VanEck Admits ETF Marketing Violation, Settles SEC

VanEck has agreed to pay $1.7m fine to settle SEC accusations regarding its 2021 ETF launch.

In order to settle accusations from the United States Securities and Exchange Commission (SEC) related to VanEck’s 2021 introduction of an exchange-traded fund (ETF) with a social media focus, the company will pay a fine of $1.75 million.

The investment adviser was hit with a civil penalty by the SEC. In a statement released on February 16, the SEC disclosed that VanEck had failed to adequately disclose that a well-known social media celebrity will be helping to market the VanEck Social Sentiment ETF when it launched in March 2021.

Using “positive insights” from social media and other data sources, the ETF sought to track an index. But the SEC found that VanEck worked with a powerful and contentious online personality to increase the fund’s appeal and tried to use social media to boost its performance.

The influencer’s identity was withheld by the financial watchdog, but reports from 2021 linked Barstool Sports founder David Portnoy to the promotion of the VanEck ETF. Unknown to the public, the regulator discovered that the influencer’s fee was correlated with the fund’s growth, ensuring increased remuneration as the fund grew.

The concealed agreement was criticized by the SEC, with particular attention paid to VanEck’s neglect to disclose to the ETF board the influencer’s anticipated role. The board’s obligation to supervise financial matters during advisory contract discussions was broken by this secret arrangement, which had substantial effects on the management contract and fund operations.

The co-chief of the asset management unit of the SEC Enforcement Division Andrew Dean, emphasized the need of adviser openness. He pointed out that the board’s capacity to evaluate the advisory contract fairly and comprehend the financial implications of licensing agreements is hampered by the inaccurate disclosures made.

VanEck acknowledged violating the Investment Company Act and Investment Advisers Act by consenting to the SEC’s order. Without acknowledging or contesting the findings the corporation received a cease and desist order, censure and the mandatory financial penalty.

The move comes after a comprehensive performance review by the company led to the decision to discontinue one of its ETF products, the Bitcoin Strategy ETF, a month ago. Seemingly in an effort to increase the number of people that visit its designated site bitcoin Van Eck, an ETF with the ticker HODL, said on February 15 that it would be reducing its fees starting on February 21 from 0.25% to 0.20%.