September 25, 2023 | In the matter of DWS Investment Management Americas, Inc. File No. 3-21709.
Deutsche Bank’s American investment advisor subsidiary (“DWS”) has agreed to pay a $19 million fine to the SEC in connection with disclosures regarding the investment advisor’s ESG policies and proprietary “DWS ESG Engine.” The SEC alleged that DWS made materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations, and that DWS did not have policies in place reasonably designed to ensure its public statements about the use of ESG factors in investment decisions were accurate. DWS allegedly lacked policies and procedures to ensure the ESG Integration Policy was consistently followed by investment professionals, that investment professionals consulted the “DSW ESG Engine,” or that investment professionals incorporated ESG issues in valuation models or investment recommendations.
March 28, 2023 | Securities and Exchange Commission v. Vale S.A., No. 1:22-cv-02405 (E.D.N.Y. 2022).
Vale S.A., a publicly traded Brazilian mining company, agreed to pay $55.9 million to the SEC to settle charges related to disclosures of the safety of Vale’s dams. The settlement includes $25 million in disgorgement of alleged ill-gotten profits. The allegedly false disclosures were issued before the January 2019 collapse of Vale’s Brumadinho dam, which killed 270 people. The SEC alleged that Vale knew that the Brumadinho dam, which was built to contain potentially toxic byproducts from iron ore mining, did not meet internationally recognized standards. However, Vale’s annual sustainability report stated that Vale adhered to the “strictest international practices” in dam safety. The SEC’s investigation was conducted by the Climate and ESG Task Force in the Division of Enforcement, which was formed in March 2021 to identify material gaps or misstatements in ESG disclosures.
The SEC charged Goldman Sachs Asset Management for failing to follow certain policies and procedures for investments marketed as ESG investments. To settle the charges, GSAM agreed to a cease-and-desist order, a censure, and a $4 million penalty.
The SEC charged Compass Minerals International Inc. for misleading investors about costs for a technology upgrade at the world’s largest underground salt mine, near Ontario, Canada, as well as failing to properly analyze the financial risks of contamination at one of its former facilities in Brazil. To settle the charges, Compass Minerals was ordered to pay $12 million and agreed to cease and desist from further violations.
The SEC charged BNY Mellon Investment Adviser Inc. for misstatements and omissions in ESG quality reviews for certain investments. To settle the charges, BNY Mellon Investment Adviser agreed to a cease-and-desist order, a censure, and a $1.5 million penalty.
The SEC charged Vale S.A., a Brazilian mining company and iron ore producer, for making false and misleading claims in its sustainability reports and other ESG disclosures regarding the safety of its Brumadinho dam, which collapsed in 2019 and killed 270 people.
The SEC charged Trevor Milton, founder of Nikola Corporation, for making false and misleading statements about Nikola’s products, technological accomplishments, and commercial achievements. Nikola was founded with the goals of manufacturing trucks that run on alternative fuels with low or zero emissions and building an alternative fuel station infrastructure to support such vehicles. Nikola agreed to a cease-and-desist order, certain voluntary undertakings, and a $125 million penalty. The SEC’s order also established a Fair Fund to return penalty proceeds to victim investors.
The SEC charged Trevor Milton, founder of Nikola Corporation, for making false and misleading statements about Nikola’s products, technological accomplishments, and commercial prospects. Nikola was founded with the goals of manufacturing trucks that run on alternative fuels with low or zero emissions and building an alternative fuel station infrastructure to support such vehicles. Milton falsely claimed, inter alia, that Nikola had developed a successful semi-truck prototype, an electric pickup truck prototype, and a “game-changing” battery technology, had billions of dollars of orders at a price point 20-30% below that of diesel vehicles, and was producing hydrogen at a cost four times lower than the prevailing market rates. In December 2021, Nikola agreed to a cease-and-desist order, to certain voluntary undertakings, and a $125 million penalty. The SEC’s order also established a Fair Fund to return penalty proceeds to victim investors.
The SEC brought an emergency enforcement action to stop offering fraud and misappropriation of investor assets by Tra Jay Scarlett through his companies Chatfield PCS Ltd. and GO ECO Manufacturing Inc. The SEC alleged that Scarlett and Chatfield made false and misleading statements to investors, raising at least $3.2 million, by falsely marketing that GO ECO was an environmentally friendly protein-drink bottling and manufacturing company when, in fact, GO ECO had no active business operations. On March 30, 2022, the SEC obtained a final judgment that ordered the defendants to pay over $5 million in penalties, disgorgement, and prejudgment interest.
The SEC found that Fiat Chrysler violated reporting provisions of federal securities laws by making misleading disclosures about an internal audit of its emissions control systems confirming that its vehicles are compliant with all environmental regulations. Fiat Chrysler did not sufficiently disclose the limited scope of its internal audit, which did not address several issues raised by EPA and did not constitute a comprehensive review of its compliance with U.S. emissions regulations. Fiat Chrysler agreed to cease and desist and to pay a $9.5 million penalty. The SEC also created a Fair Fund to distribute the penalty to harmed investors and issued an order in November 2021 approving a proposed plan of distribution.