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VanEck admits ETF marketing violation, agrees to SEC fine – Cointelegraph

VanEck will pay a $1.75 million fine to resolve charges from the U.S. Securities and Exchange Commission (SEC) related to the 2021 launch of a social media-focused exchange-traded fund (ETF).

The SEC imposed a civil penalty on the investment adviser. The SEC disclosed this in a document on February 16th. statement When launching the VanEck Social Sentiment ETF in March 2021, VanEck did not fully disclose that prominent social media personalities were participating in the product’s marketing.

The ETF aimed to track the index using “positive insights” from social media and other data sources. However, the SEC found that VanEck sought to promote the fund’s success through social media and worked with influential and divisive online figures to increase the fund’s appeal.

Screenshot of the SEC’s administrative and cease-and-desist orders. Source: SEC

The financial watchdog has not named the influencer, but reports in 2021 previously implicated Barstool Sports founder David Portnoy in promoting the VanEck ETF. Regulators found undisclosed details that influencers’ remuneration is tied to the growth of the fund, guaranteeing higher remuneration as the fund grows.

The SEC criticized the hidden transactions, focusing on VanEck’s failure to notify the ETF board of the influencers’ intended involvement. This non-disclosure arrangement materially affected the management agreement and fund operations and breached the board’s obligation to provide financial oversight during advisory agreement discussions.

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Andrew Dean, co-director of the SEC’s Division of Enforcement’s Asset Management Division, emphasized the need for transparency from advisors. He noted that the failure to provide accurate disclosures hampers boards’ ability to properly evaluate advisory agreements and understand the economic impact of licensing agreements.

VanEck consented to the SEC’s order and admitted to violating the Investment Company Act and the Investment Advisers Act. The company accepted the cease-and-desist order, censure, and necessary financial penalties without admitting or denying the findings.

The announcement follows the company’s decision a month ago to terminate one of its ETF products, the Bitcoin Strategy ETF, after a thorough performance evaluation. In an apparent attempt to boost the popularity of a dedicated spot Bitcoin (BTC) ETF with the ticker HODL, Van Eck said: signaled On February 15th, it was announced that fees would be reduced from 0.25% to 0.20% from February 21st.

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