The US Securities and Exchange Commission (SEC) has opened an inquiry into special purpose acquisition company (SPAC) dealings on Wall Street and is seeking information on how underwriters are managing the risks involved, Reuters reported, citing four people with direct knowledge of the matter.
The regulator sent letters to Wall Street banks seeking information on their SPAC dealings, the four people said.
SPACs, also known as blank cheque companies, are listed shell companies that raise funds to acquire or merge with a private company without going through the traditional initial public offering process.
READ: SPACs and blank-check companies - a two-minute explainer
The SEC letters asked the banks to provide the information voluntarily suggesting the inquiry was on an informal basis, two of the sources said, although one of those two people said letters were sent by the SEC’s enforcement division, indicating that they may lead to a formal investigation, Reuters reported.
Funds channelled into SPACS over the last year have hit US$70bn, according to Goldman Sachs; other sources put the amount at more than US$83bn.