On August 21, 2023, the Securities and Exchange Commission (SEC) announced that it has levied charges against “Titan Global Capital Management USA LLC”, a New York-based FinTech investment adviser. The charges stem from Titan’s use of “hypothetical performance metrics” in advertisements that the SEC deemed misleading.
From August 2021 to October 2022, Titan, which provides multiple intricate strategies to retail investors via its mobile trading app, made statements on its website about hypothetical performance. Notably, the firm advertised “annualized” performance results as high as 2,700 percent for its “Titan Crypto strategy”. The SEC’s order alleges that these advertisements were misleading as they omitted crucial information. For instance, the hypothetical performance projections assumed that the strategy’s performance in its initial three weeks would persist for a full year.
Furthermore, the SEC found that Titan violated the “marketing rule” by promoting hypothetical performance metrics without establishing and executing the necessary policies and procedures. This marketing rule had been revised in December 2020.
The SEC’s order also highlighted other discrepancies:
- Titan provided inconsistent disclosures to clients about the “custody of crypto assets”.
- The firm included liability disclaimer language in its client advisory agreements, which gave a false impression that clients had relinquished non-waivable rights to take action against Titan.
- Contrary to its claims, Titan did not have policies and procedures concerning employee personal trading in crypto assets.
Additionally, Titan self-reported to the SEC that it did not ensure client signatures were obtained for specific transaction types in client accounts and agreed to settle related charges.
Osman Nawaz, Chief of Enforcement’s Complex Financial Instruments Unit, commented, “Titan’s advertisements and disclosures painted a misleading picture of certain of its strategies for investors. This action serves as a warning for all advisers to ensure compliance.”
In response to the charges, Titan cooperated with the investigation and consented to the SEC’s order. Without admitting or denying the SEC’s findings, Titan has agreed to a cease-and-desist order, a censure, and will pay $192,454 in disgorgement, prejudgment interest, and an $850,000 civil penalty. The penalty amount will be distributed to affected clients.
Image source: Shutterstock
Credit: Source link
