Cantor Fitzgerald Settles SEC Charges Over Misleading SPAC Disclosures

Cantor Fitzgerald, a prominent investment bank, has agreed to pay a $6.75 million settlement to resolve Securities and Exchange Commission (SEC) charges related to misleading disclosures in special purpose acquisition company (SPAC) filings. The settlement, announced on December 12, 2024, follows an SEC investigation into Cantor's role as a SPAC sponsor.

The SEC alleged that Cantor Fitzgerald caused two SPACs, CF Finance Acquisition Corp. II (CFAC II) and CF Acquisition Corp. V (CFAC V), to make false and misleading statements in their registration statements on Forms S-1 and S-4. The misleading disclosures claimed that the SPACs had not selected any specific business combination target and had not initiated any substantive discussions with potential targets. However, the SEC found that Cantor personnel had already engaged in substantive discussions with potential targets before the IPO filings.

Cantor Fitzgerald's involvement with the SPACs in question began in 2020, with the launch of multiple SPACs, including CFAC II and CFAC V. The SEC first became aware of the alleged misconduct in December 2024, when it charged Cantor Fitzgerald with causing violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act and Section 14(a) of the Exchange Act and Rule 14a-3 thereunder.

Cantor Fitzgerald's role as a SPAC sponsor significantly influenced the misleading disclosures, as the firm's team identified potential targets for each SPAC and engaged in substantive discussions before the IPO filings. This misled investors into believing that the SPACs were open to any potential acquisition, when in reality, they had already engaged with specific targets. The SEC's civil penalty of $6.75 million highlights the impact of these misleading disclosures on investors.

Cantor Fitzgerald's decision to settle the charges rather than contest them in court was likely influenced by several factors. Firstly, the company may have calculated that the cost of litigation, including legal fees and potential damages, outweighed the settlement amount. Secondly, settling allows Cantor Fitzgerald to avoid the negative publicity and reputational damage that a protracted legal battle could bring. Additionally, the settlement enables the company to move forward and focus on its core business operations, rather than being distracted by a lengthy court case. Lastly, the settlement may have been seen as a way to resolve the issue quickly and minimize potential disruption to Cantor Fitzgerald's ongoing business activities.

The $6.75 million settlement with the SEC over misleading SPAC disclosures will likely impact Cantor Fitzgerald's future business operations and reputation in the financial industry. The settlement signals a crackdown on deceptive practices in the SPAC market and may lead to increased scrutiny from investors and regulators. To mitigate these impacts, Cantor Fitzgerald should focus on enhancing transparency and compliance in its SPAC operations, rebuilding trust with investors, and demonstrating a commitment to ethical business practices.