According to FINRA, LifeSci Capital, LLC was censured and fined $900,000 for receiving unreasonable underwriting compensation in a special purpose acquisition company (SPAC) IPO and making inaccurate disclosures to investors and regulators.

The firm participated in an IPO for a SPAC where the offering was declared effective by the SEC with underwriting terms that materially differed from those approved by FINRA. The firm inaccurately described its underwriting compensation in offering documents and FINRA filings in several ways.

First, although the prospectus stated that warrants would expire five years after the effective date, the private warrant agreement actually permitted holders to exercise them for a longer period. Second, while filings stated that securities received as underwriting compensation were subject to a 360-day lock-up, neither the warrant agreement nor any other agreements actually provided for such a lock-up.

FINRA also found that the firm failed to make required filings with FINRA in connection with the SPAC offering and two other public offerings. The firm failed to file documents required by FINRA Rules and failed to timely file required documents on six occasions, with delays ranging from less than one month to more than seven months.

The firm's supervisory failures were significant. LifeSci Capital had no procedures to determine the fairness of underwriting compensation or to discuss filing requirements. The firm did not implement any supervisory review to monitor its underwriting compensation or its filings with FINRA, and failed to assign supervisory responsibility for compliance with FINRA Rule 5110 to any individual.

Investors in SPACs should understand that underwriting compensation and lock-up provisions are important factors in evaluating these offerings. Accurate disclosure of these terms is essential for making informed investment decisions.