(Reuters) – Wall Road’s high regulator is because of finalize on Wednesday new guidelines requiring larger transparency out there for offers involving “special-purpose acquisition firms” (SPACs), an investing software that has not too long ago misplaced favor in equities markets.

Also referred to as a “clean test” firm, a SPAC is a publicly traded shell firm used to accumulate non-public entities, thereby taking them public whereas side-stepping some regulatory hurdles concerned in a standard preliminary public providing (IPO).

A burst of curiosity in 2020 and early 2021 prompted considerations that SPACs may go away buyers with little visibility into what they have been shopping for.

If adopted by the five-member U.S. Securities and Change Fee (SEC) on Wednesday, the proposed new rule, first unveiled in 2022, would require stricter disclosures about compensation for SPAC sponsors, conflicts of curiosity and the potential for the dilution of share worth.

The proposed rule would additionally in some circumstances require that firms focused for acquisitions, often called “de-SPAC” transactions, register with the SEC and take duty for investor disclosures in regards to the deal, SEC officers mentioned prematurely of the vote.

Officers say the principles would deliver regulation of SPAC offers extra according to investor protections supplied by conventional IPOs.

Nevertheless, almost two years after they have been first proposed, the brand new SEC rules arrive as investor curiosity in SPACs has all however vanished.

As a of final yr, SPAC IPO worth had fallen 98% to only $4 billion from a peak in 2021 whereas the efficiency of SPAC-launched shares has tumbled greater than 90%, in response to figures from SPAC Analysis and the monetary information agency Solactive.

SEC officers mentioned that in gentle of public feedback they’d acquired on the proposal they’d made adjustments to the ultimate regulation in a number of methods. That included dropping a requirement that will have routinely deemed some SPAC IPO members to be underwriters within the subsequent de-SPAC deal.

As an alternative, the company will situation steerage on guidelines to elucidate that some members might qualify as underwriters with authorized duties for investor disclosures made as a part of the de-SPAC deal.

SEC enforcement officers have additionally moved to crack down on abuses within the SPAC market, bringing a string of SPAC-related enforcement actions in 2023 alone, together with a July settlement with Digital World Acquisition Corp, a agency set to take former U.S. President Donald Trump’s social media platform Fact Social public.