The Securities and Exchange Commission (SEC) announced today that registered investment adviser Van Eck Associates Corporation has agreed to pay a civil penalty of $1.75 million to settle charges that it failed to disclose the role of a social media influencer in launching the new exchange-traded fund her. (ETFs).
As mandated by the SEC, in March 2021, Van Eck Associates launched the VanEck Social Sentiment ETF (NYSE:BUZZ) to track an index based on “positive insights” from social media and other data. The provider of this index informed Van Eck Associates that it planned to retain a well-known and controversial social media influencer to promote the index in connection with the launch of the ETF.
To incentivize the influencer’s marketing and promotional efforts, the proposed licensing fee structure included a sliding scale tied to fund size so that as the fund grew, the index provider would receive a larger percentage of the management fee who paid the fund to Van Eck. Collaborators.
However, the SEC’s order finds, Van Eck Associates failed to disclose its intended influencer involvement and sliding scale fee structure to the ETF’s board of directors in connection with its approval of the fund launch and management fee .
Van Eck Associates consented to entry of the SEC’s order finding that it violated the Investment Company Act and the Investment Advisers Act. Without admitting or denying the SEC’s findings, Van Eck Associates agreed to a cease and desist order and censure in addition to the monetary penalty.