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Digital World (DWAC) confirms FINRA, SEC inquiries

By Kevin Donovan

18:17, 6 December 2021

Trump Building on Wall St in New York City
Early merger discussions may have violated securities law - Photo:

Digital World Acquisition confirmed Monday two inquiries from the Financial Industry Regulatory Authority (FINRA) and the US Securities and Exchange Commission (SEC) regarding events preceding its $293m (£221.1m) merger announcement with Trump Media and Technology Group.

The disclosure is listed as Item 8.01 Other Events in the 8-K filed Monday, announcing the sale of $1bn in PIPE securities.

DWAC stock rose 10.3% after Monday’s opening bell, to $49.46 from Friday’s $44.85 closing share price. After the early jump, however, DWAC stock moved lower to $41.26 before trading at $44 per share as of mid-day. Digital World stock trades over the Nasdaq exchange under the ticker DWAC.

“The transaction looking suspiciously like a scheme in which ‘the salesmen behind all of this should be fine, even if those who fall for their sales pitch get screwed’.”
by Sen. Elizabeth Warren

Early discussions

At issue are the seemingly preliminary discussions Trump Media (TMTG) had with Digital World CEO Patrick Orlando before Digital World was formed as a special-purpose acquisition company, in violation of the US Securities Act of 1933, despite Digital World reporting in its prior SEC filings it had had no such discussions.

While initial reports of these discussions emerged in late October, shortly after the merger was announced, this is the first time Digital World acknowledged the inquiries.

FINRA, SEC inquiries

“DWAC has received certain preliminary, fact-finding inquiries from regulatory authorities, with which it is cooperating,” Digital World stated in the 8-K filed today with the SEC. “Specifically, in late October and in early November 2021, DWAC received a request for information from FINRA, surrounding events (specifically, a review of trading) that preceded the public announcement of the October 20, 2021 Merger Agreement.”

The SEC, on the other hand, inquired about “meetings of DWAC’s board of directors, policies and procedures relating to trading, the identification of banking, telephone, and email addresses, the identities of certain investors, and certain documents and communications between DWAC and TMTG.”


39,676.60 Price
+0.260% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 22:00 (UTC)
Spread 106.00


16,001.20 Price
+0.470% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0040%
Overnight fee time 22:00 (UTC)
Spread 7.0

Oil - Crude

74.50 Price
-1.560% 1D Chg, %
Long position overnight fee -0.0136%
Short position overnight fee -0.0083%
Overnight fee time 22:00 (UTC)
Spread 0.040


2,072.25 Price
+1.760% 1D Chg, %
Long position overnight fee -0.0193%
Short position overnight fee 0.0111%
Overnight fee time 22:00 (UTC)
Spread 0.30

Warren calls for investigation

On 18 November, US Senator Elizabeth Warren (D-Massachusetts) wrote a letter to SEC chair Gary Gensler calling attention to the news reports and asking for an investigation into the merger, as well as SPAC activity in general.

Quoting DWAC’s S-1 shelf registration filed with the SEC on 8 July, Warren notes DWAC’s assertion that “we have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target.”

Warren then stated “these appear to be detailed discussions” taking place between DWAC and TMTG as early as March, “months prior to the SPAC’s initial filing in May 2021 and public offering in September 2021.”

“DWAC’s failure to disclose these talks during the process appears to be an omission of material information necessary for both early institutional investors and retail investors in the SPAC’s public offering,” the senator wrote to the SEC chair.

Noting the meteoric rise in DWAC stock price following the TMTG merger announcement and subsequent decline from the $175 per share high price makes, “the transaction looking suspiciously like a scheme in which ‘the salesmen behind all of this should be fine, even if those who fall for their sales pitch get screwed’.”

DWAC stated in the 8-K filing the FINRA inquiry “should not be construed as an indication that FINRA has determined any violations of Nasdaq rules or federal securities laws have occurred,” and the SEC’s inquiry “does not mean that the SEC has concluded that anyone violated the law.”

Read more: DWAC shares up 5% as Trump Media seeks Read more: DWAC shares up 5% as Trump Media seeks $1bn investmentbn investment

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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