News from Attorney General Eric T. Schneiderman
FOR IMMEDIATE RELEASE
January 9, 2017
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A.G. SCHNEIDERMAN SECURES AGREEMENT WITH HEDGE FUND MANAGER WHO MISLED INVESTORS ABOUT INVESTMENT RISKS
Schneiderman’s Investigation Of Hedge Fund Manager Vincent Au Results In Updated, Full Risk Disclosures For Investors
Settlement Also Provides An Opportunity To Redeem Investments Once They Receive Updated Disclosures Regarding Au’s Hedge Funds, Gondor Partners, LP And Gondor Partners, Ltd.
NEW YORK – Attorney General Eric T. Schneiderman today announced the resolution of an investigation into hedge fund manager Vincent Au for misrepresentations made by Au in the course of marketing two hedge funds, Gondor Partners, LP and Gondor Partners, Ltd. (the “Gondor funds”). To resolve Attorney General Scheiderman’s investigation, Au will provide complete and updated risk disclosures to all investors in the funds, will provide all investors with audited financial statements for the funds, and will give all investors an opportunity to redeem their investments in the funds. Au will also pay a penalty of $20,000 to the State of New York.
“This agreement underscores the need for investment advisers to clearly and comprehensively disclose the risks associated with investment opportunities. Investors should be fully informed when making financial decisions, and we will not allow advisers to withhold material information from their clients,” said Attorney General Schneiderman.
Au’s investment strategy on behalf of the Gondor funds primarily involves selling equity options, an investment strategy that can result in losses if stock prices move against the Gondor funds’ positions. In marketing materials for the Gondor funds, Au described scenarios in which his options strategy profits or breaks even, but did not include any scenarios in which the strategy would result in losses. By omitting any scenarios that posed a risk of loss, the marketing materials created a misleading picture of the risks associated with investing in the funds. Additionally, for a period, Au failed to disclose to his investors that he had been the subject of a complaint filed by the Financial Industry Regulatory Authority (FINRA) related to his duties as anti-money laundering compliance officer and his sales of unregistered subpenny stocks at a former firm, Avalon Partners. Instead, the Gondor funds’ offering memoranda falsely stated that there had been no such actions against Au. The Office of the Attorney General determined that Au’s misrepresentations and omissions violated the Martin Act and Executive Law § 63(12).
Through the Gondor funds, Au manages approximately $12 million for 166 investors. Au also manages the hedge funds Rivendell Partners, LP, and Rivendell Partners, Ltd.
The Assurance of Discontinuance agreed to by Au, which includes a letter sent to Au’s investors, can be found here.
Attorney General Schneiderman thanks FINRA for providing information helpful to the investigation.
The investigation was handled by Assistant Attorneys General Jonathan Zweig and Kenneth Haim of the Attorney General’s Investor Protection Bureau. Katherine C. Milgram is Chief of the Investor Protection Bureau. Manisha M. Sheth is the Executive Deputy Attorney General for Economic Justice.