Recently, the U.S. Securities and Exchange Commission (SEC) announced charges against registered investment adviser Twenty Acre Capital LP, alleging misleading conduct in its performance advertising and failure to provide fair and balanced information.

According to the SEC's order, from November 2021 to February 2023, Twenty Acre promoted the performance of a private fund it managed to potential investors using performance return data from a single investor, which did not represent the actual performance of the entire fund.

The SEC's order stated that Twenty Acre's advertisement failed to disclose that the performance of this investor significantly differed from the overall fund performance and the returns of other investors in some instances, and was substantially higher than the fund's overall performance. This discrepancy was mainly due to investment restrictions under certain Financial Industry Regulatory Authority (FINRA) rules, including prohibitions on certain individuals purchasing initial public offering (IPO) securities.

The SEC's order found that Twenty Acre violated the anti-fraud provisions of Section 206(4) of the Investment Advisers Act of 1940 and its Rules 206(4)-1(a) (commonly known as the "Marketing Rule") and 206(4)-8.

Without admitting or denying the SEC's findings, Twenty Acre agreed to the SEC's cease-and-desist order and censure. Additionally, Twenty Acre will pay a civil penalty of $100,000.

This SEC enforcement action highlights the importance of regulatory agencies in protecting investor interests and maintaining market fairness. It also serves as a reminder to investment advisory firms to comply with relevant regulations in performance advertising to ensure transparency and accuracy of information.