On May 23, 2022, the Securities and Exchange Commission announced the inaugural enforcement action against an investment adviser by its much hyped ESG Task Force.
As expected, this case does not find fault with the concept of ESG or conduct suggesting actual wrongdoing. Instead, consistent with bread and butter policy for the SEC’s Enforcement Division, the SEC charged BNY Mellon Investment Advisers for failing to act consistently with its ESG disclosures to investors and having inadequate policies and procedures to prevent the misleading disclosures. While the penalty of $1.5 million could be seen as small for this SEC, BNYMIA was charged with negligent fraud under Section 206(2), Section 206(4) and Rule 206(4)-8 under the Advisers Act, in addition to compliance violations.
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