Articles Posted in SPACs

Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses from alternative investments. Some brokers like to pitch investors on the idea of making a lot of money by investing in alternative investments, mostly because brokers get paid handsome commissions for selling them.  GPB Capital and more recently, GWG Holdings are examples of alternative investments that were pushed hard by brokerage firms, with terrible results. There is a sub-category of these investments called “liquid alternative”, which are complex and costly for clients.

FINRA, the U.S. securities industry regulator, recently issued a warning about liquid “alts,” which invest in assets “other than stocks and bonds — such as real estate, commodities and derivatives — to give retail investors exposure to alternative investments in a vehicle that can be traded daily. They are touted as a way to beat market returns but also can be risky and expensive.”

“While these funds may be appropriate for some investors,” the regulator’s warning stated, “FINRA has consistently emphasized the importance of member firms’ sales practice obligations for these and other products, especially when such products may carry additional risks for customers.” These products are inappropriate for investors unless their objective is speculation – plain and simple.

Chicago-based Stoltmann Law Offices is investigating Special Purpose Acquisition Companies (SPACs). All the rage on Wall Street, “SPACs” are companies created to acquire or fund other firms by sidestepping much of the due diligence paperwork of traditional initial public offerings. These “blank check” entities can present problems for investors, however.

Both FINRA, the U.S. securities industry regulator, and the Securities and Exchange Commission (SEC) are probing SPACs. Earlier this year, the SEC began to focus on SPACs.  The agency “wanted information on SPAC deal fees, volumes, and what controls banks have in place to police the deals internally,” according to Reuters.

SPACs have surged globally to a more than $170 billion this year, outstripping last year’s total of $157 billion, Refinitiv data showed. Although SPACs have become popular with hedge funds and companies quickly raising capital, investors often have no idea what SPAC operators will buy.

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