by T. GormanPosted on Posted in SECActions

Many investment funds have provisions which impose restrictions on the type or amount of investments which can be purchased by the firm. These can aid investors considering if they are interested in acquiring shares of a particular investment fund. If, however, the fund choses to ignore investment restrictions it may defraud investors, causing losses while violating not just the fund provisions but the securities laws. A good example of such an action is the Commission’s most recent case in the area, SEC v. Shang, Civil Action No. 25 Civ. 1920 (D. N.J. Filed April 11, 2025).

Named as defendants in the action are David Yow Shang Chiueh and Upright Financial Corporation. The firm, based in East Hanover, New Jersey, has been registered with the Commission as an investment adviser since March 1991. Mr. Chiueh is the founder and owner of the firm and was president during the period relevant here.

The firm has disclosed since its inception in 1998 that its investment policy would not permit more than 25% of its assets to be concentrated in one industry. Nevertheless, a settled action, focused on the period July 2017 to 2020, stated the company had a concentration of more than 25% of its assets in one industry. A complaint, dated November 2021, alleged violations of the firm’s concentration provisions. Upwright Finananial Corp. and David Yow Shang, A.P. File No. 3-20664 (Nov. 24, 2021). The alleged actions violated the concentration policy and caused investor losses of about $1.6 million. Despite the violations, Defendants continued to collect advisory fees of about $100,000.

Contrary to Defendants promise to halt the violations of the concentration policy, they continued. In addition, Defendants engaged in other violations. First, they withheld information from the Board necessary to evaluate its contract with the firm. Second, they misled the Board about past conduct. The Order alleges violations of Advisers Act Sections 206(1), 206(2) and 206(4). See Lit. Rel. No. 26286 (April 15, 2025).

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by T. GormanPosted on Posted in SECActions

The Commission filed on new cases last week. It was based on making false statements to market a new claimed AI product.

Be careful, be safe this week.

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the Commission filed 1 new civil injunctive action and no new administrative proceeding.

False statements: SEC v. Milan Patel, Civil Action No. 23-cv-0026 (N.D. Ga.) is a previously filed action which named as defendants Vinod Patel of Coming, Georgia and others. The complaint as to Mr. Patel, alleged that he received fabricated rumors that he knew were false from other defendants involved in the action. Nevertheless, he circulated the rumors. Defendants’ contacts also circulated the rumors. Between 2017 and January 2020 the complaint alleges that Defendant Patel circulated over 100 rumors regarding stock trading that was false. Mr. Patel sold his securities holdings, generating over $1 million in illicit trading. On April 11, 2025, the court entered a final judgment against Mr. Patel, based on his role in the scheme. The judgement entered was based on the Exchange Act Section 10(b) and Rule 10b-5 and Securities Act Section 17(a). The judgement required Defendant to pay disgorgement in the amount of $1,125,263, plus prejudgment interest of $395,309. In the parallel criminal action brought by the U.S. Attorney’s Office for the Northern District of Georgia, Mr. Patel pleaded guilty to criminal charges and was sentenced to serve 18 months in prison. See Lit. Rel. No. 26283 (April 11, 2025).

False statements: SEC v. Saniger, Civil Action No. 25 Civ. 2937 (S.D.N.Y. April 9, 2025) is an action which names as defendants Alberto Saniger, the founder and CEO of Nate, Inc. Defendant Saniger marketed the firm as a mobile shopping application that used artificial intelligence to complete users’ purchases across a variety of retail platforms. In fact, the claims were false, there was no AI device completing the transactions. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder. See Lit. Rel. No. 26282 (April 11, 2025).

FinCen

Paper: The Financial Crimes Enforcement Network issued a paper titled Analysis of Fentanyl Related Threat Patterns and Trends in Bank Secrecy Act Reports, on April 9, 2025 (here).

Hong Kong

Remarks: Christina Choi delivered the Keynote speech at the Hong Kong Web3 Festival, according to a release dated April 7, 2025 (here).

Singapore

Paper: The Monetary Authority of Singapore published a paper on Proposed Legislative Amendments to the Requirements for Enhancing Pre-and Post transaction safeguards for retail clients, according to a release dated March 28, 2025 (here).

Those principles can be summarized as follows:

Start early: The point is to begin as soon as possible to create savings and a plan that fits your goals for the future;

Use free tools: At Investor.gov the Office publishes materials to help investors start and continue to invest properly without charge;

Create a savings/investing plan: There are an abundance of resources available at little to no cost to help get a start and continue building a financial future. While Investor.gov is a great source of information, it is only one of several.

Pay off high interest debts: A key part of the plan is to eliminate high interest debt to the extent possible and focus on sources of capital other than items such as high interest loans.

Investigate the background of professions: It is essential to inquire about the background of any professionals assisting with the development of the plan. Stated differently, any advice offered should be investigated prior to acceptance.

Research: All investments should be investigated before committing funds. Unsolicited advice should be carefully evaluated before being accepted.

Invest regularly: It is essential to invest regularly using a long-term plan. This helps build wealth.

Retirement plans: Invest in a retirement plan sponsored by your employer and take advantage of any matching funds offered. You can also use other opportunities.

Scams: It is essential to avoid scams and unsolicited advice. Investor alerts from the Commission and similar sources can aid in this endeavor.

FOMO: Finally, it is essential to select proper investments. This typically translates to skipping FOMO or “fear of missing out.” It is not necessary to invest in the latest trend. Rather, the key is good, solid investments.

Adherence to the Commission’s building blocks as listed above can aid building a long term and profitable plan. The Commission’s presentation of these points should be carefully reviewed. They are available here.

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