VanEck pays $1.75M to settle SEC charges over undisclosed influencer marketing for its ETF launch.
In a recent development, VanEck has consented to a $1.75 million settlement with the United States Securities and Exchange Commission (SEC). This agreement comes in the wake of charges related to the marketing strategies employed during the 2021 launch of a social media-centric exchange-traded fund (ETF). The SEC’s investigation uncovered that VanEck failed to fully disclose the involvement of a high-profile social media influencer in the promotion of the VanEck Social Sentiment ETF, which sought to capitalize on positive social media buzz and other data.
This ETF, designed to track an index of social media sentiment, became the center of controversy due to undisclosed financial arrangements with the influencer, whose compensation was directly linked to the fund’s performance. Such a structure ensured the influencer’s earnings would increase in tandem with the fund’s growth, a detail not made known to the ETF’s board or the investing public.
The SEC pinpointed this lapse as a breach of trust, emphasizing that VanEck’s omission deprived the ETF’s board of crucial information necessary for overseeing the fund’s advisory contracts. This oversight not only contravened the Investment Company Act and Investment Advisers Act but also compromised the board’s ability to make informed decisions regarding the fund’s management and operations.
Transparency and Accountability
Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, highlighted the importance of transparency in these processes. The lack of clear disclosures obstructs the board’s capacity to evaluate advisory contracts effectively and grasp the financial implications of such partnerships.
While VanEck has neither admitted nor denied the findings, it has agreed to the imposition of a cease and desist order, a censure, and the payment of the penalty as mandated by the SEC. This settlement reflects the regulatory body’s commitment to ensuring that investment advisers maintain a high level of transparency and accountability, particularly in how they market and manage investment products.
In a related move, VanEck recently announced the discontinuation of its Bitcoin Strategy ETF, following a comprehensive performance review. Concurrently, in a bid to attract more investors to its HODL ticker-represented spot Bitcoin ETF, VanEck has reduced its fees from 0.25% to 0.20%, effective from February 21. This adjustment underscores the firm’s ongoing efforts to refine its product offerings and enhance investor appeal amidst a rapidly evolving digital asset landscape.