- SEC fines Van Eck $1.75 million for failing to disclose influencer’s role in ETF launch.
- Van Eck omitted details about the influencer’s role and the fee structure from the ETF’s board during the approval process
- The firm agreed to a cease-and-desist order, a censure, and a monetary penalty.
The U.S. Securities and Exchange Commission (SEC) has levied a $1.75 million civil penalty against registered investment adviser Van Eck Associates Corporation. The penalty settles charges that Van Eck failed to disclose a social media influencer’s involvement in the launch of its new exchange-traded fund (ETF).
The SEC’s order reveals that in March 2021, Van Eck Associates introduced the VanEck Social Sentiment ETF. The service was designed to monitor an index based on “positive insights” from social media and other data sources.
However, the company failed to disclose the intended participation of a well-known and controversial social media influencer in promoting the index alongside the ETF launch.
According to the SEC, the index provider had planned to engage the influencer to boost the index’s visibility. The firm tied the influencer’s compensation to a sliding scale linked to the fund’s size. This meant that as the ETF grew, the index provider would receive a more significant percentage of the management fee paid to Van Eck Associates.
Crucially, Van Eck Associates omitted these details about the influencer’s involvement and the fee structure from the ETF’s board during the approval process for the fund launch and the management fee.
Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit, stressed the importance of accurate disclosures, particularly in matters impacting the advisory contract. He noted that Van Eck Associates’ lapse limited the board’s ability to fully assess the situation during a critical evaluation for advisory contracts.
Notably, Van Eck Associates has consented to the SEC’s order. They acknowledged violating the Investment Company Act and Investment Advisers Act. As a result, the company agreed to a cease-and-desist order, a censure, and a monetary penalty.
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