SEC Charges VanEck with $1.75 Million Penalty for Incomplete Disclosure

The Securities and Exchange Commission (SEC) has taken action against VanEck Associates Corp., a reputable investment adviser headquartered in New York, by imposing a significant civil penalty of $1.75 million. This penalty stems from allegations surrounding VanEck’s failure to adequately disclose the planned involvement of a social media influencer in the launch of an exchange-traded fund (ETF).

Details of the Settlement

The SEC’s investigation revealed that VanEck Associates Corp. neglected to disclose critical information regarding the engagement of a social media influencer during the launch of the VanEck Social Sentiment ETF in March 2021. Specifically, VanEck had intended to enlist the services of a prominent social media personality to aid in the promotion of the ETF. Consequently, alterations were made to the proposed licensing fee structure to incentivise the influencer’s promotional efforts. However, these arrangements were not disclosed to the independent trustees of the VanEck ETF Trust until shortly before the fund’s launch.

Impact on Board Evaluation

Andrew Dean, co-chief of the SEC Enforcement Division’s Asset Management Unit, highlighted that VanEck’s failure to disclose these details severely limited the board’s ability to thoroughly evaluate the economic ramifications of the licensing arrangement and the influencer’s involvement. Such undisclosed information could have significantly influenced the board’s decision-making process regarding VanEck’s advisory contract for the fund.

Compliance Issues Uncovered

Further scrutiny by the SEC uncovered instances where VanEck misrepresented material information to the board. This misinformation pertained to various aspects of the licensing arrangement, including the influencer’s involvement, compensation details, and associated controversies. Additionally, the investigation revealed that VanEck lacked adequate written policies and procedures to ensure the provision of accurate and comprehensive information to the board regarding advisory contracts and proposed fund launches.

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VanEck’s Response and Settlement

VanEck Associates Corp. neither admitted nor denied the SEC’s findings. Furthermore, the firm opted not to provide a comment on the matter. As part of the settlement agreement, VanEck is expected to conduct a comprehensive review of its existing policies and procedures. This review aims to identify areas for improvement to prevent similar violations from occurring in the future.

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The settlement between VanEck Associates Corp. and the SEC underscores the paramount importance of transparent disclosure within the financial industry, particularly concerning engagements with influencers. It serves as a stark reminder for investment advisers to implement measures to ensure the accurate and complete disclosure of material information to relevant stakeholders, thereby upholding the integrity of the investment landscape.