The Securities and Exchange Commission recently charged global financial services firm Cantor Fitzgerald with violating laws related to regulatory disclosures by blank-check companies. The SEC found that Cantor caused two SPACs (special purpose acquisition companies) to falsely deny having had contact or substantive discussions with potential merger targets before their initial public offerings. The firm agreed to settle the charges by paying a $6.75 million civil penalty and committing to not violate the securities laws at issue in the case.
SPACs are shell companies that merge with target companies to take them public. The two SPACs controlled by Cantor executives raised $750 million from investors before merging with smart-glass maker View and satellite imagery company Satellogic. The SEC stated that Cantor executives and employees of subsidiaries had substantive discussions with potential targets before the SPACs went public. View’s merger with CF Finance Acquisition Corp. was announced in November 2020, while Satellogic’s merger with CF Acquisition Corp. V was announced in July 2021.
Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, emphasized the importance of accurate disclosures, stating that Cantor misled investors by denying contact with potential merger targets despite having substantive discussions with them. Cantor spokesperson Erica Chase stated that no investors were harmed by the alleged issues described in the order and expressed satisfaction with resolving the matter with the SEC.
The event carries potential implications for the industry and consumers, highlighting the importance of transparent regulatory disclosures in SPAC transactions. The SEC’s enforcement actions aim to ensure accuracy and accountability in financial markets. Despite the settlement, questions remain about the Trump transition team’s awareness of the SEC investigation when nominating Howard Lutnick, Cantor’s chairman and CEO, to lead the Commerce Department.
The case underscores the need for robust oversight and compliance measures in SPAC dealings to protect investors and maintain market integrity. As regulatory scrutiny continues, industry players must prioritize transparency and adherence to securities laws to build trust and safeguard financial markets from fraudulent activities. The outcome of this case may prompt reforms in SPAC regulations and practices to enhance investor protection and market stability.
