09.20.23

SEC Cracks Down on Misleading Fund Names and ‘Greenwashing’

by: Chris Matthews

The U.S. Securities and Exchange Commission adopted a new rule aimed at preventing investment companies from using misleading names to market their funds to investors. The rule was proposed in response to a growing trend of investment funds labeling themselves as environmental, social or governance focused, suggesting that they invest in companies that meet certain criteria. The rule requires investment advisors to make sure that a fund with a name that implies a focus on companies with a particular set of characteristics has 80% of its investments reflect the plain English meaning or established industry use of a term in question. Fund managers will also have to add disclosures to their prospectuses to define the terms in their fund names and the criteria used to determine which investments meet those criteria.

Read the full article on MarketWatch