Exclusive-U.S. SEC readies penalty for DWS in greenwashing probe by end September -sources

2023-07-25 20:21

By Chris Prentice and Tom Sims NEW YORK/FRANKFURT The U.S. Securities and Exchange Commission is preparing to resolve

By Chris Prentice and Tom Sims

NEW YORK/FRANKFURT The U.S. Securities and Exchange Commission is preparing to resolve a two-year probe into allegations of greenwashing by the German fund manager DWS, with a fine by the end of September, two people with knowledge of the matter said.

Resolution of the case with the U.S. authorities, which the people said would likely result in a financial settlement that is not expected to be significant, would help draw a line under an episode that has tarnished the image of Deutsche Bank-controlled DWS.

DWS said the resolution of allegations was a top priority but that it couldn't comment on timeframes or outcomes. The Securities and Exchange Commission (SEC) and Deutsche Bank declined to comment.

Since 2021, regulators on both sides of the Atlantic have investigated accusations sparked by a whistleblower that DWS may have misled investors by marketing its funds as greener than they actually were. Investigations in Germany are still ongoing.

DWS has said that it stands by its financial disclosures and fund prospectuses and is cooperating with investigators. But the scrutiny has resulted in raids by investigators on DWS' headquarters, the resignation of its chief executive and pressure on its share price.

Under Democratic leadership, the SEC has pledged to crack down on "greenwashing" and the inflating of ESG credentials to attract investors. Last year it cracked down on Goldman Sachs with a $4 million fine.

DWS had earmarked civil litigation provisions of 8 million euros ($8.84 million) by the end of last year.

It remains unclear when there may be a resolution on the case with German authorities.

DWS has been in settlement negotiations with Frankfurt prosecutors over a multi-million euro fine, one of the people said.

Earlier in July, Reuters and other media reported that German prosecutors were investigating DWS' former CEO Asoka Woehrmann, who in the past has called allegations "unfounded".

($1 = 0.9055 euros)

(Reporting by Chris Prentice and Tom Sims; Editing by John O'Donnell, Louise Heavens and Susan Fenton)