On September 25, the SEC announced
two enforcement actions against a subsidiary (respondent) of a German multinational investment bank and financial services company, in which the respondent agreed to pay a total of $25 million in penalties arising from (i) purportedly misleading statements respondent made regarding its Environmental, Social, and Governance (ESG) program; and (ii) its failure to develop a mutual fund Anti-Money Laundering (AML) program. According to the order
, respondent allegedly marketed itself to clients and investors as a leader in ESG that adhered to specific policies for integrating ESG considerations into its investments but failed to implement certain provisions of its global ESG integration policy. The order contains a number of statements that respondent made concerning its ESG program that the SEC found to be materially misleading. For example, respondent allegedly represented through its ESG Policy that its research analysts were required to include financially material and reputation relevant ESG aspects into its valuation models, investment recommendations and research reports and consider material ESG aspects as part of their investment decision, but respondent’s internal analyses allegedly showed that research analysts have inconsistent levels of documented compliance with this requirement. The SEC determined that respondent’s failure to implement certain policies and procedures violated multiple sections of the Advisers Act, including Section 206(2), “which prohibits an investment adviser, directly or indirectly, from engaging ‘in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client.’”
Through the ESG order, respondent has agreed to pay a $19 million civil penalty and to cease and desist from committing any further violations of the violated sections of the Advisors Act. The SEC also charged respondent with a separate Anti-Money Laundering order, for failure to comply with the Bank Secrecy Act and FinCen regulations. Respondent did not admit nor deny the SEC’s claims.