SEC Charges Investment Adviser for Misstatements and Omissions on ESG Investment Quality Reviews
The SEC charged BNY Mellon Investment Adviser, Inc. for misstatements and omissions about the use of ESG considerations when making investment decisions for certain mutual funds that it managed. The SEC Order found that BNY Mellon Investment Adviser represented or implied in numerous statements that all investments in the related funds underwent an ESG quality review, even though that was not always the case. BNY Mellon Investment Adviser agreed to pay a $1.5 million penalty to settle the SEC’s claims. Adam Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Climate and ESG Task Force stated, “As this action illustrates, the Commission will hold investment advisers accountable when they do not accurately describe their incorporation of ESG factors into their investment selection process.” The SEC established the Climate and ESG Task Force in March 2021 to develop initiatives to proactively identify ESG-related misconduct through the use of data analysis to assess information across registrants and identify potential violations. The initial focus of the task force is to identify any material gaps or misstatements in issuers’ disclosure of climate risks under existing rules. Additionally the task force will analyze disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies, as well as evaluate and pursue tips, referrals, and whistleblower complaints on ESG-related issues.
Click here to read a client alert from Ropes & Gray covering the settlement.