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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