November 28, 2022

Adviser Fined for Failing to Adhere to ESG Investment Policies

An investment adviser settled SEC charges for failing to supervise its screening process for ESG investments.

In the Order, the SEC found that the adviser failed to adhere to its own policies for assessing and selecting ESG-focused securities for a series of portfolios. The SEC said that the adviser required asset managers to fill out a questionnaire to assess a security's ESG qualities, but that the asset managers infrequently completed these questionnaires, sometimes only after a security had already been purchased. Additionally, the SEC found that the adviser failed to develop policies for the central storage of completed questionnaires and failed to provide staff with adequate guidance on the applicability and scope of the policies that governed the ESG investment process.

As a result, the SEC determined that the adviser violated Advisers Act Section 206(4) ("Prohibited transactions by investment advisers") and Advisers Act Rule 206(4)-7 ("Compliance procedures and practices").

To settle the charges, the adviser agreed to (i) cease and desist, (ii) a censure and (iii) a civil monetary penalty of $4 million.

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