Just a few years after banks helped create a gargantuan market for blank-check companies, they’re pulling away from the deals, afraid of the risks.

Goldman Sachs Group Inc. is ending its involvement with most of the special purpose acquisition companies it took public and pausing new U.S. SPAC issuance, Bloomberg reported on Monday. Bank of America Corp. scaled back work with some SPACs and could retreat further as it evaluates its policies surrounding the deals, people familiar with the matter said.

Their pullback follows an intense boom in the vehicles over the past couple of years, as financiers, politicians and celebrities piled into the deals that list on public stock exchanges to raise money so they can buy other companies. But new guidelines from the Securities and Exchange Commission have sucked air out of the balloon, which was already rapidly deflating thanks to souring markets, jittery regulators and dwindling returns for the deals.

“The SEC continues to spoil an already rather lame SPAC party,” said Oliver Scharping, a portfolio manager at Bantleon. “There’s virtually no money to be made with new issuances right now.”

The banks’ recent concerns center around liability risks stemming from the new rules, which are aimed at tightening oversight on a market after it set back-to-back yearly records. The proposals would require SPACs to disclose more information about potential conflicts of interest and make it easier for investors to sue over false projections. 

They also would require underwriters of a blank-check offering to also be underwriters of the SPAC’s subsequent purchase of a target firm, known as the de-SPAC. That expansion of underwriter liability poses a greater risk for investment banks, prominent law firms have cautioned.

And so far, it has put the brakes on for Wall Street’s biggest banks with others expected to follow. Citigroup Inc. paused initial public offerings of new U.S. SPACs until it gets more clarity on the potential legal risks posed by the guidelines, Bloomberg reported last month.

Goldman is retreating because of the proposed rules, though it may elect to continue the advisory work with a small number of SPAC clients in rare cases. Bank of America, which is also continuing selective work with some deals, has ended its relationships with some SPACs and been in discussions with clients on navigating the current environment, Bloomberg reported.

Together, Bank of America, Citigroup and Goldman accounted for more than 27% of U.S. SPAC deals since the start of last year, overseeing about $47 billion of the transactions, according to data compiled by Bloomberg.

A SPAC works with its adviser even after going public to complete its merger with a target firm, known as the de-SPAC transaction. If it fails to complete that deal, it’s forced to return capital to investors.

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