This greenwashing rule, which had been proposed in late May 2022, effectively sought to combat the practice whereby funds labeled themselves as green or ESG-focused without actually complying with that description.
Under Section 35d of the Investment Company Act, it is unlawful for a registered fund to bear a name that includes words the SEC finds materially deceptive or misleading. In 2001, to implement this statutory provision, the SEC adopted Rule 35d-1.
If the decision stands, it would severally hamper the SEC’s enforcement efforts in in the Fifth Circuit which includes Texas, Louisiana, and Mississippi, effectively preventing the agency from using its established mechanisms to issue civil penalties in those states.