SPAC operation level: financial consumer tilt protection

Compared with the target company and SPAC management, financial consumers investing in SPACs will undoubtedly take greater investment risks. Investor protection has always been one of the most noteworthy issues in the securities market. For investor protection in SPAC listing, the United States has adopted a three-in-one guarantee method of "investor-led + information disclosure + rights protection and relief". First, investors have absolute dominance in voting on company mergers, and mergers and acquisitions need to be approved by more than 80% of investors, otherwise the transaction will not be able to proceed. Secondly, information disclosure and transparency have been implemented throughout the SPAC listing process. SPACs need to provide S-1 Forms, 8-K Forms, and revised prospectuses to securities regulators and consumers at the time of registration, after listing on the OTCBB, and during the merger and acquisition process. these three documents.

The core content of these three documents all involve the disclosure of SPAC's internal control information, which has the effect of compulsory disclosure of information and can effectively protect investors' right to know. Finally, adequate rights protection and relief measures provide a strong backing for financial consumers’ investment behavior. If the merger fails, the investor’s investment funds and interest for the same period after deducting operating costs will be returned. Compared with other high-risk investments, Investment failure will only bring loss of opportunity cost to investors; if the merger is successful, when investors face securities infringement, consumers can still protect their rights through securities class action.

The stable development of the financial market is inseparable from the participation of financial consumers, and the substantial unequal status of financial consumers and operators is very prominent in the financial market. Financial institutions have strong financial strength and professional technical personnel. Use standard clauses, disclaimer clauses and other means to transfer risks, so that consumers are in a weak position.

In the field of SPAC listing, because investors' investment has the nature of choosing a "blind box", which increases investment risks and uncertainties, the United States has put forward higher information disclosure requirements and investor rights protection requirements. Such a tilted protection mechanism for financial consumers is worthy of reference for my country. This paper believes that in the operation stage after the introduction of the SPAC listing mechanism in my country, my country can achieve tilted protection for financial consumers in the following ways:

First, determine consumer dominance. Consumer dominance is mainly reflected in merger decision-making and risk-taking. In terms of merger decision-making, the merger decision of SPAC and target company should be approved by the vast majority of investors. The proportion adopted in the United States is 80%. This paper believes that this standard The determination of the standard comes from the combination of trading habits and the subjective determination of the legislator. Specifically in my country, the determination of the standard is a legislative technical issue. As long as the normative document is formed, it will have a guiding role in the market and should be decided by the legislator. However, it should at least exceed the 2/3 ratio of the company's special voting rights. In terms of risk-taking, if the SPAC merger fails and enters the dissolution process, the financial consumer's investment after deducting operating costs and the interest for the same period should be fully returned to the consumer within a certain period to reduce the investor's investment risk as much as possible.

Second, strictly protect information disclosure. During the listing period of blank check companies, the lack of information disclosure was the main reason for the frequent occurrence of market fraud, and then Rule 419 issued by the US SEC imposed strict requirements on information disclosure during the listing process of blank check companies. The 8-K form further improves the information disclosure standard of the corresponding company. Information disclosure is one of the most powerful means to protect the rights of financial consumers. This paper believes that my country should put forward higher information disclosure requirements than other types of IPOs in terms of information disclosure of the SPAC listing mechanism. The information disclosed should include but not limited to The following categories: financial audit report, internal control relationship, executive salary, financial statements, major contracts, company management's shareholding, changes in shareholders and shareholding ratios, and external guarantees. In addition, the securities regulatory agency has the right to force the introduction of accounting, auditing and other market intermediaries to spot-check SPAC information disclosure matters or conduct mandatory information disclosure to ensure accurate and timely disclosure of SPAC information.

Third, improve the ex post relief mechanism. The ex post remedy in the U.S. securities market is centered on civil litigation, in which the shareholder class action system adopts an "opt out" mechanism (Opt out: a mechanism of "express election, implied opt in", if investors do not expressly express their withdrawal , then its claim rights will be automatically included in the class action claim) and the "risk compensation" (risk agency) mechanism, which can well break through the difficult dilemma of "shareholder collective action" and attract high-level lawyers to participate in the litigation. The shareholder litigation model stipulated in Articles 149 and 151 of my country's "Company Law" requires the individual shareholders who bring a lawsuit to bear the litigation costs. Initiation of civil securities litigation.

After the revision of my country's "Securities Law", Article 95 introduced the class action rules that follow the "election mechanism", making Chinese-style securities class actions on the stage of history, but this is just a new beginning. my country's securities class actions can be The operability is still low, and needs to be further improved from the aspects of "litigation representation mechanism", "lawyer agency mechanism", and "indiscriminate prevention and control mechanism". While introducing the SPAC listing mechanism, we should continue to improve my country's securities group litigation system, so as to enrich investor remedies and deter the SPAC management's breach of trust.