Published on Feb 26th, 2024 |

$1.5 Million Charge for ETF Launch Disclosure Failure

SEC Releases


An RIA was recently charged $1.5 Million by the SEC for failing to provide proper disclosures about the launch of one of its new ETFs.

The SEC expects Firms to provide accurate information to Fund Boards, especially when it involves the 15(c) process. Any material information that could affect their decision needs to be provided by the Investment Adviser.

What Happened?

What Happened?

According to the SEC:

  • The RIA did not adopt or implement written policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder.
  • The RIA received an exclusive license to use a specific index in connection with their ETF.
  • The provider of this index told the RIA that they were hiring a “well-known and controversial social media influencer” to promote the index with the launch of the ETF.
  • The provider of the index received a larger percentage of fees based on AUM when certain thresholds were obtained.
  • The Fund Board did not receive a disclosure about the use of the social media influencer or the increased fees for the index provider.

Vigilant's Conclusion

Vigilant’s Conclusion

As Firms continue to find new avenues of marketing, they should have proper policies and procedures to ensure that all material information is properly disclosed.

With the SEC continuing to hand out enforcements, including a focus on disclosures and marketing materials, establishing a proactive compliance culture is vital for reducing one’s risk for potential regulatory action.

Implementing effective Compliance strategies on your Compliance program is important in helping establish a compliance driven culture, and Vigilant can help assist in applying that.

Contact Us for Compliance Support