ESMA publishes SPAC disclosure and investor protection guidance
16 July 2021 France
Image: stock.adobe.com/Tilio_&_Paolo
The European Securities and Markets Authority (ESMA) issued a public notice yesterday to assist national competent authorities in taking a coordinated approach towards the scrutiny of special purpose acquisition company (SPAC) prospectuses.
It is ESMA’s view that SPAC transactions may be inappropriate for some investors due to the risks associated with dilution, conflicts of interest regarding sponsors’ incentives and the ambiguity surrounding the target company.
SPACs are companies with no commercial operations that are formed solely to raise capital through an initial public offering for the purpose of acquiring an existing company. They often attract well-known sponsors and investors and have seen a surge in popularity in recent years.
ESMA also emphasised the importance of the application of the EU’s investor protection legislative framework MiFID II and its product governance rules, instituted by the bloc to regulate financial markets to standardise practices and restore confidence in the industry.
ESMA’s statement sets out how issuers should satisfy the specific disclosure requirements of the Prospectus Regulation to enhance the clarity and comparability of SPAC
prospectuses.
It will also provide SPACs with an understanding of the disclosure that NCAs will expect them to include in their prospectuses.
ESMA interim chair Anneli Tuominen says: “There has been a significant rise in SPAC activity in EU capital markets this year and with this comes growing interest from investors.
“Therefore, it is essential that investors are provided with the information necessary to understand the structure of SPAC transactions before making any investment decisions.”
It is ESMA’s view that SPAC transactions may be inappropriate for some investors due to the risks associated with dilution, conflicts of interest regarding sponsors’ incentives and the ambiguity surrounding the target company.
SPACs are companies with no commercial operations that are formed solely to raise capital through an initial public offering for the purpose of acquiring an existing company. They often attract well-known sponsors and investors and have seen a surge in popularity in recent years.
ESMA also emphasised the importance of the application of the EU’s investor protection legislative framework MiFID II and its product governance rules, instituted by the bloc to regulate financial markets to standardise practices and restore confidence in the industry.
ESMA’s statement sets out how issuers should satisfy the specific disclosure requirements of the Prospectus Regulation to enhance the clarity and comparability of SPAC
prospectuses.
It will also provide SPACs with an understanding of the disclosure that NCAs will expect them to include in their prospectuses.
ESMA interim chair Anneli Tuominen says: “There has been a significant rise in SPAC activity in EU capital markets this year and with this comes growing interest from investors.
“Therefore, it is essential that investors are provided with the information necessary to understand the structure of SPAC transactions before making any investment decisions.”
← Previous regulation article
Majority of firms moving to consolidate regulatory reporting requirements under single platform
Majority of firms moving to consolidate regulatory reporting requirements under single platform
Next regulation article →
Joint Associations (again) request clarification on CSDR mandatory buy-ins
Joint Associations (again) request clarification on CSDR mandatory buy-ins
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
