SPAC
The flames were out even before 2022 began, but this year the SPAC frenzy has officially collapsed. Dozens of special-purpose acquisition companies are preparing to give back billions of dollars to investors after they can’t find anything to buy, and several that have completed purchases have gone bankrupt.
Apparently neither investors nor regulators are handing out blank checks, and the attack is on multiple fronts. The SEC and the Justice Department have stepped up scrutiny of industry deals for signs that sponsors or company officials have rushed into the market and broken rules by surprising investors. What’s more, the proposed rule sought to require sponsors to disclose more information, discourage rosy forecasts, and increase the responsibility of banks to help fund SPACs.
Senator Elizabeth Warren also called for tougher rules, calling the industry “rife with fraud, self-dealing and inflated fees.”
ESG labeled funds
Assets in funds touted as sustainable, green and socially responsible have skyrocketed over the past few years. The ESG label is a marketing coup with many investors rushing at the chance to make money and feel good about it.
But in 2022, US regulators began asking some tough questions about what it really means for an investment to be “green” or “ESG.” The SEC proposed new marketing regulations and began suing companies over its disclosure. Regulators are also investigating whether managers of funds touted as sustainable have given up voting rights on environmental, social and governance issues. Asset managers led by BlackRock Inc. have warned that some of the SEC’s proposed rule on labeling could backfire.
wholesale brokerage
SEC Chairman Gary Gensler has set his sights on the business models of wholesale brokerage firms such as Citadel Securities and Virtu Financial Inc. After more than a year of him hinting that major rule changes are on the horizon, regulators have proposed a series of plans this month. More and more trading orders are being filled on stock exchanges rather than by these companies or a few competitors.
Many individual stock trading orders are now processed by wholesale brokerage firms who pay to process client trades from companies such as Robinhood Markets Inc. through a practice known as order flow payments. Proponents of the current system say retail investors have never had anything better and these arrangements allow them to trade without fees.
Crypto reputation
If FTX’s spectacular and sudden collapse was a boon to crypto skeptics, it was a devastating blow to the entire industry. Co-founder Sam Bankman-Fried, the face of the company, spent a good deal of time in Washington and successfully established himself as a responsible player in a gloomy industry. His indictment, arrest and extradition have been highly embarrassing and problematic for lawmakers and regulators who have spent time with him, both publicly and privately.
The industry is now under the microscope, perhaps in a heavier hand than before FTX’s failure, as Washington considers ways to crack down on abuse. increase. They have long advocated a more proactive, law-enforcement-led approach to the asset class.
