SEC Fines Goldman Sachs Asset Management $4 Million!

The Securities and Exchange Commission (SEC) has charged Goldman Sachs Asset Management with false advertising of funds and account strategies. According to the SEC, GSAM was fined $4 million for policy and procedural failures in two mutual funds and a separately managed account strategy marketed as ESG investments.

The SEC’s order states that from April 2017 through February 2020, GSAM failed to comply with several policies and procedures related to the ESG research its investment teams used to select and monitor securities.

From April 2017 through June 2018, the company did not have written policies and procedures for ESG research for one product. After implementing policies and procedures, they needed to be consistently followed through February 2020.

For example, the order notes that GSAM’s policies and procedures required its staff to complete a questionnaire for each company to be included in each product’s investment portfolio before selection; however, the team met many of the ESG questionnaires after the securities had already been selected for inclusion, relying on prior ESG research that was often conducted in a manner different from that required by the policies and procedures.

GSAM shared information about its policies and procedures that it should have consistently followed with third parties, including intermediaries and the Funds’ Board of Trustees.

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

Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement and head of the Climate and ESG Task Force, said, “In response to investor demand, advisors such as Goldman Sachs Asset Management are increasingly labelling and marketing their funds and strategies as ‘ESG.’

“When they do so, they need to establish appropriate policies and procedures that govern how ESG factors are evaluated as part of the investment process, and then follow those policies and procedures to avoid providing investors with information about these products that deviate from their practices.”


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