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Opinion
Chris Bryant

You Can't Bank on SPACs. Thanks, Gary Gensler!

Wall Street’s biggest financial institutions are stepping away from blank-check firms after the SEC issues new guidelines.

Gary Gensler, chairman of the US Securities and Exchange Commission.

Gary Gensler, chairman of the US Securities and Exchange Commission.

Photographer: Evelyn Hockstein/Reuters

In a new low for an already maligned asset class, bulge-bracket Wall Street banks are walking away from advising special purpose acquisition companies following a regulatory crackdown. SPACS were already an excessively complex and costly method of joining the stock exchange. Without backing from the big banks their future looks bleak.

Financial institutions were until recently happy to foist these cash-shells on the market and collect a bounty of fees for helping them find targets — regrettably often not very good ones — to merge with and take public. Now they’ve developed cold feet because the US Securities and Exchange Commission wants the banks that underwrite blank-check firm listings to also vouch for the information that appears in the merger prospectuses. That would expose them to greater legal liability.