hill recommended rules around the use of SPACs in the UK be liberalised to help London maintain its competitiveness post-Brexit.
Lord Hill’s proposals have already invited criticism with Richard Buxton among these.
In a recent webinar he noted: “I disagree with the Hill Review’s view that the entirety success of the City of London should be measured by an IPO league table against other jurisdictions.”
Jon Yarker is a freelance reporter for FTAdviser