Investment Company Shareholders Lose Millions
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).