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FINRA's Eileen Murray Defends Increased Regulation of ESG

In a recent interview with CNBC, FINRA Chair Eileen Murray forcefully made the case for increased government regulation of environmental, social and governance (ESG) disclosures by public companies. Citing concerns with the lack of ESG accountability, consistency and transparency, Murray opined that the current system of self-regulation and reporting is not enough: “I see ESG as an ecosystem. . . . it’s going to take regulators, business, and educators to deal with this.”

The stakes are huge, as investors are increasingly drawn to companies that certify their compliance with ESG standards. Sustainable investments now total $17 trillion in the US alone according to a recent report from the Forum for Sustainable and Responsible Investment. But, Murray says, investors seeking responsible investments are often left in the dark: “How many companies are reporting on ESG and saying they are ESG compliant when they’re really not? What is the standard? What does it mean?”

As former co-CEO of the world’s largest hedge fund, Bridgewater Associates, Murray brings a unique perspective to the debate over the role of government agencies in the regulation ESG disclosures. While in the private sector, Murray believed companies could self-regulate—but she has since changed her tune: “I was dead wrong. . . . We need regulators to step up and start to ensure that companies are applying standards in disclosure.”

Significantly, Murray deferred to the SEC when asked which agency should be responsible for regulating ESG disclosure requirements, pointing out that SEC Chair Gary Gensler has “put people in place to spearhead these initiatives” on ESG. Consistent with Murray’s calls for “collaboration between regulators and business,” the SEC has spent much of this year soliciting and compiling public comments for an upcoming release of new rules related to climate change and other environmental disclosures. 

For its part, FINRA appears equally poised to contribute to the emerging regulatory landscape, focusing on diversity, equity, and inclusion (DEI) disclosures. During her interview, Murray applauded Nasdaq’s new listing rules that require companies to have at least two diverse directors or else publicly disclose board diversity statistics on an annual basis. “Without those kinds of movements, we aren’t going to make progress, and I think history demonstrates that.” Although public comments on DEI disclosures are now closed, companies can expect upcoming regulations to reflect a similar “comply or disclose” framework.

© 2022 Bracewell LLPNational Law Review, Volume XI, Number 323
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About this Author

Joshua Klein Corporate Securities Lawyer Bracewell
Partner

Josh Klein represents corporations and individuals in complex disputes involving corporate, securities and commercial issues. He advises clients, both as plaintiffs and defendants, in cases involving allegations of breach of contract, fraud, tortious interference, fiduciary duty, antitrust and violations of the Racketeer Influenced and Corruption Organzaitions Act (RICO). Josh also advises entities and individuals in various enforcement investigations and proceedings brought on by governmental agencies and regulators.

Josh regularly appears before federal and state courts across the...

212.508.6153
Keith Blackman Securities Lawyer Bracewell Law Firm
Partner

Keith Blackman defends clients in disputes involving complex securities before the Financial Industry Regulatory Authority (FINRA), as well as in trial and appellate courts. He primarily represents financial services clients in cases involving claims of fraud, malpractice, racketeering, breach of contract and securities law violations. He also has experience in tax disputes, intellectual property litigation and white-collar defense. Over the course of his career, Keith has appeared in state and federal courts in New York and around the country.

212.508.6132
Meagan Maloney White Collar Attorney Bracewell Law Firm
Associate

Meagan Maloney focuses her practice on complex commercial litigation and appeals, as well as white collar criminal defense. During law school, she served as president of the American Constitution Society and as a case note and comment editor of SMU Law Review.

212.938.6433
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