SEC Brings First Marketing Rule Action; Firm to Pay $1M

What You Need to Know

Titan Global Capital Management’s violations included the misleading use of hypothetical performance metrics in ads, the SEC said.
The firm also made conflicting disclosures to clients about how Titan custodied crypto assets.
It agreed to pay an $850,000 fine, plus disgorgement and interest.

In its first action related to its new Marketing Rule, the Securities and Exchange Commission has ordered Titan Global Capital Management USA LLC, a New York-based fintech RIA, to pay more than $1 million for using hypothetical performance metrics in advertisements that were misleading, among other violations.

In its order, the SEC also charged Titan with “multiple compliance failures” that led to misleading disclosures about “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.”

For a period ranging from August 2021 to October 2022, Titan, which offers complex strategies to retail investors through its mobile trading app, “made misleading statements on its website regarding hypothetical performance, including by advertising ‘annualized’ performance results as high as 2,700 percent for its Titan Crypto strategy,” according to the SEC.

The order alleges that Titan’s ads were misleading “because they failed to include material information, for example, that the hypothetical performance projections assumed that the strategy’s performance in its first three weeks would continue for an entire year.”

The order also finds that Titan violated the Marketing Rule by advertising “hypothetical performance metrics without having adopted and implemented required policies and procedures or taking other steps” as required.