Investment-management firm VanEck has agreed to pay a $1.75 million penalty to the Securities and Exchange Commission (SEC) for failing to disclose the involvement of a social-media influencer in the launch of its VanEck Social Sentiment exchange-traded fund (ETF), known as BUZZ.
Though the SEC complaint does not name the influencer, it is widely known that Barstool Sports founder Dave Portnoy heavily promoted the ETF’s launch in March 2021. Portnoy even held an “emergency press conference” to endorse the product, putting his reputation behind it.
VanEck has consented to the SEC order without admitting or denying the SEC’s findings. The company declined to comment, and Portnoy has not responded to requests for comment.
According to the SEC’s order, the influencer’s involvement was not disclosed to the independent trustees of the VanEck ETF trust, nor were they informed about the financial arrangement between the company and the index provider responsible for the BUZZ index.
The proposed licensing fee structure included a sliding scale tied to the size of the fund. This structure incentivized the influencer’s marketing efforts, with the index provider receiving a higher percentage of the management fee as the fund grew. Unfortunately, VanEck failed to disclose both the influencer’s participation and the sliding fee scale to the board.
This lack of disclosure limited the board’s ability to assess the economic impact of the licensing arrangement and the influencer’s involvement. Andrew Dean, co-chief of the SEC enforcement division’s asset management unit, stated that Van Eck Associates’ failure to adequately disclose these details during the high-profile fund launch hindered the board’s evaluation of Van Eck Associates’ advisory contract for the fund.
This penalty serves as a reminder to investment-management firms about the importance of full transparency when it comes to disclosing key details and arrangements surrounding their investments.
