On September 6, 2022, the SEC issued an order instituting administrative and cease-and-desist proceedings against Perceptive Advisors LLC (“Perceptive”) a New York based investment adviser. In anticipation of the institution of the proceedings, Perceptive and the SEC entered into a Settlement.
Perceptive provides investment advisory advice to pooled investment vehicles and according to its March 31, 2022 Form ADV it had approximately $10.36 billion in assets under management. One of Perceptive’s investment vehicles is the Perceptive Life Sciences Master Fund, Ltd. (the “PSLM Fund”).
The gravamen of the SEC’s order revolves around Perceptive’s activities concerning special purpose acquisitive companies (“SPACs”). A SPAC is generally a publicly-traded, shell company which raises money, through an IPO, for the purpose of acquiring other, privately held companies. SPAC’s have “sponsors” that launch the IPO and generally manage the business of the SPAC, including the process of acquiring target companies. The sponsor is typically compensated on a percentage (often 20% to 25%) of the SPAC’s initial public offering proceeds (in the form of discounted shares and, at times, warrants). This compensation is sometimes referred to as the sponsor’s “promote” or “founder shares,” and it is received upon completion of a SPAC’s acquisition of a target company.