The New York-based FinTech investment advisory firm offers multiple complex strategies to retail investors through its mobile trading app. According to the SEC’s order, from August 2021 to October 2022, Titan “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.”
The SEC alleged Titan’s advertisements 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.”
According to the SEC’s allegations, Titan violated the SEC’s amended marketing rule “by advertising hypothetical performance metrics without having adopted and implemented required policies and procedures.”
The SEC further alleged that Titan:
- Made conflicting disclosures to clients about how Titan custodied crypto assets;
- Included in its client advisory agreements liability disclaimer language that created the false impression that clients had waived non-waivable causes of action against Titan; and
- Contrary to representations, failed to adopt policies and procedures concerning employee personal trading in crypto assets.
“When offering and marketing complex strategies, investment advisers must ensure the accuracy of disclosures made to existing and prospective investors,” said Osman Nawaz, Chief of Enforcement’s Complex Financial Instruments Unit. “The Commission amended the marketing rule to allow for the use of hypothetical performance metrics but only if advisers comply with requirements reasonably designed to prevent fraud.”
“Titan’s advertisements and disclosures painted a misleading picture of certain of its strategies for investors,” Nawaz added. “This action serves as a warning for all advisers to ensure compliance.”
According to the SEC, Titan self-reported to Commission staff its failure “to ensure that client signatures were obtained for certain types of transactions in client accounts.” Titan consented to the entry of the SEC’s order finding that it violated the Advisers Act and agreed to pay $192,454 in disgorgement and prejudgment interest, as well as an $850,000 civil penalty.
Titan’s Response
“Although Titan reached a settlement with the SEC, Titan neither admits nor denies any wrongdoing,” the company said in a statement. “We fully cooperated with the SEC’s inquiry and are pleased to have reached a resolution of these issues.”
Titan also noted that the SEC acknowledged that, in July 2022, Titan took remedial measures to enhance its compliance program, “including hiring a new chief legal and chief compliance officer and additional legal and compliance staff,” the company stated. “Titan continues to make significant investments to build and enhance its compliance program.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.