SEC to Presumably Take Enforcement Action Against Large Asset Manager

WisdomTree Asset Management recently received a "Wells" notice from the U.S. Securities and Exchange Commission (SEC) regarding three of its ETFs focused on environmental, social, and governance (ESG) criteria.

This notice indicates that the SEC staff has made a preliminary decision to recommend enforcement action against WisdomTree for alleged violations of U.S. federal securities laws.

The SEC’s actions could lead to civil penalties, injunctions, or other legal consequences. However, the notice itself is not a formal charge, and WisdomTree asserts that it has complied with all relevant regulations.

The SEC’s concerns pertain to three specific ETFs managed by WisdomTree: the International ESG Fund (RESD), the Emerging Markets ESG Fund (RESE), and the U.S. ESG Fund (RESP). These funds, designed to invest in securities with high sustainability ratings, were liquidated by WisdomTree in February 2024 following a December 2023 decision by its Board of Directors.

The liquidation was driven by a lack of investor demand and limited prospects for future growth. At the time of their operation, these funds managed assets averaging $119 million.