In Australian Securities and Investments Commission v Vanguard Investments Australia Ltd [2024] FCA 308 the Federal Court of Australia found Vanguard Investments Australia contravened section 12DF(1) of the ASIC Act when it made false or misleading representations about the ESG exclusionary screens that were applied to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund.
UPDATE: In the penalty decision Vanguard was ordered pay an aggregate pecuniary penalty to the Commonwealth of $12,900,000.
Vanguard admitted to engaging in conduct that was liable to mislead the public and that it had made representations that were false or misleading.
These representations were made to the public in a range of communications, including Product Disclosure Statements, a media release, a Finance News Network interview on YouTube, and a presentation at a Finance News Network Fund Manager Event which was published online.
The only issue in dispute relating to liability concerned the breadth of certain statements made by Vanguard in its PDSs issued in respect of units in the Fund and on its website in promoting the Fund.
Justice O’Bryan did not accept ASIC’s contention that the PDSs and the website conveyed a representation that ESG screening was applied to all securities.
He decided that the PDSs issued in respect of units in the Fund and Vanguard’s website stated in clear terms that the Fund comprised bonds issued by governments, government related entities and companies, but the ESG screening was applied only to companies.
He concluded that statements in Vanguard’s PDSs and on its website were to the effect that securities issued by companies were researched and screened against applicable ESG criteria, and that securities issued by companies that violated those criteria were excluded or removed from the Bloomberg SRI Index and therefore the Fund.
The matter has been listed for further hearing at which the Court will consider the appropriate penalty to impose for the conduct.
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Author: David Jacobson
Principal, Bright Corporate Law
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The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
