Updated February 18th, 2024 at 15:57 IST
SEC found that VanEck collaborated with an influential online personality to enhance the fund’s appeal and promote its success on social media platforms.
Gary Gensler | Image:X/Twitter
SEC fines VanEck: VanEck Associates Corporation has agreed to pay a $1.75 million fine to settle charges brought by the Securities and Exchange Commission (SEC) related to the launch of a social media-focused exchange-traded fund (ETF) in 2021.
The SEC imposed a civil penalty on the investment adviser, stating that during the launch of the VanEck Social Sentiment ETF in March 2021, VanEck failed to fully disclose the involvement of a prominent social media personality in marketing the product.
The ETF aimed to track an index using “positive insights” from social media and other data sources. However, the SEC found that VanEck collaborated with an influential online personality to enhance the fund’s appeal and promote its success on social media platforms.
While the SEC did not explicitly name the influencer, previous reports have linked David Portnoy, the founder of Barstool Sports, to the promotion of the VanEck ETF. The regulator noted that the influencer’s compensation was tied to the fund’s growth, which was not disclosed by VanEck.
The SEC criticised VanEck for failing to inform the ETF’s board about the influencer’s involvement, stating that this undisclosed arrangement had significant implications for the management contract and fund operations.
Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, emphasised the importance of transparency from advisers, stating that accurate disclosures are essential for the board to properly assess advisory contracts and understand the economic impact of licensing agreements.
VanEck admitted to violating the Investment Company Act and Investment Advisers Act and agreed to a cease-and-desist order, censure, and the financial penalty without admitting or denying the findings.
This announcement follows VanEck’s decision to terminate its Bitcoin Strategy ETF product a month ago after a performance evaluation. Additionally, the company announced a fee reduction for its dedicated Bitcoin ETF, lowering fees from 0.25 per cent to 0.20 per cent as of February 21 in an effort to enhance its popularity.
