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Special Purpose Acquisition Companies (“SPACs”)

October 2021

FINRA is examining firms’ offering of, and services provided to, Special Purpose Acquisition Companies (“SPACs”) and their affiliates (e.g., sponsors, principal stockholders, board members, and related parties).  Unless otherwise noted, the relevant period for each request is July 1, 2018, through September 30, 2021 (the “Relevant Period”).  In addition, if your response varies over the Relevant Period, please explain the differences in your response. 

  1. Provide copies of the Firm’s policies and procedures (“WSPs”), compliance memoranda, and other internal guidance in effect or issued during the Relevant Period concerning the following activities that may relate to SPACs: (i) public offerings; (ii) qualified independent underwriters1 (“QIU”); (iii) due diligence; (iv) suitability; (v) conflicts of interest; (vi) private securities transactions; (vii) employee trading; (viii) information barriers; (ix) watch and restricted lists; (x) research reports; (xi) outside business activities; and (xii) communications with customers regarding corporate events or shareholder votes and research reports.
     
  2. Provide a list of training offered during the Relevant Period that addresses or addressed the following topics: (i) SPACs; (ii) public offerings; (iii) QIUs; (iv) due diligence; (v) conflicts of interest; (vi) employee trading; (vii) information barriers; (viii) watch and restricted lists; (ix) research reports; and (x) outside business activities.
     
  3. Describe all services offered by the Firm and its affiliates (e.g., any person or entity directly or indirectly controlling, controlled by, or under common control with the Firm) to SPAC issuers during the Relevant Period. 
     
  4. Describe all services offered by the firm and its affiliates to companies that are/were acquisition targets of a SPAC offered by the Firm.
     
  5. Identify all departments or workgroups involved with the Firm’s investment banking services including underwriting, structuring, financing, sponsoring of, or due diligence for, SPACs.  Describe the role of each department as it relates to SPAC securities for which the firm provided these services.
     
  6. If the Firm uses (or has used) a third-party provider for due diligence, provide a list of the entities retained and a description of (i) the services provided by the entity and (ii) the process the firm uses for review and/or independent confirmation of third-party findings.
     
  7. If the Firm is currently relying or has relied on a QIU in connection with a SPAC offering during the Relevant Period, provide a list of the QIU(s) retained, any agreements entered into, and a description of the services provided and compensation received by the QIU.
     
  8. Describe any efforts undertaken by the firm or its registered representatives to identify customers for promotion or recommendation of SPAC securities in the primary or secondary market.
     
  9. Describe any restrictions, prohibitions, or customer profile (e.g., investment objective, risk tolerance, etc.) limitations the firm had in place, regarding primary or secondary market transactions in SPAC securities.
     
  10. For any SPAC offerings identified in Non-Public Exhibit A2, provide the following:
     
    1. a detailed timeline and an itemized list describing the services provided by, and responsibilities of, the Firm, in connection with any business combination or merger. The timeline and list should identify to whom the services were rendered, and include any documentation that describes or otherwise outlines the services provided;
       
    2. an itemized list of all payments, rights, interests, or benefits received or otherwise acquired or accrued by the Firm, or any “participating members” as defined in FINRA Rule 5110(j)(15), whether in cash or otherwise, from any source in connection with the SPAC offerings;
       
    3. an itemized list describing any prospective services to be provided by the Firm to any SPAC or SPAC Affiliate in connection with any business combination or merger.  The list should identify when and to whom the prospective services are to be provided, and the Firm’s anticipated compensation;
       
    4. the Firm’s complete due diligence file, including any additions or updates, and all communication to/from the Firm to the SPAC and its sponsor(s) related to the due diligence undertaken by the Firm;
       
    5. any potential conflicts of interest the Firm identified in relation to the SPAC offerings, including: how the conflict was identified; whether and how the Firm addressed or mitigated the conflict, and any disclosures contained in public filings and disclosures provided to retail investors, regarding the conflict; and
       
    6. a list of any customer complaints, arbitration claims, civil lawsuits, or other claims received by the Firm related to the SPAC offerings.
 

1 As defined in FINRA Rule 5121(f)(12).

2 Exhibit A will be provided privately to firms that receive an inquiry