By Jessica DiNapoli

WASHINGTON (Reuters). – Democratic U.S. According to a Tuesday report by Reuters, Senator Elizabeth Warren plans to introduce a bill that would crack down on special purpose acquisition companies (or SPACs) after a proliferation of bad deals, which have frequently resulted in large losses for investors.

Warren’s “SPAC Accountability Act of 2022”, which Warren is preparing, would raise the legal liability of a variety of people involved in these deals. It also improves investor disclosures. Additionally, it will lock up early investors who bankroll such deals for a longer time.

Warren’s bill might not gain traction in this year’s midterm elections because of the focus on lawmakers, but it will likely increase the pressure on an industry already under new restrictions from the U.S Securities and Exchange Commission.

SPACs, the largest gold rush on Wall Street in recent years are shell companies that list publicly to raise capital with the aim of buying a private business and making it public.

It allows the target to bypass the more stringent regulatory oversight of a traditional initial publicly offered (IPO). Warren, among others, has criticised Warren’s criticisms that many deals lack quality or are not properly due-diligence.

Warren detailed in Tuesday’s report a last-year investigation on SPACs (and their backers) that found investor harm and required further regulation.

“This investigation found that Wall Street insiders have used SPACs as their own personal piggy banks while retail investors have suffered,” Warren said in a prepared statement. “This industry is rife with fraud, self-dealing and inflated fees, and the SEC and Congress should continue to act to crack down on these abuses.”

Reuters reported that billions have been raised by investment banks to fund SPAC transactions, which are causing many losses for investors.

SEC rules, which were presented in March by the SEC would close many loopholes and offer SPAC investors protections that are similar to what they received during the IPO process.

Warren’s bill, which codifies the SEC changes in law, would expand on Warren’s proposal. This bill would broaden the definition of an underwriter and include all parties that assist in the acquisition of the target business. It will increase legal liability for banks, SPAC sponsors, boards and target companies.

The bill would further lock down SPAC sponsor for longer periods, prohibiting them from cashing in before the company merges and can make any projected profits. It would increase disclosure requirements in connection to target takeover.