Key Points
The U.S. Securities and Exchange Commission (SEC) has levied a $1.75 million penalty against investment adviser Van Eck Associates Corporation.
This penalty was announced on Feb. 16.
The SEC stated that during the 2021 launch of the VanEck Social Sentiment ETF, Van Eck failed to disclose the involvement of a well-known social media personality in the product’s marketing.
Details of the SEC’s Findings
The ETF was created to track an index that uses positive insights from social media and other data sources.
The SEC discovered that Van Eck had partnered with a polarizing online personality to boost the fund’s appeal.
The influencer was offered a sliding scale fee structure tied to the fund’s growth, which was not disclosed.
Reports from 2021 suggest that David Portnoy, the founder of Barstool Sports, was the influencer involved in promoting the Van Eck ETF.
The SEC criticized Van Eck for not informing the ETF’s board about the influencer’s planned participation.
This arrangement had significant implications for the management contract and the fund’s operations, and the board’s ability to oversee the fund’s financial parameters was compromised.
Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, stressed the need for transparency from advisers.
He pointed out that failing to provide accurate disclosures hampers the board’s ability to fairly evaluate the advisory contract and consider the economic impact of any licensing agreements.
Van Eck’s failure to disclose this information limited the board’s ability to consider the economic impact of the licensing arrangement and the involvement of the influencer.
The SEC believes that Van Eck’s alleged concealment of details severely restricted the board’s ability to assess the economic implications of the licensing contract with the index provider and the potential impact of the influencer on the ETF.
Van Eck has agreed to the SEC’s order, acknowledging its oversight in violating the Investment Company Act and Investment Advisers Act.
It has also agreed to a cease-and-desist order and censure, along with the monetary penalty, without admitting to or denying the findings.
This news follows Van Eck’s announcement last month that it would dissolve its Bitcoin Strategy ETF after a thorough evaluation of its performance.
To boost the popularity of its dedicated Bitcoin ETF, HODL, Van Eck announced on Feb. 15 that it was lowering its fees from 0.25% to 0.20% as of Feb. 21.
Van Eck recently shared its predictions for the crypto market in 2024.
It anticipates that Bitcoin (BTC) will reach unprecedented highs by the end of 2024, driven by a predicted U.S. economic recession and potential regulatory reforms after the forthcoming presidential election.
Van Eck did not predict that Ethereum (ETH) would overtake Bitcoin, but it did forecast that it would outperform leading tech equities.
Van Eck also predicts a reshuffling among cryptocurrency exchanges, suggesting that rivals like Coinbase and others could surpass Binance in trading volume.
