The U.S. Securities and Exchange Commission (SEC) announced today that it has sued New York-based FinTech investment advisor Titan Global Capital Management USA LLC (Titan) for violations related to deceptive advertising and other compliance deficiencies. This is the first violation of the SEC’s amended marketing rule.
According to the SEC 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 ads predicted “annual” performance results as high as 2,700%. The SEC alleges that these ads were misleading because they omitted vital information, such as the assumption that the strategy’s initial three-week performance would last a full year.
In addition, Titan has violated the Commission’s marketing rule by promoting these hypothetical measures without having implemented the necessary policies and procedures.
The SEC’s complaint also revealed several other deficiencies in Titan’s compliance. These include conflicting revelations about how Titan handled the custody of crypto assets for customers, a lack of policies and procedures regarding the private trading of crypto assets by Titan’s employees, and unauthorized use of customer signatures. However, Titan itself reported to the SEC that they had not always obtained customer 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, stressed the importance of accurate disclosures, especially when promoting complex strategies. He stated that while the SEC has changed its marketing rule to allow the use of hypothetical performance metrics, investment advisors are still required to adhere to guidelines designed to prevent fraudulent activity.
As a result of the SEC’s findings, Titan has agreed to settle 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 conservatory interest, and an $850,000 civil fine. The punishment will be meted out to Titan’s affected customers.
The research team consisted of Kelly Rock, Elisabeth Goot, Armita Cohen and Osman Nawaz from the Complex Financial Instruments Unit. They were supported by Alexander Lefferts of the Enforcement Division’s Office of Investigative and Market Analytics, and Ling Yu and Carolyn O’Brien of the Examination Division.
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