SEC sanctions firm over SPAC deal disclosures

The U.S. Securities and Exchange Commission (SEC) sanctioned investment advisory firm Perceptive Advisors LLC for failing to disclose alleged conflicts of interest involving special purpose acquisition company (SPAC) deals.

Without admitting or denying the SEC’s charges, the New York-based firm agreed to a cease-and-desist order, a censure, and a US$1.5-million penalty to settle the allegations.

The regulator alleged that Perceptive formed multiple SPACs in 2020 that were sponsored by entities owned by personnel at the firm and by a private fund it advised that stood to benefit when those SPACs completed business acquisitions.

The SEC found the firm “repeatedly invested” assets of a private fund it advised to complete these deals, and didn’t disclose these conflicts.

“Perceptive did not provide its private fund clients and investors with adequate information about the conflicted SPAC investments,” said Dabney O’Riordan, chief of the SEC enforcement division’s asset management unit.

“Today’s action reflects the commission’s continued effort to hold private fund advisers accountable when they fail to live up to their obligations,” he added.

Earlier this year, the SEC proposed a series of rule changes designed to address growing investor protection concerns involving SPACs, which have enjoyed a boom over the previous couple of years.

Those reforms seek to enhance disclosure for SPAC deals, and contemplate added investor protections to level the playing field between these kinds of shell company transactions and more highly regulated traditional initial public offerings.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.