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Sharp exchanges at hearing illuminate debate on SEC’s oversight of ESG

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Article originally appeared on InvestmentNews

You can dig through hundreds of comment letters to distill the essence of a regulatory debate, or you can tune into a Capitol Hill hearing and have it laid out in a sharp exchange between a lawmaker and a regulator.

That happened Tuesday at a meeting of a House Financial Services subcommittee that featured Gurbir Grewal, the SEC’s director of enforcement, who took hits from Republicans over the Securities and Exchange Commission’s oversight of investing using environmental, social and governance factors.

Rep. Ann Wagner, R-Mo., pressed Grewal on how the SEC can take ESG enforcement actions when there is no regulatory definition of ESG.

“You can’t enforce something that’s not defined, sir,” Wagner said to Grewal during a hearing of the House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets.

Earlier in the colloquy with Wagner, Grewal explained that the SEC recently brought charges against BNY Mellon for making misstatements about the firm’s ESG practices. He said the SEC used anti-fraud provisions of securities laws and charged the firm with violations of its fiduciary duties.

“You can enforce, Rep. Wagner, lies — when an adviser lies about what it’s doing,” Grewal said.

That answer wasn’t good enough for Wagner, who also asserted the SEC lacks the authority and expertise to impose ESG requirements on issuers, funds and investment advisers. She criticized the agency’s proposed ESG rules, which include mandatory climate-risk disclosures for public companies, ESG disclosures for funds and advisers, and a rule to prevent misleading fund names.

“I’m highly disappointed in the lack of answers and transparency today,” Wagner said.

Grewal got a warmer reception from Rep. Juan Vargas, D-Calif., who has written a bill approved by the House last year that would require public companies to do what the SEC rule proposes — disclose climate risks.

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Read more at InvestmentNews

Dan Moisand

 

Dan Moisand is a nationally recognized fiduciary fee-only financial planner, an Institute Real Fiduciary™ Advisor and Chair-elect of the CFP Board.

The Institute has enshrined the ‘Moisand Rule’ on fiduciary practices. It is basic and is more important today than ever: “You have to avoid conflicts. If I avoid a conflict, I don’t worry about it.”

Watch the video of Moisand speaking here.

Bob Veres

 

Bob Veres is a long term observer of financial planning. His Newsletter, “Inside information” Is a staple of leading planners. In the May edition he writes about fiduciary and the Institute.

"But a much bigger point is that the fiduciary standard—as Knut Rostad of the Institute for the Fiduciary Standard has pointed out—has been determined by the Supreme Court (1963 ruling) to be at the very heart of the Investment Advisers Act of 1940. It is the foundation of what it means to be an RIA registered with the SEC instead of a tipster or a tout."

- Bob Veres, Parting Thoughts ... The SEC's Own Compliance Culture