Regulatory Notice 08-54

Guidance on Special Purpose Acquisition Companies

Special purpose acquisition companies (SPACs) are shell companies that raise capital in initial public offerings (IPOs) for the purpose of merging with or acquiring an operating company. The SPACs market has undergone rapid growth in recent years. In 2007, 22 percent of all initial public offerings in the United States were issued by SPACs totaling over $12 billion in raised capital. While SPACs' percentage of the capital raised in the IPO market so far in 2008 declined to 12 percent, they continue to be significant vehicles for raising capital in the public market. SPAC IPOs differ significantly from traditional equity IPOs, with unique conflicts of interest and incentives for SPAC managers, underwriters and financial advisors. Firms and their customers who invest in SPACs should be aware of these differences before participating in a SPAC IPO.

Questions regarding this Notice should be directed to: Joseph E. Price, Vice President, Corporate Financing, at (240) 386-4623 or Lisa Jones Toms, Counsel, Corporate Financing, at (240) 386-4661.