Brokerage Regulator FINRA Cautions Firms Touting ESG Investments

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. ...