The SEC’s 2024 Division of Examination’s Examination Priorities rings of its recent $19 million settlement with DWS about that firm’s practices related to ESG practices and procedures in investment strategies.
“The Division continues to prioritize examinations of registered investment companies, including mutual funds and ETFs, due to their importance to retail investors, particularly those saving for retirement. Examinations of registered investment companies often include assessing, among other things, their compliance programs and fund governance practices, disclosures to investors, and accuracy of reporting to the SEC.”
I read somewhere very recently (forgive an old man for not remembering where) that the DWS enforcement and fine were not fundamentally ESG-specific, but were instead really about fund governance and conformance to its publicly-disclosed strategy. ESG simply happened to the the subject matter. That is spot on given that the SEC has no specific powers related to environmental and social issues except in very limited circumstances. For the time being, investors create their own ESG risk by virtue of how they portray – and implement – ESG investment strategies. SEC is making it known they continue to be on the lookout to see how well investors walk the talk.
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