The U.S. Securities and Exchange Commission (SEC) on Monday fined DWS Securities, a subsidiary of Deutsche Bank (DB), a combined $25 million for misstatements regarding its environmental, social, and governance (ESG) reporting as well as failure to set up an anti-money laundering program.
- The SEC fined Deutsche Bank subsidiary DWS Securities $25 million for misstatements regarding its ESG reporting and failure to properly address money laundering.
- SEC regulators alleged that from August 2018 through late 2021, DWS “failed to adequately implement certain provisions of its ESG policy,” deceiving investors and clients.
- The SEC’s move reflects its crackdown on “greenwashing,” as well as steps to ensure a fund’s name properly aligns with its investment objectives.
In two separate enforcement actions, the SEC charged DWS $19 million and $6 million, respectively, for making misleading statements about its ESG reporting, and for failing to set up an anti-money laundering (AML) program designed to detect illegal activity.
Regarding the former charge, the SEC alleged DWS made “materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations.” The regulator alleged that from August 2018 through late 2021, DWS had “failed to adequately implement certain provisions of its global ESG integration policy,” deceiving investors and clients.
The SEC’s move reflects its rigor to enforce penalties against companies and funds that mislead investors with overblown claims about ESG, a phenomenon known as greenwashing.
Regulators also have moved to overhaul rules associated with fund naming, to ensure that an asset manager’s name aligns more closely with its stated investment objectives. Last week, a panel of SEC regulators voted 4-1 to require ESG and other theme-based funds to abide by the Names Rule, a 2001 rule that requires funds to hold at least 80% of their assets in the type of investment or asset class most closely associated with the fund’s name.
Critics argue the rules would unduly burden funds and their investors, as up to 75% of U.S. investment funds, including those with themes like “growth” and “value” featured in their name, would be subject to the new rules.
Deutsche Bank shares were down close to 1% in morning trading Monday. They’ve fallen more than 9% so far this year.