The SEC said the case is its first enforcement action based on the new marketing rule that went into force last November. That regulation overhauled how advisors can promote their firms for the first time since 1961. Major provisions include permitting client testimonials and allowing the use of past performance metrics with many related restrictions.
“When [the SEC] comes into your shop, they’re looking at every aspect of the marketing rule, not just what they published” in guidance, Lynch said.
The case against Titan touched on other hot-button issues for the SEC. For instance, the agency also charged it with making “conflicting disclosures” about how it custodied client funds; failing to adopt policies and procedures regarding crypto trading by its employees; and violations regarding its use of “hedge clauses.”
“This is the perfect [compliance] cocktail,” Martin said. “There are a lot of issues here.”
‘Enforcement 40’ for 2020
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