BNY Mellon Investment Adviser Hit With $1.5M SEC Fine for ESG Infractions

What You Need to Know

BNY Mellon did not always perform the ESG quality review that it disclosed using as part of its investment selection process.
The action involves the ESG review process for six U.S. mutual funds, none of which were part of the BNYMIA ‘Sustainable’ fund range.

The Securities and Exchange Commission on Monday charged BNY Mellon Investment Adviser Inc. for misstatements and omissions about environmental, social and governance considerations in making investment decisions for certain mutual funds that it managed.

To settle the charges, BNY Mellon Investment Adviser, which serves as the advisor for all BNY Mellon’s U.S. mutual funds, agreed to pay a $1.5 million penalty.

According to the SEC’s order, from July 2018 to September 2021, BNY Mellon Investment Adviser “represented or implied in various statements that all investments in the funds had undergone an ESG quality review, even though that was not always the case.”

The order finds that “numerous investments held by certain funds did not have an ESG quality review score as of the time of investment.”

Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force, said in a statement that “registered investment advisors 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.”

According to the SEC’s order, BNYMIA “represented to investors via mutual fund prospectuses and to those funds’ boards that its affiliated sub-adviser to the Overlay Funds implemented ESG principles by conducting proprietary ESG quality reviews as part of the Sub-Adviser’s investment research process for all investments made by the Overlay Funds.”

BNY Mellon Investment Adviser said Monday in a statement that it was “pleased to resolve this matter concerning certain statements it made about the ESG review process for six U.S. mutual funds. While none of these funds were part of the BNYMIA ‘Sustainable’ fund range, we take our regulatory and compliance responsibilities seriously and have updated our materials as part of our commitment to ensuring our communications to investors are precise and complete.”