Deutsche Bank AG's DWS asset management arm agreed to pay a total of $25 million to settle Securities and Exchange Commission probes into alleged greenwashing and anti-money laundering lapses.
The penalties include $19 million for "materially misleading statements" about how it incorporates environmental, social, and governance factors into research and investment recommendations and $6 million for failing to develop a mutual fund AML program, the SEC said in a statement on Monday.
DWS didn't admit or deny the SEC's findings.DWS has been under scrutiny by various agencies including the SEC since a former employee, Desiree Fixler, went public over two years ago with claims that the asset manager had inflated its ESG credentials. The allegations and ensuing probes hit the firm's share price as investors sought to assess the financial impact.
"Investment advisers must ensure that their actions conform to their words," Sanjay Wadhwa, deputy director of the SEC's enforcement division, said in the statement on Monday. "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." DWS shares briefly gained on the news but were trading 0.43% lower as of 3:26 pm local time.
A spokesman for DWS said the firm is "pleased that the SEC recognized our cooperation in the investigation and our remediation efforts."
The ESG order found "no misstatements in relation to our financial disclosures or in the prospectuses of our funds." "The order also makes clear that there was no intent to defraud, and the weaknesses identified by the SEC are in relation to processes and procedures that the firm has already taken steps to address," the spokesman said.
DWS has rejected Fixler's claims from the outset and Chief Executive Officer Stefan Hoops has said he stands behind the disclosures targeted in the probes. He has also said that some of the firm's past marketing claims may have been "
The vast majority of that was for expected settlements from several probes in the US and Germany, a person familiar with the matter said at the time.
The settlement is the biggest fine that the SEC has extracted thus far in its push under Chair Gary Gensler to crack down on how asset managers label ESG funds. Goldman Sachs Group Inc. agreed to pay $4 million to settle claims last November that its asset-management unit didn't properly weigh ESG factors in some of its investment products.
A Bank of New York Mellon Corp. arm agreed to pay $1.5 million to settle allegations in May 2022 that it falsely implied some mutual funds had undergone an ESG quality review. On the policy front, last week, the Wall Street regulator also imposed the most sweeping overhaul for fund-labeling regulations in more than two decades.
The backers of the overhaul say the measures in particular will help rein in overblown claims about ESG investments.
With assistance from Ben Bain.
