In a landmark development, DWS, the German asset manager majority-owned by Deutsche Bank, has agreed to pay a substantial $25 million to resolve two separate enforcement actions brought by the United States Securities and Exchange Commission (SEC). These actions are the culmination of a more than two-year-long investigation into allegations of greenwashing, which have cast a shadow over the asset management firm.
The SEC’s charges against DWS revolve around two significant issues. Firstly, the company was accused of violating anti-money laundering (AML) regulations. According to the SEC, DWS provided advisory services to mutual funds with assets totaling billions of dollars. However, it failed to establish AML programs tailored to the specific risks associated with these funds, as mandated by law. This failure was a significant violation in the eyes of the SEC.
Gurbir Grewal, the director of the SEC’s enforcement division, commented on the matter, stating, “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, as required by law.”
Secondly, DWS was accused of making “materially misleading statements” concerning its control over environmental, social, and governance (ESG) factors within its investment and research recommendations for ESG-related products. This included actively managed mutual funds. The SEC found that DWS had promoted ESG as an integral part of its investment philosophy, claiming it was in its “DNA.” However, the SEC’s order revealed that DWS’s investment professionals did not adhere to the ESG investment processes it had marketed.
Sanjay Wadhwa, deputy director of the SEC’s enforcement division, emphasized this aspect, stating, “DWS advertised that ESG was in its ‘DNA,’ but, as the SEC’s order finds, its investment professionals failed to follow the ESG investment processes that it marketed.”
Importantly, DWS decided to accept these penalties without admitting or denying the SEC’s findings. The company expressed satisfaction in resolving the matter swiftly and noted that the SEC’s investigation did not uncover any misstatements related to its financial disclosures or its funds’ prospectuses.
Furthermore, DWS stated, “the weaknesses identified by the SEC are in relation to processes and procedures that the firm has already taken steps to address.”
This settlement marks a significant moment in the ongoing debate over greenwashing within the financial industry and underscores the regulatory scrutiny faced by asset managers in their ESG-related practices.
Photo Source: Google
27th Spetember , 2023
Delino Gayweh
Serrari Financial Analyst
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