On July 20, 2022 the SEC issued a press release concerning the resolution of an administrative proceeding in which the defendants "violated certain antifraud and reporting provisions of the federal securities laws and [] profited by selling [] stock when it was inflated as a result of the misconduct." Specifically, the alleged misconduct was in connection with "false[]" statements to investors regarding "high compliance standards" and "very few consumer complaints" related to the "short-term and limited health insurance products" offered by the defendants. There is nothing especially surprising about this enforcement action, which is squarely within the SEC's typical remit.

However, one item about the press release was surprising: it specifically stated that "[t]he Division of Enforcement's Climate and ESG Task Force provided assistance in this matter." This statement in an SEC press release concerning an enforcement action is highly unusual. Since the beginning of the year (2022), there have only been two SEC press releases highlighting the involvement of the Climate and ESG Task Force. And both of the prior instances were clearly within the bailiwick of the Climate and ESG Task Force (misstatements in ESG disclosures and misstatements about use of ESG considerations in making investments). Here, by contrast, there is nothing that apparently links the SEC enforcement action to the stated purpose of the Climate and ESG Task Force. Indeed, all of the alleged misstatements at issue in this action derived from the usual sources--SEC filings (10-Ks, 8-Ks), earnings calls, investor presentations--rather than from ESG reports.

Now, there are a plethora of possible non-policy reasons that the Climate and ESG Task Force might be referenced in an SEC press release about an unrelated matter. It could be as simple as an individual enforcement attorney continuing with a prior investigation even after joining the Climate and ESG Task Force, or a bureaucratic sharing of resources. It is also possible that there was originally an ESG component to this investigation that was ultimately abandoned.

But if the Climate and ESG Task Force is devoting resources to prosecuting garden-variety fraud, the implications are significant. Not only does this represent a diversion of resources from a well-publicized initiative by the Biden Administration's SEC, but it could potentially also indicate a lack of appetite to pursue purely ESG-related enforcement actions, and instead relate such prosecutions to core SEC investigative practices. Only time will tell, but this type of enforcement activity will be an important indicator as to the depth of the commitment of the SEC to ESG-specific enforcement priorities.

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