SEC adopts final rule: iXBRL tagging for SPAC disclosures
Aiming to bolster investor protections in Special Purpose Acquisition Companies (SPACs), the Securities and Exchange Commission (SEC) has announced the adoption of the final rule for SPACs, Shell Companies, and Projections. The rule mandates Inline XBRL tagging for information in Subpart 1600 of Regulation S-K.
Until now, investors in SPACs arguably had fewer protections compared to traditional initial public offerings (IPOs) due to fewer and more limited disclosure requirements, leading to potential information asymmetry between sponsors and investors.
Inline XBRL, a format that combines XBRL tags with the HTML or XHTML document, is now a key component of the disclosure requirements for SPACs, particularly in relation to compensation, conflicts of interest, dilution, and board determinations in de-SPAC transactions.
XBRL US, in its comment letter during the rule’s proposal stage, suggested a phased-in approach for smaller entities due to resource constraints. In response, the SEC has incorporated a one-year phase-in for the tagging requirements, providing all issuers, regardless of size, with additional time to comply.
In a statement, SEC Chair Gary Gensler emphasised the alignment of investor protections in SPACs with those in traditional IPOs. The final rules introduce enhanced disclosures, accountability for forward-looking statements, and issuer obligations to address information asymmetries, misleading information, and conflicts of interest in SPAC and de-SPAC transactions.
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