ETF issuer VanEck has settled with the U.S. Securities and Exchange Commission (SEC) concerning charges related to inadequate disclosure in its Social Sentiment ETF launch.
In a recent development, VanEck, a prominent ETF issuer, has agreed to pay a civil penalty of $1.75 million to settle charges brought forth by the U.S. Securities and Exchange Commission (SEC). The charges stem from VanEck’s failure to disclose crucial details regarding the involvement of a social media influencer in the launch of its VanEck Social Sentiment ETF (BUZZ) in March 2021.
The SEC’s order highlighted that VanEck did not disclose the participation of a “well-known and controversial” social media influencer in promoting the index upon which the ETF was based. Additionally, VanEck failed to reveal the fee structure linked to the influencer’s compensation, which was tied to the fund’s size. This structure included a licensing fee that increased as the fund’s assets grew, granting the index provider a larger share of the management fee paid to VanEck.
Impact on decision-making
The lack of disclosure regarding the influencer’s involvement and the fee structure limited the ETF’s board’s ability to evaluate the economic implications of the licensing arrangement. Andrew Dean, Co-Chief of the SEC’s Enforcement Division’s Asset Management Unit, stressed the significance of accurate disclosures, especially concerning matters that could affect advisory contracts. VanEck’s failure to disclose these details hindered the board’s decision-making regarding the fund’s launch and management fee.
VanEck consented to the SEC’s order without admitting or denying the findings. The SEC found that VanEck violated the Investment Company and Investment Advisers Act. In addition to the civil penalty of $1.75 million, VanEck agreed to a cease-and-desist order and will implement measures to prevent similar disclosure failures.
VanEck fee reduction for HODL Bitcoin ETF
Amidst growing competition in the spot Bitcoin ETF market, VanEck has announced a fee reduction for its newly launched HODL Bitcoin ETF. Beginning February 21st, the management fee for the HODL ETF will be reduced from 0.25% to 0.20%, reflecting the ongoing fee wars among ETF issuers.
Market dynamics
Data from analytics firm SoSo Value reveals significant investor interest in the spot Bitcoin ETF market, with total net inflows reaching $477 million on February 15th, marking the fifteenth consecutive trading day of net inflows. However, the same day, Grayscale’s ETF, GBTC, experienced a net outflow of $174 million.
Among Bitcoin spot ETFs, BlackRock’s IBIT emerged as the leader in net inflows on February 15th, recording a daily net inflow of $330 million. With a total historical net inflow of $5.17 billion to date, IBIT solidifies its position as a significant player in the market.
VanEck’s settlement with the SEC underscores the importance of transparent disclosures in the financial industry. Meanwhile, fee reductions and steady inflows characterize the competitive landscape of the spot Bitcoin ETF market, with IBIT leading the pack in attracting investor interest.
