In a significant enforcement action, the Securities and Exchange Commission (SEC) has announced settled proceedings against the formerly registered investment adviser Mass Ave Global Inc. (MassAve) and its co-founder and CEO Winston M. Feng. The charges stem from false and misleading statements made to investors in MassAve’s flagship opportunity fund and failures to disclose critical conflicts of interest. As part of the settlement, MassAve will pay a civil penalty of $350,000, and Feng will pay a $250,000 penalty and face a 12-month suspension from industry-related work.

Background of the Case

MassAve, based in New York City, was a prominent investment adviser specializing in Asia-focused investments, managing over $1 billion in regulatory assets. From 2020 to 2022, the firm allegedly issued a series of materially false and misleading statements regarding its flagship opportunity fund's holdings and exposures. According to the SEC, some of these inaccuracies were due to modifications made by Feng to the underlying portfolio data, which were subsequently included in investor communications such as monthly tear sheets, summary portfolio snapshots, and top 10 position lists.

Compounding these issues, from late 2022 to early 2023, MassAve failed to disclose a conflict of interest related to its other co-founder operating a separate hedge fund in China. This lack of transparency violated essential compliance policies and procedures that safeguard investor interests.

Implications and Penalties

In January 2023, MassAve alerted investors about the inaccuracies in its communications and the lack of appropriate disclosures. This revelation led to a significant number of redemption requests, prompting the firm to wind down its operations.

The SEC’s orders determined that MassAve violated the antifraud and compliance provisions of the Investment Advisers Act of 1940, while Feng was found in violation of the antifraud provisions of the same Act. Without admitting or denying the findings, MassAve and Feng consented to the SEC’s orders, agreeing to cease and desist from further violations, and accepting the imposed penalties.

Regulatory Commentary

Osman Nawaz, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, emphasized the importance of complete and accurate reporting in investor communications and conflict of interest disclosures. Nawaz stated, "Complete and accurate reporting at all turns, whether in investor communications or about conflicts of interest, is vital to investor protection. We will continue to hold individuals accountable for falling short in making such disclosures."

Conclusion

This case underscores the critical importance of transparency and integrity in investment advisory services. The SEC's action against MassAve and Winston Feng serves as a stern reminder of the rigorous standards required for investor protection and the severe consequences of non-compliance.

For more information on the SEC's enforcement actions and to stay updated on regulatory developments, visit the SEC’s official website.

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