The U.S. Securities and Exchange Commission (SEC) announced today that it has charged New York-based FinTech investment adviser Titan Global Capital Management USA LLC (Titan) with violations related to misleading advertisements and other compliance failures. This marks the first violation of the SEC’s amended marketing rule.
According to the SEC’s announcement, from August 2021 to October 2022, Titan made misleading statements on its website about the hypothetical performance of its investment strategies, including its Titan Crypto strategy. Titan’s advertisements projected “annualized” performance results as high as 2,700%. The SEC claims these advertisements were misleading because they omitted material information, such as the assumption that the strategy’s initial three-week performance would continue for an entire year.
Furthermore, Titan violated the Commission’s marketing rule by promoting these hypothetical metrics without having implemented the necessary policies and procedures.
The SEC’s complaint also revealed several other compliance lapses by Titan. These included conflicting disclosures about how Titan handled the custody of crypto assets for clients, a lack of policies and procedures regarding personal crypto asset trading by Titan’s employees, and unauthorized use of clients’ signatures. However, Titan did self-report to the SEC that they hadn’t always obtained client signatures for specific transactions, leading to a settlement of those related charges.
Osman Nawaz, Chief of Enforcement’s Complex Financial Instruments Unit at the SEC, emphasized the importance of accurate disclosures, especially when promoting complex strategies. He stated that while the SEC has amended its marketing rule to allow the use of hypothetical performance metrics, investment advisers must still adhere to guidelines meant to prevent fraudulent activities.
As a result of the SEC’s findings, Titan has agreed to a settlement without admitting or denying the allegations. The settlement includes a cease-and-desist order, a censure, a combined payment of $192,454 in disgorgement and prejudgment interest, and an $850,000 civil penalty. The penalty will be distributed to Titan’s affected clients.
The investigation team consisted of Kelly Rock, Elisabeth Goot, Armita Cohen, and Osman Nawaz from the Complex Financial Instruments Unit. They were supported by Alexander Lefferts from the Enforcement Division’s Office of Investigative and Market Analytics, and Ling Yu and Carolyn O’Brien from the Division of Examinations.
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