Gary Gensler is Chair of the U.S. Securities and Exchange Commission. This post is based on his recent public statement. The views expressed in the post are those of Chair Gensler, and do not necessarily reflect those of the Securities and Exchange Commission or the Staff.
Today [March 30, 2022], the Commission is considering a proposal to strengthen investor protections in special purpose acquisition companies (SPACs). I am pleased to support this proposal because, if adopted, it would strengthen disclosure, marketing standards, and gatekeeper and issuer obligations by market participants in SPACs, helping ensure that investors in these vehicles get protections similar to those when investing in traditional initial public offerings (IPOs).
Aristotle captured an overarching principle with his famous maxim: Treat like cases alike. [1]
SPACs present an alternative method to go public from traditional IPOs. I don’t just mean the first stage—when the blank-check company goes public (which I call the “SPAC blank-check IPO”). I’m also referring to the second stage, often called the de-SPAC (which I call the “SPAC target IPO”).
Nearly 90 years ago, Congress addressed certain policy issues around companies raising money from the public with respect to information asymmetries, misleading information, and conflicts of interest. [2]
For traditional IPOs, Congress gave the SEC certain tools, which I generally see as falling into three buckets: disclosure; standards for marketing practices; and gatekeeper and issuer obligations. Today’s proposal would help ensure that these tools are applied to SPACs.
First, Congress said, companies raising money from the public should provide full and fair disclosure at the time investors are making their crucial decisions to invest. To address such disclosure, today’s proposal would:
SEC Comment Letter on Share Repurchase Disclosure Modernization
More from: Ira Kay, Mike Kesner, Pay Governance
Ira T. Kay is managing partner/founder and Mike Kesner is partner at Pay Governance LLC. This post is based on their Pay Governance memorandum. Related research from the Program on Corporate Governance includes Short-Termism and Capital Flows by Jesse Fried and Charles C. Y. Wang (discussed on the Forum here); and Share Repurchases, Equity Issuances, and the Optimal Design of Executive Pay by Jesse Fried (discussed on the Forum here).
Introduction and Background
Pay Governance recently submitted a comment letter to the U.S. Securities and Exchange Commission (SEC) on its proposed rules to modernize the disclosure of share repurchases. [1] As background, the SEC is proposing companies furnish a new form (Form SR) containing detailed information on daily share repurchases no later than one business day after the execution of a repurchase. Though the proposed rules require Form SR to be furnished for each day of a share repurchase process, the SEC is asking the public for opinions regarding level of detail, frequency, and potential exemptions/exceptions. In our comment letter we acknowledge not being experts on share repurchase disclosure, but we wanted to address aspects of the SEC’s business case for the proposed changes. Namely, we were concerned with the SEC’s reference to claims of certain commentators that share repurchases were being used by executives to unjustly enrich themselves at the expense of shareholders, employees, and long-term investment in the company.
Below are a few of the comments included in the SEC proposal:
READ MORE »