Investor Protection

CFA Strongly Supports SEC Proposals to Enhance ESG-Related Disclosures and Update Names Rule

Washington, D.C. – Today, CFA submitted comments on two proposals by the Securities and Exchange Commission (SEC) that would ensure retail investors have more accurate and reliable information about the products and services that are marketed and sold to them. One proposal, the Environmental, Social, and Governance Disclosures [ESG] for Investment Advisers and Investment Companies, would require investment companies and investment advisers to provide additional disclosures about how they incorporate ESG considerations into their investing practices. The other, titled Investment Company Names, would, among other changes, expand the scope and applicability of the SEC’s current Names Rule to cover a broader set of fund naming conventions, including funds’ use of ESG-related terminology in their names, and the use of derivative investment instruments in investment portfolios.

“We are pleased by both of these rule proposals,” said Dylan Bruce, CFA Financial Services Counsel. “We strongly support the SEC’s effort to enhance the disclosures that investors receive from funds and advisers regarding ESG considerations in fund strategies and investments. We also support the SEC’s proposal to improve the reliability and accuracy of fund names—the current Names Rule is in dire need of updating, and this proposal would better protect the many investors that reasonably rely on the accuracy and reliability of fund names when making investment decisions.”

“Greenwashing, the practice of misrepresenting the extent to which a product or service is green or sustainable, is a real problem and retail investors can be misled by marketing claims that are not backed up by actual ESG practices,” said Micah Hauptman, CFA Director of Investor Protection. “These proposals, if finalized, would require funds and advisers to back up their claims and would reduce the potential for greenwashing.”

Micah Hauptman, 202-939-1004
Dylan Bruce, 202-642-1704