ESG Enforcement Tracker

Key facts:

Purpose Investments, a registered investment fund manager in Toronto, published articles on its website suggesting to the public that it considered ESG factors in its investment decisions and made claims about ESG principles in its processes and data usage.

Its founder and CEO (and, for the purposes of the Securities Act, its ‘Ultimate Designated Person’ (UDP)) is Som Seif. The UDP has supervision responsibilities to ensure compliance with Ontario Securities Law.

OSC, the largest securities regulator in Canada (whose jurisdiction includes the Toronto Stock Exchange) filed an application for enforcement proceedings with the Ontario Capital Markets Tribunal on the grounds that such sales communications were misleading, untrue and in conflict with the prospectuses of the managed funds. Consequently, it alleges significant related failings of the UDP.

The OSC states in its filing that Purpose Investments did not consider ESG factors when making investment decisions. It highlights the absence of formal policies or procedures for the portfolio management team regarding ESG considerations. It notes the incomplete and insufficient ESG data available at relevant time periods to inform such decisions.

Purpose Investments updated its website in 2023 after the OSC reviewed it investments. The OSC now takes action against uncertain or misleading sales communications, false statements, and omissions of information that a reasonable investor would consider relevant when engaging with Purpose Investments, among other grounds.

The OSC is seeking a permanent suspension and cessation of trading of securities or derivatives, a review of procedures, a reprimand, removal of directors and officers, and a prohibition on acting in such roles across various securities-related activities, as well as a penalty of CA$5 million for each breach of securities law and disgorgement of ‘amounts obtained’.