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On Wednesday, the SEC found that DIMA failed to ensure that the mutual funds it advised had an AML program tailored to their specific risks, as required by law. This resulted in the failure of these mutual funds to adopt and implement policies and procedures designed to detect activities indicative of money laundering and conduct AML training specific to their business. To settle this charge, DIMA agreed to a cease-and-desist order and a $6 million penalty.
“The SEC’s order finds that DWS advised mutual funds with billions of dollars in assets yet failed to ensure that the funds had an AML program tailored to their specific risks,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
In a second enforcement action, the SEC charged DIMA with making materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations for its ESG-integrated products. From August 2018 until late 2021, DIMA failed to adequately implement certain provisions of its global ESG integration policy, leading investors and clients to believe it was more committed to ESG considerations than it was in practice. To settle these charges, DIMA agreed to a cease-and-desist order, censure, and a $19 million penalty.
“Whether advertising how they incorporate ESG factors into investment recommendations or making any other representation that is material to investors, investment advisers must ensure that their actions conform to their words,” said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force.
These penalties have impacted Deutsche Bank’s share price, which fell close to 1% in morning trading on Wednesday. The bank’s shares have declined more than 9% so far this year.
The SEC’s enforcement actions reflect its increasing focus on “greenwashing”, a practice where companies exaggerate their ESG credentials, as well as efforts to ensure that a fund’s name aligns with its investment objectives. Last week, SEC regulators voted 4-1 to require ESG and other theme-based funds to comply with the Names Rule, which mandates that funds hold at least 80% of their assets in the type of investment most closely associated with the fund’s name.
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