SEC Heavily Penalizes VanEck For Its ETF

The Securities and Exchange Commission (SEC) has fined asset manager VanEck $2 million for failing to disclose the role of an influencer in marketing its Bitcoin ETF, nor inform its board of directors of variable fees.

VanEck nabbed by SEC for misleading advertising around its ETF

Last week, the U.S. Securities and Exchange Commission (SEC) announced that it had fined investment firm VanEck $1.75 million for failing to meet its legal obligations to disclose crucial information to investors during the high-profile launch of its BUZZ ETF in March 2021.

The SEC has two main criticisms of VanEck. On the one hand, the company failed to mention in the documents submitted to the SEC the involvement of an influencer in the promotion of this ETF. However, the law requires disclosure of such commercial agreements likely to influence investor opinion.

On the other hand, VanEck did not disclose to the board of directors of the ETF the sliding scale fee structure linked to the licensing agreement of the index on which the BUZZ ETF. These two factors could have affected the Board’s decision to approve the launch and management fees of this fund.

VanEck hid the workings of its ETF from regulators

According to the SEC, VanEck has not adequately disclosed the operation of its ETF BUZZ launched in March 2021. This ETF replicates the performance of an index constructed at based on opinions from social networks, a mechanism that VanEck should have made clear to investors and regulators.

The SEC therefore considers that VanEck violated the law on investment companies by limiting the ability of the board of directors to properly assess the economic interest of the ETF for investors. In addition to the fine, the asset manager will have to comply with a cease-and-desist order from the authorities.

This is not the first time that companies or celebrities have been nabbed by the authorities for promoting dubious financial products without disclosing all the intricacies. For example NBA and billionaire Mark Cuban were targeted by a class action lawsuit for promoting a risky investment program. Kim Kardashian, meanwhile, recently agreed to pay a $1.26 million fine after promoting a risky crypto on social networks.