From SEC to Zennie62Media, ZennieReport.com – The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against DWS Investment Management Americas, Inc. (“Respondent” or “DIMA”).
DWS Investment Management Americas, Inc. Submits Offer Of Settlement
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the
findings herein, except as to the Commission’s jurisdiction over Respondent and the subject
matter of these proceedings, which are admitted, Respondent consents to the entry of this Order
Instituting Administrative and Cease-and-Desist Proceedings, Pursuant to Sections 203(e) and
203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial
Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.
On the basis of this Order and Respondent’s Offer, the Commission finds that:
- This matter arises from DWS Investment Management Americas, Inc.’s (“DIMA”)
material misstatements, and its failure to adopt and implement policies and procedures reasonably designed to prevent the resulting violations of the Advisers Act and the rules thereunder concerning DIMA’s integration of Environmental, Social, and Governance (“ESG”) factors in research and investment recommendations for certain actively managed ESG integrated mutual funds and separately managed account strategies advised by DIMA (collectively the “ESG Integrated Products”) - DIMA marketed itself to clients and prospective clients, and to investors and prospective investors in the funds it managed, as a leader in ESG, including through its marketing of the ESG Integrated Products. For example, in 2019, a DIMA senior leader described in a public marketing piece that ESG is “top of mind throughout our organization” through use of a proprietary “DWS ESG Engine” that is “the centerpiece of our commitment to integrating ESG considerations into our investment process [and] [e]very DWS investment team uses it to make investment decisions for their portfolio.
- However, from August 2018, DIMA failed to adequately implement certain provisions of the DWS Group GmbH & Co. KGaA (“DWS”) global ESG integration policy (the “ESG Integration Policy” or the “Policy”) in advising DIMA’s ESG Integrated Products as it had led clients and investors to believe it would, or otherwise adopt and implement reasonably designed
policies and procedures to ensure that its public statements about the ESG Integrated Products were accurate. Among other things, in 2019, a version of the ESG Integration Policy was uploaded on DWS’s U.S. public website through which DIMA marketed its advisory services. In marketing itself and its managed funds and strategies to clients and prospective clients, and to investors and prospective investors, DIMA represented that through this Policy its research analysts were required to include “financially material and reputation relevant ESG aspects into valuation model[s], investment recommendations and research reports and consider material ESG aspects as part of their [i]nvestment decision.” Yet this representation was misleading because DIMA failed to adequately implement the Policy’s requirements for research and monitoring compliance. Nor did DIMA adopt and implement reasonable policies and procedures to help ensure that its public representations about the ESG Integration Policy were not misleading. Indeed, internal analyses showed DIMA research analysts having inconsistent levels of documented compliance with the ESG Integration Policy’s requirements to consider material ESG risk factors in research and valuation models. The ESG Integration Policy nonetheless remained published on the website, creating the impression that its employees were following the ESG Integration Policy, when DIMA knew or should have known that it lacked adequate procedures to ensure this was the case.
Respondent DWS Investment Management Americas, Inc.
- DWS Investment Management Americas, Inc. (SEC File No. 801-252) is an investment adviser that has been registered with the Commission since 1940. DIMA is a Delaware corporation with its principal office in New York, New York. DIMA is a corporate subsidiary of DWS Group GmbH & Co. KGaA, an asset management holding company headquartered in Frankfurt, Germany.
The detailed list of actions by DWS according to the SEC, can be read here.
Violations
- As a result of the conduct described above, DIMA willfully2 violated Section 206(2) of the Advisers Act, which prohibits an investment adviser, directly or indirectly, from engaging “in
any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client.” Scienter is not required to establish a violation of Section 206(2), which may rest on a finding of simple negligence. SEC v. Steadman, 967 F.2d 636, 643 n.5 (D.C. Cir. 1992) (citing SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 194-95 (1963)). - As a result of the conduct described above, DIMA willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-8 promulgated thereunder, which provides in relevant part that
it is unlawful for an investment adviser to a pooled investment vehicle to make any untrue statement of a material fact or to omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, to any investor or prospective investor in the pooled investment vehicle. A violation of Section 206(4) and the rules thereunder. does not require scienter, and may rest on a finding of simple negligence. Steadman, 967 F.2d at 647.
Remedial Efforts and Cooperation
In determining to accept the Offer, the Commission considered remedial acts undertaken
by Respondent and cooperation afforded the Commission staff. For example, throughout the
staff’s investigation, DIMA provided detailed factual summaries and made substantive
presentations on key topics. As discussed above, DIMA’s remedial steps include, but are not
limited to, modifying relevant processes, policies, procedures, and controls.
In view of the foregoing, the Commission deems it appropriate and in the public interest to
impose the sanctions agreed to in Respondent’s Offer.
Accordingly, pursuant to Sections 203(e) and 203(k) of the Advisers Act, it is hereby
ORDERED that:
A. DIMA cease and desist from committing or causing any violations and any future
violations of Sections 206(2) and 206(4) of the Advisers Act and Rules 206(4)-7 and 206(4)-8
thereunder.
B. DIMA is censured.
C. DIMA shall, within 10 days of the entry of this Order, pay a civil money penalty in the amount of $19,000,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Section 21F(g)(3) of the Securities Exchange Act of 1934. If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.
Payment must be made in one of the following ways:
(1) Respondent may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request;
(2) Respondent may make direct payment from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or
(3) Respondent may pay by certified check, bank cashier’s check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to:
Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169
Payments by check or money order must be accompanied by a cover letter identifying
DWS Investment Management Americas, Inc. as a Respondent in these proceedings, and the file
number of these proceedings; a copy of the cover letter and check or money order must be sent to
Brianna Ripa, Assistant Director, Asset Management Unit, Securities and Exchange Commission,
100 F Street NE, Washington, DC 20549.
D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be
treated as penalties paid to the government for all purposes, including all tax purposes. To
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any
award of compensatory damages by the amount of any part of Respondent’s payment of a civil
penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such a
Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting
the Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the
Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed
an additional civil penalty and shall not be deemed to change the amount of the civil penalty
imposed in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a
private damages action brought against Respondent by or on behalf of one or more investors based
on substantially the same facts as alleged in the Order instituted by the Commission in this
proceeding.
By the Commission.
Vanessa A. Countryman
Secretary