Syed Rahman explains what the FCA’s new rules for SPACs may mean for the banks

With the Financial Conduct Authority (FCA) having reformed its regime to attract some of the lucrative SPAC (special purpose acquisition company) market, Syed Rahman wrote about the implications for banks.

In an article that was published by The Banker, Syed explained that the changes have been made by the FCA to offer both the flexibility that are required for SPACs and the protection for those who invest in them.

He emphasised that, if SPACs do become a regular feature in the UK, banks could earn large amounts setting them up. Investment banks are well positioned to help find buyers for SPAC shares and would usually receive a commission on the money that is raised for the initial listing. A bank could also receive commission when the SPAC completes its deal with the target company.

Syed also highlighted the fact that the FCA’s changes do not prevent banks advising on a SPAC’s listing. Paragraph 2.16 of the FCA proposal states that such an advisor should be an appropriate independent third party and adds that this “would not necessarily exclude banks or other companies with which the SPAC has an existing affiliation or service relationship.”

The FCA has also referred to banks being an appropriate adviser if a fair and reasonable statement needs to be published to shareholders if a SPAC director has a conflict of interest regarding the acquisition target or its subsidiary.

Syed concluded that the FCA’s action looks set to bring benefits to the banking world.

Syed's article was featured on The Banker. (Subscription required)