Partner Syed Rahman considers the Financial Conduct Authority’s approach to SPACs – and the risks

With the Financial Conduct Authority (FCA) looking to reassess its regime with a view to attracting SPACs to the City, Syed Rahman considered the implications.

In an article, he explained what a SPAC (special purpose acquisition company) is and why the FCA would want to attract them to the UK. Syed detailed the FCA’s proposals and outlined how they may be more favourable to SPACs than the current situation.

But his piece makes it clear that while SPACs are currently immensely popular in other countries, there are risks associated with them. Litigation could be prompted by what investors consider to be the poor performance of a SPAC, leading them to take action against those they blame for a lack of financial return on their investment.

Whether everyone involved was provided with the true financial position of the company could be an issue that prompts litigation. The failure of a SPAC to perform as expected may also lead to calls for an investigation and / or legal action.

While SPACs can be a useful route for those looking to invest and those looking to drive through a deal, Syed makes it clear that anyone thinking of becoming involved in one needs to take time to be aware of the potential pitfalls.

Syed's article featured on Global Banking and Finance.