The Financial Industry Regulatory Authority is urging brokers to review environmental, social and governance claims they make to their clients, after it found firms had made deceptive ESG statements.
The notice is the first time FINRA has mentioned ESG in its annual examination and risk monitoring report, which came out Tuesday. FINRA discovered some brokers’ ESG communications discussed misleading rankings, ratings or awards and included claims about funds that were “inconsistent with or unsupported by” offering documents, according to the regulator’s report.
Brokers should be “implementing and maintaining reasonably designed procedures for communications promoting ESG factors,” the report said.
- Firms need to prominently describe any ESG investing risks to balance promotional material, FINRA said.
- FINRA didn’t identify any of the brokers that raised its concerns.
- The Securities and Exchange Commission is expected to adopt rules intended to better combat greenwashing and other misleading ESG statements by funds in the coming months, according to the agency’s agenda.
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