SEC Charges Van Eck Associates for Failing to Disclose Influencer's Role in Launch of ETF

SEC Charges Van Eck Associates for Failing to Disclose Influencer’s Role in Connection with ETF Launch

The Securities and Exchange Commission today announced that registered investment adviser Van Eck Associates Corporation has agreed to pay a $1.75 million civil penalty to settle charges that it failed to disclose a social media influencer’s role in the launch of its new exchange-traded fund (ETF).

According to the SEC’s order, in March 2021, Van Eck Associates launched the VanEck Social Sentiment ETF (NYSE:BUZZ) to track an index based on “positive insights” from social media and other data. The provider of that index informed Van Eck Associates that it planned to retain a well-known and controversial social media influencer to promote the index in connection with the launch of the ETF. 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. However, as the SEC’s order finds, 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.

Sullivan & Cromwell Poised to Be Appointed as Binance’s Independent Monitor

New York law firm Sullivan & Cromwell is poised to be appointed Binance Holdings Ltd.’s independent monitor following the crypto giant’s multibillion-dollar settlement with the US government.

The white-shoe firm is the leading contender for the coveted monitorship, according to people familiar with the selection process, likely beating a crowded field of lawyers and consultants vying for what’s seen as a lucrative watchdog role. Former federal prosecutor and firm partner Sharon Cohen Levin would likely lead the monitorship team, said one of the people, who asked to remain anonymous to discuss the confidential matter.

While the appointment hasn’t been officially signed off on, Sullivan & Cromwell is at the top of the list and the Justice Department is close to approving the firm, one of the people said.

Hedge Funds Warn SEC Cyber Lapses Risk Exposing Trading Secrets

The Securities and Exchange Commission and the Commodity Futures Trading Commission last week adopted rules expanding what private fund advisers must confidentially report—such as details on their crypto investments and credit strategies, including litigation funding. Regulators said the additional data will help them monitor market risks and bolster oversight of the private fund industry, which has grown to managing about $26 trillion in gross assets.

Industry groups voiced concerns about the government’s ability to safeguard data on the so-called Form PF, warning the detailed information could provide a roadmap to funds’ confidential proprietary investment strategies. The SEC in particular is an attractive target for hackers and has a fraught cyber record—as illustrated last month when hackers gained access to the agency’s official X account.

Debt Box counters SEC’s bid for dismissal, alleges strategic maneuver

In the Feb 14. filing, Debt Box characterized the SEC’s move as a strategic maneuver to evade possible sanctions and a permanent dismissal due to alleged misconduct.

The SEC submitted a motion to dismiss its case against Debt Box on Jan. 30, expressing its intent to assess the evidence in the case and understand the factors that might have led its legal representatives to initially make inaccurate statements to the court.

However, Debt Box argues that the SEC’s readiness to dismiss the case without prejudice is a strategic move to evade sanctions and possibly initiate a revised version of the enforcement action free from misconduct allegations:

“The SEC wants to exit this action under its own terms while retaining the option to re-file another enforcement action against the Debt Box defendants and other defendants at some undetermined time in the future, and perhaps in a different forum — as if nothing happened in this case, but something did happen in this case.”

Ex-Goldman Sachs Analyst Convicted of Insider Trading

A former Goldman Sachs analyst in London was convicted of using confidential information to personally trade shares, U.K. authorities said Thursday.

Mohammed Zina worked for Goldman between 2014 and 2017, including a stint in the bank’s conflicts resolution group, a unit that helps foster the company’s culture and set its strategy.

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Zina, who pleaded not guilty, was convicted of insider trading and fraud after a three-month trial. The 35-year-old is set to be sentenced Friday.

His brother, Suhail Zina, a former lawyer for a separate firm in London, was charged in the same case but acquitted earlier this month.

Lessons from the Rescission of Elon Musk’s $55.8B Option Grant

CEO compensation can be a source of concern for shareholders, which makes it a concern for the Delaware Chancery Court. Another major concern is director independence. The decision by the Delaware Chancery Court to void Elon Musk’s 2018 compensation package demonstrates what happens when these two concerns collide.

The court’s 200-page legal analysis assesses everything from director independence and what constitutes an appropriate board-led process to disclosure for potentially conflicted transactions and the entire fairness standard of review.

In this article, you’ll find out what led the court to rescind Musk’s $55.8 billion Tesla option grants—even though Musk had met aggressive milestones, including growing the company’s market capitalization by more than 10x. I’ll also offer practical tips for directors coming from the case.

Musk’s SEC Subpoena Fight Carries on After Court’s Oops Moment

Elon Musk will get another chance to resist testifying in the US Securities and Exchange Commission’s probe of his 2022 Twitter Inc. acquisition after a federal magistrate said she erred in ordering him to comply with a subpoena.

It turns out Musk is entitled to make his case to a higher-ranking US district judge about why he shouldn’t have to testify — which was recognized Friday by a San Francisco magistrate judge who said her Feb. 10 order enforcing the subpoena will now be just a recommendation.

US Magistrate Judge Laurel Beeler said she “lost sight of the fact” that back in October, Musk had exercised his right to decline to let her have final say in the dispute. She has now re-assigned the case to a district judge.

SEC Charges TIAA Subsidiary for Failing to Act in the Best Interest of Retail Customers

The Securities and Exchange Commission today announced that registered broker-dealer TIAA-CREF Individual & Institutional Services LLC (TC Services), a subsidiary of Teachers Insurance and Annuity Association of America (TIAA), will pay more than $2.2 million to settle charges that it failed to comply with Regulation Best Interest (Reg BI) in connection with recommendations to retail customers to open a TIAA Individual Retirement Account (TIAA IRA).

According to the SEC order, the TIAA IRA allowed retail customers to invest in both a pre-selected “core menu” of affiliated investments, including affiliated mutual funds, and, through the TIAA IRA’s optional “brokerage window,” a broader array of securities, including a variety of mutual funds, ETFs, stocks, and bonds. During the relevant period, the brokerage window included the lowest-cost share classes of certain affiliated mutual funds offered in the core menu, but with the investment minimums waived. Due to the waivers, customers could have purchased substantially equivalent, lower-cost share classes of these mutual funds in the brokerage window. The SEC’s order finds that TC Services violated Reg BI by, among other things, failing to disclose both that substantially equivalent, lower-cost share classes of affiliated funds were available in the brokerage window and the conflicts that created.

According to the SEC’s order, more than 94 percent of TIAA IRA customers invested only through the core menu. As a result, nearly 6,000 TC Services retail customers paid more than $900,000 combined in expenses that they could have avoided by purchasing substantially equivalent funds through the brokerage window.