BNY Mellon's Investment Adviser arm has agreed to pay the US Securities and Exchange Commission $1.5m in penalties following "misstatements and omissions" about its ESG approach to managing funds.
According to a statement issued by the SEC yesterday (23 May), BNY Mellon Investment Adviser suggested it had embedded ESG quality reviews into all of its funds, which the federal agency found was "not always the case",
As such, BNY Mellon was found to have violated two sections under the Investment Advisers Act of 1940 and numerous rules under the Investment Company Act. Alongside paying a $1.5m penalty, the firm agreed to a cease-and-desist order and a censure. The SEC said BNY Mellon "promptly undertook remedial acts and cooperated with Commission staff in its investigation".
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Sanjay Wadhwa, deputy director of the SEC's Division of Enforcement and head of its Climate and ESG Task Force, said: "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.
"Here, our order finds 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."
Adam Aderton, co-chief of the SEC Enforcement Division's Asset Management Unit and a member of the Task Force, added: "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."
