Fraud and Fiduciary Breach: SEC Alleges Repeat Violations by N.J. Investment Firm and Exec
The U.S. Securities and Exchange Commission has filed charges against 67-year-old David Yow Shang Chiueh of East Hanover, N.J., and his investment advisory firm, Upright Financial Corp., for misconduct and for investing more than 25% of Upright Growth Fund’s assets in a single company over multiple years, causing losses of $1.6 million.
In November 2021, Chiueh and Upright settled SEC charges that they, as investment advisers to Upright Growth Fund, violated its policy by investing more than 25% of its assets in one industry between July 2017 and June 2020, committing fraud and breaching their fiduciary duties.
Despite being ordered to stop this conduct, the SEC’s complaint alleges, the defendants continued their fraud by violating the 25% industry concentration limit and making misrepresentations about it between at least Nov. 24, 2021, and June 23, 2024. As a result, the complaint alleges that the defendants’ decision to wait more than 2.5 years to sell the relevant stock resulted in losses of approximately $1.6 million to the fund and its investors.
Meanwhile, the SEC filing claims that the defendants collected advisory fees of approximately $100,000 on the fund’s assets that exceeded the 25% limit.
Additionally, the SEC’s complaint alleges the defendants engaged in further misconduct during this same period when Chiueh operated the fund’s board without the required number of independent trustees and misrepresented the independence of one in filings. The defendants also failed to provide or withheld key information from the board, according to the complaint, and they hired an accountant for the fund without the required vote by the board.
“As alleged, the defendants not only ran the fund contrary to its fundamental investment policies, but they actively misled investors and the fund’s board about their conduct,” said Corey Schuster, chief of the Division of Enforcement’s asset management unit. “Undeterred by their prior SEC settlement involving these very same issues, we allege that the defendants repeatedly violated fundamental rules designed to protect investors in mutual funds.”
The SEC’s complaint charges the defendants with violating antifraud and other provisions of the federal securities laws, including provisions of the Investment Advisers Act of 1940 and the Investment Company Act of 1940. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties.
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