SEC slaps Goldman Sachs Asset Management with $4m fine

November 28, 2022

The Securities and Exchange Commission (SEC) has charged Goldman Sachs Asset Management for false advertisement of funds and account strategies.

According to the SEC, GSAM was fined due to policies and procedures failures involving two mutual funds and one separately managed account strategy marketed as ESG investments and received a $4m penalty.

The SEC’s order finds that, from April 2017 until February 2020, GSAM had several policies and procedures failures involving the ESG research its investment teams used to select and monitor securities.

From April 2017 until June 2018, the company failed to have any written policies and procedures for ESG research in one product, and once policies and procedures were established, it failed to follow them consistently prior to February 2020.

For example, the order finds that GSAM’s policies and procedures required its personnel to complete a questionnaire for every company it planned to include in each product’s investment portfolio prior to the selection; however, personnel completed many of the ESG questionnaires after securities were already selected for inclusion and relied on previous ESG research, which was often conducted in a different manner than what was required in its policies and procedures.

GSAM shared information about its policies and procedures, which it failed to follow consistently, with third parties, including intermediaries and the funds’ board of trustees.

The Division of Enforcement’s Climate and ESG Task Force was formed in March 2021. Among other things, it analyzes disclosure and compliance issues relating to investment advisers’ and funds’ ESG strategies. More information about the Task Force can be found here.

SEC’s division of enforcement deputy director and head of its climate and ESG Task Force Sanjay Wadhwa said, “In response to investor demand, advisers like Goldman Sachs Asset Management are increasingly branding and marketing their funds and strategies as ‘ESG.

“When they do, they must establish reasonable policies and procedures governing how the ESG factors will be evaluated as part of the investment process, and then follow those policies and procedures, to avoid providing investors with information about these products that differs from their practices.”