BNY Mellon’s Investment Adviser subsidiary has been charged by the Securities and Exchange Commission after making misstatements surrounding ESG policies for some of its investment strategies.
The firm has agreed to pay a $1.5 million fine to settle the charges, while not admitting or denying any wrongdoing.
According to the SEC, between July 2018 and September 2021, the firm implied that all assets within a range of the funds BNY Mellon Investment Advisor oversaw were subject to an ESG review. However, this was not the case for all assets within the portfolios.
“Investors are increasingly focused on ESG considerations when making investment decisions,” said Adam Aderton, co-chief of the SEC Enforcement Division’s Asset Management Unit.
“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 fine marks the first time the SEC has taken action on ESG disclosure against an asset management firm. It comes as the regulator prepares to roll out new rules in this area for the asset management sector, and it is consulting on disclosure rules for listed companies in relation to climate risks.
The SEC’s order outlined that the failings related to a range of “overlay funds”, which were advertised as having attributed an ESG score to all assets within each portfolio.
However, the regulator said BNY Mellon Investment Adviser had “made misleading statements regarding ESG quality review practices” in the prospectus documents for the overlay funds, as well as in RFP documents promoting the funds.