SEC’s $1.75 Million Fine Against Van Eck
In a recent enforcement action, the U.S. Securities and Exchange Commission (SEC) has penalized Van Eck Associates Corporation with a civil fine of $1.75 million. This decision, announced on February 16, is tied to Van Eck’s 2021 launch of the VanEck Social Sentiment ETF and the undisclosed involvement of a high-profile social media influencer in its marketing strategies.
Undisclosed Influencer Marketing Raises Concerns
The SEC has brought to light that during the promotional campaign of the VanEck Social Sentiment ETF, there was a failure to fully disclose the engagement of a notable social media figure. This undisclosed partnership involved a payment structure directly proportional to the ETF’s growth, a detail that was not shared with the fund’s board, compromising their oversight responsibilities.
The Influencer’s Impact on Fund Operations
While the SEC did not name the influencer, reports link David Portnoy, the founder of Barstool Sports, to the ETF’s promotion. The SEC has criticized Van Eck for not informing the ETF’s board about the influencer’s role, which had significant implications for the fund’s management and operations.
SEC’s Stance on Transparency
Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, stressed the importance of transparency from advisers. The undisclosed arrangements obscured the board’s ability to evaluate the financial impact of the advisory contract, thus hindering their decision-making process.
Van Eck’s Response to the SEC Order
Van Eck has agreed to the SEC’s order, which includes a cease-and-desist directive and a censure. The investment firm has accepted the penalty without admitting to or denying the allegations but acknowledged its oversight in adhering to the Investment Company Act and Investment Advisers Act.
Van Eck’s Recent Moves in the ETF Space
Following the SEC’s announcement, Van Eck revealed a fee reduction for its dedicated Bitcoin ETF, the HODL, and shared optimistic projections for the crypto market in 2024. Despite dissolving one of its ETF products, the company predicts a strong performance for Bitcoin and a reshuffling in the hierarchy of cryptocurrency exchanges.
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