SIFMA lawsuit against Missouri anti-ESG investment law survives

The case over Missouri’s first ESG investment rule will move forward after a federal judge earlier this month denied the state’s motion to dismiss.

Securities Industry and Financial Markets Association He sued Show Me State last August. over two securities regulations enacted four months ago that violate environmental, social and governance standards. The measure would require advisors and broker-dealers to obtain written consent from clients when buying or selling investment products based on social or other non-financial objectives, and would require advisors and broker-dealers to consider ESG considerations. It will also be necessary to recognize that incorporating it will result in investment and advice being provided. We don’t just focus on maximizing the financial benefits of our clients. ”

Missouri Secretary of State Office

SIFMA claimed in it that complaint The rule conflicts with federal securities laws that require uniform regulation and disclosure across states.

“This type of regulation is completely new,” the industry group said, adding that Missouri “goes grossly overboard” by lumping together non-financial purposes. “There is no precedent in securities law, and 49 other states do not require it.”

SIFMA said the rule pre-empts the National Securities Market Improvement Act of 1974 and the Employee Retirement Income Security Act and is unconstitutionally vague and violates the First Amendment.

The rule seeks to directly regulate asset managers, opening a new front in the Republican-led national anti-ESG fight. Previous legislation passed so far has regulated state funds and contracts.

SIFMA named Missouri Secretary of State John R. Ashcroft and Missouri Securities Commissioner Douglas Jacoby as defendants. Ashcroft, the son of former U.S. Attorney General John Ashcroft, created the rule after lawmakers failed to pass legislation with the same purpose.

last fall, Missouri asked the court to throw out the case. The reasons include that SIFMA had no standing and that its claims were baseless.

in Decided on January 7th, Judge Stephen Baugh of the Western Missouri District rejected all of the state’s arguments. The judge ruled that SIFMA is valid, especially because the rules impose compliance costs on SIFMA members. The remedy SIFMA is seeking, namely the invalidation of the investment rules, would resolve each member’s injury, Bo said.

Baugh rejected Ashcroft’s contention that SIFMA’s claims are baseless, instead arguing that the group argues that NSMIA’s preemption of Missouri’s investment adviser rules is because “the investment adviser’s representative and regulate federally covered investment advisory firms beyond what the NSMIA allows, and broker-dealers require documentation that exceeds federal requirements under this rule. Baugh also said that SIFMA has taken sufficient steps to establish that the rule is “‘linked’ to ERISA to support ERISA preemption claims.” Further, assuming the rule regulates securities, the court found that SIFMA properly asserts that the rule precludes ERISA’s “comprehensive plan of relief.” ” said the judge.

The court also found that SIFMA properly argued that the regulations violated the First Amendment and that the regulations were unconstitutionally vague.

A spokesman for Mr Ashcroft said the Secretary of State “continues to fight to protect investors from hidden and misleading agendas that may not have investors’ best financial interests in mind”. Ta.