WisdomTree Settles SEC Charges

WASHINGTON (Reuters) – New York-based investment adviser WisdomTree Asset Management has agreed to pay $4 million to settle charges from the Securities and Exchange Commission (SEC) regarding misleading marketing practices related to three funds that were promoted as having an environmental, social, and governance (ESG) investment strategy.

Why It’s Important

This case illustrates the SEC's ongoing efforts to address "greenwashing," where investment firms market funds as ESG compliant while actually investing in companies involved in fossil fuels or other excluded sectors.

Context

• From March 2020 to November 2022, WisdomTree claimed that its three exchange-traded funds did not invest in fossil fuels or tobacco companies. However, the SEC found that these funds were actually invested in coal mining, natural gas extraction and distribution, and tobacco retail sales.
• WisdomTree utilized third-party data that failed to adequately screen out all companies associated with fossil fuels and tobacco. The SEC noted that the firm did not maintain sufficient policies and procedures for excluding such companies.
• As part of the settlement, WisdomTree agreed to a cease-and-desist order and censure, along with the $4 million civil penalty, without admitting or denying the SEC's findings.
• A spokesperson from WisdomTree stated that the funds in question were small and have been liquidated, emphasizing their commitment to regulatory and compliance responsibilities and their pride in investment transparency.