Four quick reactions from KPMG on SEC proposed rules for investment companies
The SEC has proposed amendments related to the Investment Company Act's Names Rule, as well as enhanced ESG disclosure requirements for registered investment companies, business development companies, registered investment advisers and certain unregistered advisers. These proposals, which are subject to a comment period, seek to enhance transparency and help ESG-conscious investors gain greater clarity about their holdings.
A quick-hitting summary of this proposed regulation and its potential impact on financial services firms is available here.
Read more in the latest edition of Defining Issues: SEC investment management proposals focus on ESG (kpmg.us)
Here are four reactions from KPMG leaders:
The SEC’s proposed rule for investment advisers and certain investment companies is wide in scope and aims to provide consistent standards for ESG disclosures in a manner that investors will find decision useful. Given that no consistent standard exists today, this is quite a significant proposal. In addition, the proposal requires certain environmentally focused funds the obligation to disclose information regarding the GHG emissions associated with the portfolio. It’s also worth noting that while the ESG considerations may have provided an impetus to propose the amendments, the changes to the Names Rule specifically are not just confined to ESG strategies and naming.
Sean McKee, National Audit Leader, Public Investment Management
When it comes to ESG disclosures, detailed descriptions matter. Today, the SEC proposed amendments to rules and disclosure forms which would require registered investment companies, business development companies, registered investment advisers and certain unregistered advisers to enhance disclosure used in marketing materials, offering documents and other documents. If you have strategies rooted in ESG, it’s a good time to make sure your disclosure is clear to investors.
Matthew Giordano, Deputy Lead Partner, Public Investment Management
The SEC's proposals related to the Investment Company Act’s Names Rule and enhanced disclosures for ESG reflect significant steps taken by the Commission to bring investors enhanced transparency surrounding fund strategies. In the absence of a universally accepted definition of ESG, the SEC is seeking to combat greenwashing by placing increased accountability on investment advisers to disclose, in sufficient detail, the investment process used to arrive at decisions made within a portfolio. The goal is to ensure that investment decisions are consistent with the name of a fund and investors’ expectations.
Larry Godin, Principal and National Practice Lead for Asset and Wealth Management, Regulatory Risk and Compliance
These proposals are a natural follow on to the SEC climate-related disclosure proposals released on March 21 as the information produced by corporations will be vital to being able to satisfy these disclosure requirements.
Maura Hodge, Audit Leader, KPMG US IMPACT
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