July 1, 2022

Volume XII, Number 182

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SEC Announces 2022 Examination Priorities, Includes ESG

On March 30, 2022 the U.S. Securities and Exchange Commission (“SEC”) announced its 2022 examination priorities. Among the “significant focus areas” is Environmental, Social, and Governance (“ESG”) investing. SEC examiners will be scrutinizing disclosures by registered investment advisors (“RIA”) that advertise ESG strategies or claim to incorporate certain ESG criteria, to ensure disclosures regarding portfolio management practices do not involve materially false and misleading statements or omissions.

The SEC has already flagged ESG investments as potentially higher-risk for investors due to a lack of standardized ESG terms and the various strategies that could reasonably carry the “ESG” label (e.g., incorporating ESG factors vs. prioritizing ESG factors vs. aiming to “achieve measurable ESG impact goals”). The SEC’s recent proposed rule to enhance and standardize climate-related disclosures is a first step towards creating a uniform disclosure framework that would mitigate some of these risks.

In the meantime, SEC examiners will continue to focus on ESG-related advisory services and investment products (including mutual funds, exchange-traded funds (ETFs), and private fund offerings) to ensure these funds:

  • Are accurately disclosing their ESG investing approaches;

  • Have implemented policies and procedures to ensure their ESG-related disclosures are in compliance with federal securities laws, including review of portfolio management;

  • Are voting client securities in accordance with proxy voting policies and procedures and in alignment with their ESG-related disclosures and mandates; and

  • Are not overstating or misrepresenting the ESG factors considered or incorporated into portfolio selection (e.g., greenwashing), such as in their performance advertising and marketing.

SEC examiners also may assess and compare any exchange advisory services offered to issuers regarding ESG initiatives.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 95
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About this Author

Sarah Aberg Government Contracts Attorney Sheppard Mullin Law Firm New York
Special Counsel

Sarah Aberg is special counsel in the White Collar Defense and Corporate Investigations Group in the firm's New York office.

Areas of Practice

Sarah's practice encompasses litigation, internal investigations and white collar defense, with a focus on financial services and securities. She has conducted multiple criminal trials and numerous internal investigations into a wide variety of allegations, including mail and wire fraud, mortgage fraud, insider trading, market manipulation, money laundering,...

212-634-3091
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