SEC’s Amended ESG Names Rule Sends Clear Signal to Companies

Olshan partner Spencer Feldman published an article in Bloomberg Law (subscription required) entitled “SEC’s Amended ESG Names Rule Sends Clear Signal to Companies.” The article discusses SEC amendments to the Investment Company Act’s “names rule,” prohibiting investment funds from using names that are likely to mislead or deceive investors about a fund’s investments. The amendments focused on funds using such terms as “sustainable,” “green,” or “socially responsible” when they do not invest a substantial amount in such sectors. “The amended names rule highlights the need for investment funds and individual public companies to ensure transparency and avoid investment deception in their naming and promotion,” Spencer writes. “The amendments establish a new requirement that a fund review its portfolio assets’ treatment under its 80% investment policy at least quarterly and include timeframes for getting back into compliance if a fund departs from its 80% investment policy.” He concludes, “Investment funds and individual public companies should familiarize themselves with the SEC’s message, as materially misleading and deceptive names are subject to the anti-fraud provisions of the US federal securities laws.”