SEC Approves "Names" Rule To Combat Greenwashing

On September 20, 2023, the SEC approved amendments to the "Names Rule," which were initially proposed in May 2022. Although the stated "purpose of the Names Rule," according to the accompanying Fact Sheet distributed by the SEC, "is to prevent fund names from misrepresenting the fund's investments and risks," primarily by requiring investment funds to "adopt a policy to invest at least 80 percent of their assets in accordance with the investment focus the fund's name suggests"--a rule with apparently general application--the SEC has made it clear that a key target of this new rule is the recent phenomenon of greenwashing, in which investment funds falsely claim to be environmentally-friendly in their activities (or to a greater degree than justified by the facts).