SEC Charges BNY Mellon Investment Adviser for Misstatements and Omissions Concerning ESG Considerations
The Securities and Exchange Commission today charged BNY Mellon Investment Adviser, Inc. for misstatements and omissions about Environmental, Social, and Governance (ESG) considerations in making investment decisions for certain mutual funds that it managed. To settle the charges, BNY Mellon Investment Adviser agreed to pay a $1.5 million penalty.
The SEC’s order finds that, from July 2018 to September 2021, BNY Mellon Investment Adviser represented or implied in various statements that all investments in the funds had undergone an ESG quality review, even though that was not always the case. The order finds that numerous investments held by certain funds did not have an ESG quality review score as of the time of investment.
“Registered investment advisers and funds are increasingly offering and evaluating investments that employ ESG strategies or incorporate certain ESG criteria, in part to meet investor demand for such strategies and investments,” said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force. “Here, we allege that BNY Mellon Investment Adviser did not always perform the ESG quality review that it disclosed using as part of its investment selection process for certain mutual funds it advised.”
“Investors are increasingly focused on ESG considerations when making investment decisions,” said Adam S. Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Task Force. “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.”
BNY Mellon Investment Adviser consented to the entry of the SEC’s order finding that it violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-7 and 206(4)-8, and Section 34(b) of the Investment Company Act. Without admitting or denying the SEC’s findings, BNY Mellon Investment Adviser agreed to a cease-and-desist order, a censure, and to pay a $1.5 million penalty. The SEC’s order also noted that BNY Mellon Investment Adviser promptly undertook remedial acts and cooperated with Commission staff in its investigation.
The SEC’s investigation was conducted by Robert Baker and Michael Moran with the Enforcement Division’s Asset Management Unit in the Boston Regional Office. SEC staff involved in the examination that led to the investigation included Mayeti Gametchu, Kenneth Leung, Albert Monsini, and Alexander Pevzner, all in the Boston Regional Office.
The Division of Enforcement’s Climate and ESG Task Force was formed in March 2021, and among other things, it analyzes disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies. More information about the Task Force can be found here.