Investment adviser Van Eck Associates Corporation has agreed to pay a $1.75m fine to settle SEC charges (without admitting or denying the charge) that it had failed to disclose a social media influencer’s role in the launch of its VanEckSocial Sentiment ETF back in March 2021.

The ETF trades on the NYSE under the BUZZ ticker and is meant to track 75 large cap securities with the “highest degree of positive investor sentiment and bullish perception” based on content mined from social media, news articles, and blog posts, according to VanEck’s website. At the time of writing, the BUZZ portfolio includes Coinbase, Paypal, Tesla and MicroStrategy.

Likely finfluencer

While the SEC does not name the influencer in its order, Dave Portnoy, the finfluencer and founder of the popular sports and pop culture website Barstool Sports, who helped kick-start the day-trading revolution, partnered with VanEck during the launch of BUZZ.

Portnoy participated in the bell-ringing ceremony at the NYSE when the Social Sentiment ETF began trading and touted it in an interview with CNBC personality Jim Cramer and on Fox Business News. 

Portnoy frequently comments on stocks on platforms such as X and was instrumental in kicking off the day-trading mania that took hold during the early months of the coronavirus pandemic.

“Van Eck Associates’ disclosure failures concerning this high-profile fund launch limited the board’s ability to consider the economic impact of the licensing arrangement and the involvement of a prominent social media influencer.”

Andrew Dean, Co-Chief, SEC Enforcement Division’s Asset Management Unit

To incentivize the influencer’s marketing and promotion efforts, the proposed licensing fee structure included a sliding scale linked to the size of the fund so, as the fund grew, the index provider would receive a greater percentage of the management fee the fund paid to Van Eck Associates, the SEC said. In this way, the licensing fee structure directly correlated the index provider’s compensation with the ETF’s asset size.

Failure to disclose to board

Van Eck Associates failed to disclose the influencer’s planned involvement and the sliding scale fee structure to the ETF’s board in connection with its approval of the fund launch and of the management fee, the SEC alleged.

“Fund boards rely on advisers to provide accurate disclosures, especially when involving issues that can impact the advisory contract, known as the 15(c) process”, said Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit. 

“Van Eck Associates’ disclosure failures concerning this high-profile fund launch limited the board’s ability to consider the economic impact of the licensing arrangement and the involvement of a prominent social media influencer as it evaluated Van Eck Associates’ advisory contract for the fund”, Dean said.

Portnoy has not been charged by regulators in any way in connection with the SEC’s settlement with Van Eck Associates.