The U.S. securities regulator has ramped-up its inquiry on Wall Street's blank check acquisition frenzy, homing in on potential conflicts of interest created when banks act as underwriters and advisers on the same deal, Reuters reported. The Securities and Exchange Commission is exploring whether certain fee structures may incentivise underwriters on special purpose acquisition company, or SPAC, listings to secure unsuitable deals when also advising on the later stage merger, potentially putting investors at risk. Banks that have received SEC requests for information include top SPAC underwriters Citigroup, Credit Suisse Group, Morgan Stanley and Goldman Sachs. SPACs are listed shell companies used to take private companies public, sidestepping the more traditional and lengthy initial public offering (IPO) process. Reuters reported in March that the SEC's enforcement division had opened an inquiry on Wall Street banks' SPAC dealings, sending letters to several institutions seeking information on deal risks and internal controls. Since March, the SEC has focused its inquiry on a group of banks, law firms and SPAC sponsors involved in troubled deals and has sought more information about the deals and interviewed executives concerned. The SEC is particularly interested in the fees banks have earned when playing several roles on a deal.
