Disclosure case reveals reach of SEC enforcement (Fund Directions)

A recent SEC action against a faith-based investment adviser followed the same truth-in-advertising rules the SEC set in motion for its regulation of ESG-related investing. Inspire Investing LLC settled SEC charges that it misled investors about its “biblically responsible” investing strategy for its ETFs and separately managed account offerings. With the lead quotes, FrontLine Compliance Founder and President Amy Lynch describes the core of the case as the firm disclosing its investing strategy in fund documents in one way, while in reality the firm was doing something different. The case indicates that the SEC can pursue enforcement actions based on false disclosures or marketing that are outside of the ESG “greenwashing” type case. It would also seem to provide several lessons for fund boards with an ESG mandate. Ms. Lynch recommends that these fund boards review investment holdings at each board meeting, as well as reports that cover the ESG strategies for those holdings and the support for that information, requiring a lot of paperwork to complete. See Fund Directions (subscription required), “SEC case against Christian fund adviser suggest enforcers looking beyond ESG”