The
Securities and Exchange Commission (SEC) has charged WisdomTree, a popular New
York-based exchange-traded funds (ETFs) issuer, with making false statements
and failing to comply with its own investment criteria. According to the market
watchdog statement, “WisdomTree agreed to a cease-and-desist order and censure
and to pay a $4 million civil penalty.”

WisdomTree Fined $4
Million by SEC for Fund Misrepresentation

The SEC’s
order alleges that from March 2020 to November 2022, WisdomTree misled
investors and the board of trustees by claiming that three of its ESG-marketed ETFs
would not invest in companies involved in fossil fuels and tobacco. Contrary to
these representations, the funds invested in companies engaged in coal mining,
natural gas extraction, and tobacco retail.

The
regulatory body found that WisdomTree relied on data from third-party vendors
that failed to adequately screen out all companies involved in fossil fuel and
tobacco-related activities. Furthermore, the firm lacked proper policies and
procedures to ensure compliance with its stated investment criteria.

“When
investment advisers represent that they will follow particular investment
criteria, whether that is investing in, or refraining from investing in,
companies involved in certain activities, they have to adhere to that criteria
and appropriately disclose any limitations or exceptions to such criteria,” Sanjay
Wadhwa, Acting Director of the SEC’s Division of Enforcement, commented. “By
contrast, the funds at issue in today’s enforcement action made precisely the
types of investments that investors would not have expected them to based on
WisdomTree’s disclosures.”

Without
admitting or denying the SEC’s findings, WisdomTree has agreed to a
cease-and-desist order, censure, and a $4 million civil penalty.

This
enforcement action highlights the SEC’s ongoing efforts to combat
“greenwashing” in the rapidly growing ESG investment sector. It
serves as a reminder to asset managers of the importance of accurate
disclosures and robust compliance procedures in ESG-focused products.

SEC News: #SEC charges @WisdomTreeFunds with failing to adhere to its own investment critera for ESG marketed Funds. Wisdomtree did infact invest in fossil fuels and tobacco. There you have it. https://t.co/FYV0GYaUFK pic.twitter.com/H3JRQyueOl

— MartyParty (@martypartymusic) October 21, 2024

WisdomTree: A Pioneer in
Cryptocurrency Funds

WisdomTree
is among several issuers with their own Bitcoin ETF on Wall Street. The WisdomTree Bitcoin Fund (BTCW) tracks the spot price of the oldest cryptocurrency. Since its debut, BTCW has gained 75%, compared to Bitcoin ‘s 60%
increase in 2024.

While it
may not be the largest Bitcoin ETF out there, the company has a long history of
issuing other cryptocurrency instruments on regulated exchanges worldwide.

In May,
WisdomTree, in partnership with 21Shares, introduced the first crypto
exchange-traded products (ETPs) in the UK for Bitcoin and Ethereum, listed on
the London Stock Exchange. More notably, WisdomTree was one of the first to
launch such instruments in Europe—and globally—in 2019. Today, a range of
crypto ETPs and ETFs are available for trading in Amsterdam, Paris, Frankfurt,
and Switzerland.

The
difference between ETPs and ETFs lies in their scope and structure. ETPs encompass
a wide range of investment vehicles, including ETFs, Exchange-Traded Notes
(ETNs), and Exchange-Traded Commodities (ETCs). On the other hand, ETFs are a
specific subset of ETPs, meaning all ETFs are ETPs, but not all ETPs qualify as
ETFs. While ETPs cover various asset types and structures, ETFs are typically
designed to track the performance of a particular index or sector.