SEC Fines Fintech Firm Titan Over $1M for Marketing Rule Violation
The US Securities and Exchange Commission announced a fine of more than $1 million to fintech investment advisory firm Titan Global Capital Management USA LLC in connection with violations related to misleading advertisements and other compliance failures.
This marks the first violation of the SEC’s amended marketing rule, which went into effect in November 2022 and has since been broadened and amended.
The New York-based firm agreed to a cease-and-desist order, to a censure and to pay $192,454 in disgorgement, prejudgment interest of $7,598 and an $850,000 civil penalty that will be distributed to affected clients, according to the SEC. However, Titan did not admit to or deny the filings.
Designed to prevent advisors from misleading clients, the rule expanded the definition of advertising when it comes to investments and added disclosure requirements for marketing materials.
In Monday’s order, the SEC charged Titan with “multiple compliance failures” that led to misleading disclosures about the custody of clients’ crypto assets, the use of improper “hedge clauses” in client agreements, the unauthorized use of client signatures and the failure to adopt policies concerning crypto asset trading by employees.
“Titan’s advertisements and disclosures painted a misleading picture of certain of its strategies for investors. This action serves as a warning for all advisors to ensure compliance,” said Osman Nawaz, chief of the SEC enforcement division’s complex financial instruments unit, said
The SEC alleged that Titan made misleading statements on its website and mobile app regarding hypothetical performance, including an advertisement of annualized performance results as high as 2,700% for its cryptocurrency offering.
The order also found that Titan violated the marketing rule by advertising hypothetical performance metrics without having “adopted and implemented required policies and procedures or taking other steps required by the Commission’s marketing rule.”