VanEck’s SEC Fine for ETF Marketing Violation

VanEck Associates Corporation has agreed to pay a $1.75 million fine to settle charges brought by the Securities and Exchange Commission (SEC) regarding the launch of its social media-focused exchange-traded fund (ETF) in 2021. The investment adviser was found to have failed to fully disclose the involvement of a prominent social media personality in marketing the product. The ETF aimed to track an index based on positive insights from social media and other data sources. It was discovered that VanEck collaborated with an influential online personality to enhance the fund’s appeal, without disclosing that the influencer’s fee was tied to the fund’s growth.

While the SEC did not name the influencer involved, reports from 2021 suggested that it may have been David Portnoy, the founder of Barstool Sports. The regulator found that the undisclosed arrangement had significant implications for the management contract and fund operations, violating the board’s duty to oversee financial aspects during advisory contract discussions. The SEC’s Andrew Dean emphasized the importance of transparency from advisers, stating that the failure to provide accurate disclosures hindered the board’s ability to assess the advisory contract and understand the economic impact of licensing agreements.

VanEck admitted to violating the Investment Company Act and Investment Advisers Act as part of its agreement with the SEC. The company accepted a cease-and-desist order, censure, and the financial penalty without admitting or denying the findings. This announcement comes after VanEck recently terminated its Bitcoin Strategy ETF following a performance evaluation. In an effort to boost the popularity of its dedicated Bitcoin ETF, the company also announced a reduced fee from 0.25% to 0.20% as of February 21.