By Rebecca Ungarino

Cantor Fitzgerald, the Wall Street firm helmed by Commerce Secretary nominee Howard Lutnick, will pay $6.75 million to settle civil regulatory charges over misleading disclosures.

The Securities and Exchange Commission said Thursday that Cantor caused two entities it controlled to violate securities laws. According to the regulator's order, Cantor led two special-purpose acquisition companies, or SPACs, which it oversaw in 2020 and 2021, to make misleading statements to investors ahead of their initial public offerings.

Cantor neither admitted nor denied the findings.

SPACs have generally fallen out of favor on Wall Street after a boom that in many cases benefited management teams and left investors holding the bag. They are shell companies that go public without underlying businesses and raise money from investors in that IPO with the goal of buying a target.

"No investor was ever harmed by the alleged issues described in the order," a spokesperson for Cantor said in a statement. "We are pleased to have concluded this matter by mutual agreement with the SEC."

The order doesn't name Lutnick, Cantor's longtime CEO who has helped run President-elect Donald Trump's presidential transition team and who is now Trump's pick to head the Commerce Department. The charges draw attention to his varied business interests, though, from running Cantor as CEO since 1991. He joined the company 41 years ago.

In addition to his firm's public association with SPACs -- Cantor, according to the SEC, has sponsored nine through its subsidiaries -- Lutnick is viewed as an outspoken advocate of cryptocurrencies. His firm, which he has called the "best investment bank for digital assets," has been a custodian for reserves of so-called stablecoin group Tether.

The order charges Cantor with causing violations of federal securities laws' antifraud and proxy provisions. The SEC said in its order on Thursday that Cantor "caused the SPACs in their SEC filings to deny having had contact or substantive discussions with potential business combination targets prior to their IPOs."

But at the time of the two SPACs' respective market debuts, Cantor "had already commenced negotiations with a small group of potential target companies for the SPACs," including with the companies, View and Satellogic, with which they eventually merged, according to the SEC.

Even though Cantor had held meaningful discussions with companies, including the eventual targets, it "misled investors about a critical investment consideration by repeatedly stating in public filings that it had not identified or approached any potential merger targets," said Sanjay Wadhwa, acting director of the SEC's enforcement division.

In a separate statement on Thursday, SEC Commissioner Mark Uyeda said he didn't support the agency's case against Cantor because "the alleged misstatements and omissions are not material, and I do not view the facts in the Order as demonstrating investor harm."

SPACs went from a high-profile boom to a bust in recent years. The SEC, several years after they were Wall Street's investment du jour, earlier this year adopted rules meant to protect investors in the blank-check firms.

View, a glass company that struggled after it went public, filed for bankruptcy this year. Shares of Satellogic, a satellite-technology company, have fallen 38% since it went public.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com

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December 12, 2024 19:40 ET (00:40 GMT)

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