SEC hands fintech investment advisor Titan $850,000 penalty for misleading clients
The US Securities and Exchange Commission (SEC) has handed Titan Global Capital Management USA LLC a penalty of $850,000 for allegedly misleading investors with “hypothetical performance metrics in advertisements” and compliance failures that led to misleading disclosures about custody of clients’ crypto assets.
Titan handed fine for allegedly misleading investors
The regulator says the fintech investment advisor, which is based in New York, misled investors by using hypothetical performance metrics for a period ranging from August 2021 to October 2022, “including by advertising ‘annualized’ performance results as high as 2,700 percent for its Titan Crypto strategy”.
These metrics, the regulator says, “failed to include material information” and violated the SEC’s marketing rule, which was amended in December 2020, as the advisory didn’t adopt or implement the required policies and procedures.
The amendment meant that Titan could use hypothetical performance metrics in its advertising, but that it also had to simultaneously adhere to additional requirements outlined to prevent fraud.
In addition to this, Titan was found to have made “conflicting disclosures” to clients about how it custodied crypto assets, and had allegedly given clients the impression that they had “waived non-waivable causes of action against Titan” through the improper direction of hedge clauses.
Osman Nawaz, chief of enforcement’s complex financial instruments unit, says that investment advisers “must ensure the accuracy of disclosures made to existing and prospective investors”.
“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.”
Although it has neither admitted nor denied the SEC’s findings, Titan cooperated with the SEC’s investigation and will pay $192,454 in disgorgement, prejudgment interest and an $850,000 civil penalty, the funds from which will be distributed to affected clients.
