H.R. 5910 would exclude all special purpose acquisition companies (SPACs) from safe harbor protections. (SPACs are companies without commercial operations that exist solely to raise capital through initial public offerings to later engage in mergers or acquisitions.) Under current law, most public companies are shielded from liability by safe harbor protections when prospective information published by the company—such as projections of revenues, income, and earnings per share—proves to be false or misleading. Currently, only SPACs that issue penny stocks, equity securities that trade for less than $5 per share, are excluded from those protections.
CBO estimates implementing the bill would cost the Securities and Exchange Commission (SEC) less than $500,000. Because the SEC is authorized to collect fees each year to offset its annual appropriation, CBO expects that the net effect on discretionary spending over the 2022-2027 period would be negligible, assuming appropriation actions consistent with that authority.
By excluding all SPACs from safe harbor protections, the bill would make additional SPACs potentially liable for false or misleading forward-looking statements. As a result, the SEC could prosecute more SPACs for making false or misleading forward-looking statements. Some of those prosecutions could result in additional civil penalty collections, which are treated as revenues. However, CBO estimates that any such collections would be insignificant over the 2022-2032 period.