The U.S. Securities and Exchange Commission (“SEC”) recently charged an investment adviser firm for alleged misstatements and omissions about the use of Environmental, Social and Governance (“ESG”) considerations when making investment decisions for certain mutual funds, and the investment adviser agreed to settle (without admitting or denying the SEC’s allegations) the charges by paying a penalty of $150 million.
In the administrative and cease-and-desist proceeding, the SEC alleges that the investment adviser represented or implied that all investments in the mutual funds had undergone an ESG quality review; however, the SEC’s order claims that numerous investments held by certain funds did not have an ESG quality review score as of the time of investment.
Based upon the SEC’s scrutiny related to ESG investing, RIA Compliance Consultants recommends that an investment adviser firm, which uses or claims to use ESG considerations when making investment recommendations or decisions, should review its advertising, marketing materials, RFP responses and investment policy statements to verify that the firm is not overstating or inaccurately describing how it actually uses ESG criteria when making investment recommendations or decisions.
Best Practices Checklist for Investment Advisers Utilizing ESG
If your investment adviser firm is recommending or selecting investments based upon ESG criteria, RIA Compliance Consultants has prepared ESG Investing – Best Compliance Practices Checklist which is available to our Annual Compliance Program Clients in the Platinum Package or for purchase on an a la carte basis at https://www.ria-compliance-consultants.com/product/esg-investing-best-compliance-practices-checklist/ .
Related Posts & Resources
- SEC Is Focusing on ESG Investing by RIAs (3/5/2021)
- ESG Investing – Best Compliance Practices Checklist
General Disclosure
The information contained in this blog post is general in nature intended for educational purposes only and is not intended to be a comprehensive analysis of this topic. RIA Compliance Consultants, Inc. is not offering any opinion whether the allegations made by the securities regulator in the administrative proceeding referenced above are accurate. This post is not intended to constitute compliance consulting advice or apply to any particular investment adviser firm’s specific situation. Please consult the applicable securities regulator’s rules and published guidance for more details about the topics referenced above. For more information about the limitations of this blog post and information on our website, please see our Disclosures webpage.
