Lack Of Disclosure Costs VanEck Almost $2 Million Fine In SEC’s ETF Investigation

In a recent development, VanEck, a registered investment adviser and issuer of Bitcoin Exchange Traded Funds (ETFs), has settled with the US Securities and Exchange Commission (SEC).

The company has agreed to pay a civil penalty of $1.75 million to settle charges related to its failure to disclose the involvement of a social media influencer in the launch of its Social Sentiment ETF.

As part of the influencer’s compensation structure, they would receive a licensing fee linked to the fund’s size. This fee would increase proportionally as the fund’s assets grew, granting the index provider a larger share of the management fee paid to VanEck Associates.

However, the SEC’s order found that the asset manager failed to disclose the influencer’s planned involvement and the sliding scale fee structure to the ETF’s board when seeking approval for the fund launch and the management fee.

According to the SEC, this lack of disclosure limited the board’s ability to evaluate the economic impact of the licensing arrangement and the influencer’s participation as they considered VanEck’s advisory contract for the fund.

Andrew Dean, Co-Chief of the SEC’s Enforcement Division’s Asset Management Unit, emphasized the importance of advisers’ accurate disclosures, particularly in matters that can impact the advisory contract. The SEC official noted that VanEck’s failure to disclose these details regarding the high-profile fund launch hindered the board’s decision-making.

Without admitting or denying the SEC’s findings, the now Bitcoin Spot ETF issuer consented to the entry of the SEC’s order, which found that the company violated the Investment Company Act and Investment Advisers Act. In addition to the $1.75 million civil penalty, VanEck has agreed to a cease-and-desist order and will implement measures to prevent similar disclosure failures.