Perceptive Advisers Gets SEC $1.5M Wrist Slap re SPACs

September 7, 2022 10:49 AM EDT PeopleLaw
'Conflicts of interest': SEC charges Perceptive Advisors over SPAC dealings, settles for $1.5M penalty
Kyle LaHucik
Associate Editor

While the SPAC market continues to oscillate between inked deals, nixed agreements and pulled IPOs, one investment advisor will have to pony up $1.5 million to the SEC for what the agency deemed “conflicts of interest” related to blank check dealings.

Perceptive Advisors, the 23-year-old New York investment advisory firm which touts $9.5 billion in assets under management, has set up multiple special purpose acquisition companies under the name Arya Sciences Acquisition Corp., with I, II, III and IV stapled on at the end. Arya V, which went public in July 2021 and has yet to announce a business merger, was not mentioned by the SEC.

The agency is charging Perceptive on the grounds that the firm failed “to disclose conflicts of interest regarding its personnel’s ownership of sponsors of special purpose acquisition companies (SPACs) into which Perceptive advised its clients to invest,” according to a Tuesday press release and SEC litigation document.

Perceptive did not admit or deny the SEC’s findings, the agency said in its press release. The advisory firm shook hands on a cease-and-desist order, a censure and the $1.5 million penalty, according to the SEC.

Perceptive also failed to “timely file” a required SEC document disclosing its beneficial ownership of stock in a public company, Amicus Therapeutics. In the time it waited to file the necessary document, “through a private fund it advised, Perceptive improperly acquired beneficial ownership of additional stock” in Amicus, which inked a deal with a Perceptive SPAC but then reneged on that tie-up in February of this year.

In an emailed statement to Endpoints News, a Perceptive spokesperson said the firm “fully cooperated with the SEC.”

“It should be noted that these disclosure gaps were identified internally. Perceptive had remedied or was in the process of remedying all SPAC disclosure and compliance gaps ultimately identified by the SEC prior to receiving the SEC’s initial inquiry,” the spokesperson said. “We have already taken significant, proactive steps to enhance our controls and policies, and as an organization we take our responsibilities to our investors seriously and are committed to transparency and the highest standards of governance.”

UPDATED: Amicus and Perceptive call off SPAC merger for gene therapy spinout after recent setback

The first Arya SPAC was 100% owned by a Perceptive-advised private fund, known as Perceptive Life Sciences Master Fund, or PLSM, as described in the SEC’s document, and ended up combining with TCR-focused biotech Immatics.

But the SEC’s charges center around Aryas II, III and IV, which involved “five Perceptive supervised personnel” as part of the sponsor ownership, meaning those individuals could receive some of the SPAC sponsor’s compensation.

“Accordingly, the Perceptive personnel had material conflicts of interest that could affect the advisory relationship between Perceptive and its advisory clients, and could cause Perceptive to render advice that was not disinterested,” the SEC writes in its document.

For Aryas II and III, “Perceptive caused the PLSM Fund to participate in PIPE transactions in the amount of $30 million and $55 million, respectively.” And PLSM bought common stock of both of those Arya businesses prior to their combinations with Cerevel and Nautilus, respectively, the SEC noted.

A Cerevel spokesperson said the company had no comment. Nautilus CEO Sujal Patel, in an emailed statement to Endpoints, called Perceptive a “great partner to work with.”

“Thus, Perceptive personnel had conflicts of interest that, among other things, could affect both whether or not Perceptive selected certain investments on behalf of its advisory clients as well as the size and scope of any such investments,” the SEC wrote.

Perceptive formed Aryas II, III and IV from February to August 2020, but the firm did not disclose its “SPAC-related conflicts of interest” to PLSM’s board of directors until March 24, 2021, despite the board holding quarterly meetings, according to the SEC. The SEC also found that Perceptive suggested to investors that its SPACs were fund-sponsored, failing to disclose that some of the firm’s personnel had ownership stakes in the blank check’s sponsors. In the case of Arya IV, those personnel owned 30% of the SPAC sponsor, the SEC found.

“Today’s action reflects the Commission’s continued effort to hold private fund advisers accountable when they fail to live up to their obligations under the Advisers Act,” Dabney O’Riordan, leader of the SEC enforcement division’s asset management unit, said in a statement.