What does this affect: Registered investment companies or business development companies, especially those with “ESG,” “green,” “climate” and similar terms in their names.
Why has it been introduced: According to the proposed amendment, this has been introduced to “prevent potential greenwashing in fund names by requiring a fund’s investment activity to support the investment focus its name communicates so that investors will not be deceived or misled by the fund’s name.”
What does it require: It required funds with terms such as “ESG,” “green, and “climate” would be required to adopt a policy to invest at least 80% of their assets into the type of investment indicated in its name and maintain written records documenting their compliance with the 80% investment policy.
When would these rules come into effect: These proposals were announced in May 2022 and, according to the SEC’s Regulatory Flexibility Agenda, are slated for final action by the SEC in the second half of 2023, however, this could be subject to change.
Where is reporting required: Firms would need to enhance prospectus disclosures and establish record keeping requirements. Additionally, the SEC has proposed additional
requirements for funds to report information on Form N-PORT regarding compliance with the
proposed names-related regulatory requirements.
Original text: Proposed Amendments to the Investment Company Names Rule
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