The SEC is reportedly looking into conflicts of interest among major banks in the SPAC deal-making process

The SEC is reportedly looking into conflicts of interest among major banks in the SPAC deal-making process

The US Securities and Exchange Commission is investigating major banks over conflicts of interest in the SPAC deal-making process that exploded in the past year, first reported. In particular, the regulator is looking into instances wherein the banks acted both as the underwriters and the advisers on the same SPAC deal and whether certain fee structures may have incentivized underwriters to secure unsuitable mergers, sources told . "The big issue for the SEC is to understand if the advisers are conflicted," one of the sources told . The SEC, according to sources, has requested information from top SPAC underwriters including Citigroup, Credit Suisse, Morgan Stanley, and Goldman Sachs. Requests do not imply malpractice. SPACs are shell companies that list with the aim of merging with private companies and taking them public. This is typically done in lieu of an IPO or a direct listing and has garnered support from Wall Street heavyweights as well as pop icons and professional athletes. Management teams of SPACs, also known as sponsors, generally pay banks a 5.5% fee for underwriting the process. Banks, however, can earn more if they also represent the merger target. Such conflict of interest could harm investors, sources told .