Investment Adviser Fined for ESG- and AML-related Procedural Failures

An investment adviser settled charges with the SEC for (i) misleading investors as to its ESG-related practices and (ii) failing to implement an AML program specific to its mutual funds business.

ESG Violations

In an Order, the SEC stated that the adviser failed to adopt policies to ensure the integration of ESG factors in its research and investment recommendations for (i) certain actively managed ESG-integrated mutual funds and (ii) separate account strategies managed by the adviser. The SEC alleged that the firm led investors to believe that it would adopt policies and procedures to ensure that its ESG-integrated products were accurate. The SEC stated that the adviser marketed itself to clients and prospective clients on its website as a "leader in ESG" and ultimately misled investors to believe that it implemented provisions of its "global ESG integration policy." As a result, the SEC found violations of Advisers Act Sections 206(2) and (4) ("Prohibited transactions by investment advisers") and Rules 206(4)-7 ("Compliance procedures and practices") and 206(4)-8 ("Pooled investment vehicles") thereunder.

To settle the charges, the adviser agreed to (i) cease and desist from further regulatory violations, (ii) a censure and (iii) pay a civil money penalty of $19,000,000.

AML Violations

In a separate Order, the SEC found that the adviser failed to implement a program specifically designed for its mutual fund business to ensure compliance with the Bank Secrecy Act requirements. The SEC said that the adviser failed to (i) adopt procedures reasonably designed to detect activities signaling potential money laundering in connection with transaction monitoring and (ii) conduct AML training specific to its mutual funds business. As a result, the SEC concluded that the broker-dealer violated Investment Company Act Rule 38a-1 ("Compliance procedures and practices of certain investment companies").

To settle the charges, the adviser agreed to (i) cease and desist from further regulatory violations and (ii) pay a civil money penalty of $6,000,000.