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VanEck Fined £1.75 Million by SEC Over Undisclosed Social Media Influencer Deal

VanEck has agreed to pay a £1.75 million fine to settle charges brought by the United States Securities and Exchange Commission (SEC) regarding its launch of a social media-focused exchange-traded fund (ETF) in 2021.

The SEC imposed a civil penalty on the investment adviser.

On February 16, the SEC disclosed in a statement that during the launch of the VanEck Social Sentiment ETF in March 2021, VanEck did not 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 attempted to enhance the fund’s success through social media and collaborated with an influential and divisive online personality to increase its appeal.

Although the financial watchdog did not explicitly name the influencer, reports from 2021 had previously linked David Portnoy, founder of Barstool Sports, to the promotion of the VanEck ETF.

The regulator observed an undisclosed detail: the influencer’s fee was tied to the fund’s growth, ensuring higher compensation as the fund expanded.

The SEC criticised the undisclosed agreement, focusing on VanEck’s failure to inform the ETF’s board about the influencer’s intended involvement.

This undisclosed arrangement had significant implications for the management contract and fund operations, breaching the board’s duty to oversee financial aspects during advisory contract discussions.

Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, emphasised the importance of transparency from advisers.

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He noted that the failure to provide accurate disclosures hampers the board’s ability to properly assess the advisory contract and understand the economic impact of licensing agreements.

VanEck accepted the SEC’s order acknowledging its violation of the Investment Company Act and Investment Advisers Act.

The company agreed to a cease and desist order, censure, and the required financial penalty without admitting or denying the findings.

The announcement comes after the company’s decision to terminate one of its ETF products, the Bitcoin Strategy ETF, a month ago following a comprehensive performance evaluation.

In an apparent effort to boost the popularity of its dedicated spot Bitcoin ETF with the ticker HODL, VanEck indicated on February 15 that it would reduce its fees from 0.25% to 0.20% starting February 21.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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