Fund Managers Punished by SEC for Obscuring Portfolio Details

An Asia-focused investment advisory firm and its top executives misled investors about one of the firm's flagship funds and failed to disclose conflicts of interest, according to charges announced today by the Securities and Exchange Commission.

Mass Ave Global Inc., a New York City firm that managed over $1 billion in assets, and co-founder and CEO Winston M. Feng were accused of providing inaccurate data to investors from 2020 to 2022 regarding the holdings and exposures of the firm's Mass Ave Opportunity Fund.

The SEC alleged that Feng personally altered underlying portfolio numbers, which were then included in reports and marketing materials sent to investors detailing the fund's holdings, top positions, and overall composition. These representations were "materially false and misleading," the SEC stated.

Separately, the agency claimed Mass Ave Global concealed a significant conflict of interest in late 2022 and early 2023 by not disclosing that the firm's other co-founder was operating an unaffiliated hedge fund in China while still involved with Mass Ave.

"Fund managers have an obligation to give investors a clear and accurate picture," said Osman Nawaz, Chief of the SEC's Complex Financial Instruments Unit. "Fell short on disclosures of any kind, whether involving fund exposures or potential conflicts, and we will take action."

To settle the charges, Mass Ave agreed to pay a $350,000 civil penalty. Feng, who also served as chief investment officer overseeing the firm's portfolios, was personally fined $250,000 and suspended from the securities industry for one year.

The SEC's order found the investment adviser violated anti-fraud and compliance rules under the Investment Advisers Act, while Feng violated anti-fraud provisions specifically. However, as is standard, neither admitted or denied the regulator's findings as part of the settlement.

In January 2023, Mass Ave acknowledged to investors that past communications about the Opportunity Fund were inaccurate and lacked proper transparency. This prompted a rush of redemption requests from clients, and the firm has been winding down operations since that revelation.

The enforcement action is the latest example of the SEC demanding fund managers and advisers be fully forthcoming with investors. Just last month, the agency fined two prominent hedge funds for misleading disclosures and marketing practices related to their funds' investment strategies and track records.

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