American investment advisers, VanEck Associates, have been formally penalized by the United States Securities and Exchange Commission (SEC) for violating transparency laws. The investment company has agreed to pay a substantial penalty fee related to their failure to disclose information about a prominent influencer’s participation in the launch of its Spot Bitcoin Exchange Traded Fund (ETF). 

On Friday, February 16, the SEC issued a press release on its official website, confirming the formal charges against Van Eck Associates. The charges are related to the SEC’s order in 2021 where the regulatory agency alleged that the investment advisers’ had launched its ETF to track an index based on the favorable sentiments from social media and other sources. 

The regulatory agency contended that the investment advisers were well aware of the index provider’s intention to enlist a popular social media influencer for the promotion of its Social Sentiment ETF. Additionally, the SEC has stated that Van Eck Associates had proposed an appealing licensing fee structure that increased as the ETF grew, to further incentivize the influencer’s marketing efforts. 

As a result, the SEC has asserted that Van Eck Associates had failed to disclose the influencer’s involvement in its ETF launch and the associated licensing fee structure to the ETF board. This allegedly deliberate omission has led to the SEC issuing an official penalty fee of $1.7 million.

The Co-Chief of the Enforcement Division’s Asset Management Unit, Andrew Dean, in response to Van Eck’s charges noted that Van Eck Associates’ disregard for transparency laws had limited the board’s ability to assess the economic impact of the licensing arrangement and thoroughly appraise the advisory’s contract for funds.

In the press release, the US SEC announced that Van Eck Associates had officially consented to pay the $1.7 million settlement charge for violating the Investment Company Act and Investment Advisers Act. Without confirming or denying the allegations, Van Eck Associates has responded by issuing a “cease and desist order” and an official censure, in addition to the agreed-upon penalty settlement. 

As of February 16, VanEck’s ETF has garnered almost $76 million in total assets under management. Since its launch, the investment management company has also witnessed significant inflows into its ETF. 

Additionally, the digital asset investment company is poised to witness more gains according to Van Eck’s head of digital asset research, Matthew Siegel who predicts that over $2.4 billion is expected to flow into the recently approved Spot Bitcoin ETF in the first Quarter of 2024. 

Featured image from Adobe Stock, chart from TradingView

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