By Alice Seeley
The U.S. Securities and Exchange Commission (SEC) announced on May 23 that it fined the investment management arm of Bank of New York Mellon Corp $1.5 million for misleading claims about Environmental, Social, and Governance (ESG) considerations in making investment decisions for certain mutual funds that it managed. BNY Mellon Investment Adviser has agreed to pay the $1.5 million penalty to settle the charges.
According to the SEC press release, 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. As a result, “numerous investments held by certain funds” did not have ESG quality scores when investors put their money in, despite statements from the firm saying they did. One fund the SEC order cited made 185 investments over roughly two years, with 25% of the fund’s assets not having an ESG score.
The SEC named several funds, the largest of which was the $3.8 billion BNY Mellon Global Real Return fund. That strategy, like the BNY Mellon Global Equity Income, BNY Mellon International Equity, and BNY Mellon Global Dynamic Bond funds that the SEC pointed out, all are sub-advised by Newton Investment Management, a subsidiary of BNY Mellon.
The SEC also discovered that BNY Mellon did not have policies designed to prevent these kinds of inaccurate statements from being made in fund documents.
BNY Mellon Investment Adviser has neither affirmed nor denied the SEC’s findings, the SEC said, but agreed to a cease-and-desist order, a censure, and to pay the penalty, the agency said.
“BNY Mellon Investment Adviser is pleased to resolve this matter concerning certain statements it made about the ESG review process for six U.S. mutual funds,” a spokesperson for BNY said, adding that the firm takes its regulatory and compliance responsibilities seriously. The SEC said BNY Mellon Investment Adviser also “promptly undertook remedial acts and cooperated with Commission staff in its investigation.”
