BNY Mellon Investment Adviser to Pay a $1.5 Million Penalty

On Monday, the US Securities and Exchange Commission (SEC) announced that it charged BNY Mellon Investment Adviser, Inc. for misstatements and omissions about Environmental, Social, and Governance (ESG) considerations in making investment decisions for certain mutual funds that it managed.

According to the press release, BNY Mellon Investment Adviser agreed to pay a $1.5 million penalty as part of the settlement. The SEC commented that BNY Mellon Investment Adviser misrepresented or implied in various statements that all investments with respect to environmental, social and governance quality had been reviewed, even though this was not always the case. In the order, it is noted that certain funds did not receive an ESG quality review score when they invested in numerous investments.

The SEC entered an order found that BNY Mellon Investment Adviser violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-7 and 206(4)-8, as well as Section 34(b) of the Investment Company Act.

Penalty Details

BNY Mellon Investment Adviser agreed to a cease-and-desist order, a censure, and a $1.5 million penalty without admitting or denying the SEC’s findings. According to the order, BNY Mellon Investment Adviser quickly implemented remedial measures and cooperated with the SEC staff during its investigation.

“Registered investment advisers 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. Here, we allege that BNY Mellon Investment Adviser did not always perform the ESG quality review that it disclosed using as part of its investment selection process for certain mutual funds it advised,” Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force, said.

Adam S. Aderton, Co-Chief of the SEC Enforcement Division’s Asset Management Unit and a member of the Task Force, highlighted: “Investors are increasingly focused on ESG considerations when making investment decisions. As this action illustrates, the Commission will hold investment advisers accountable when they do not accurately describe their incorporation of ESG factors into their investment selection process.”