WisdomTree Gets SEC Wells Notice Over ESG ETFs

A unit of WisdomTree Inc. faces possible enforcement action from the Securities and Exchange Commission, which alleges securities laws violations related to three ESG-focused exchange-traded funds it closed earlier this year.

According to an Aug. 5 filing by New York-based WisdomTree with the SEC, WisdomTree Asset Management received a Wells Notice from the regulator advising of a “preliminary determination to recommend that the SEC file an enforcement action about WTAM alleging violations of certain provisions of the U.S. federal securities laws.”

The alleged violations relate to three ETFs that WisdomTree approved for liquidation in December 2023 and were liquidated in February of this year.

According to a Dec. 12 press release, the company liquidated the WisdomTree International ESG Fund (RESD), the WisdomTree Emerging Markets ESG Fund (RESE) and the WisdomTree U.S. ESG Fund (RESP).

According to WisdomTree, the three funds, “during their periods of operations, had average assets under management, in the aggregate, of approximately $119 million.”

A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law.

etf.com parent company, U.K.-based investing firm ETFS Capital, is WisdomTree's largest shareholder. The firm, owner of a slate of ETF industry-related companies, holds 10.2% of WisdomTree’s outstanding shares. That total climbs to 18.3% when combined with its series A preferred stock. ETFS Capital is seeking to add several of its own candidates to the WisdomTree board of directors, citing WisdomTree's "dismal performance."

In its SEC filing, WisdomTree stated that it “maintains that its actions have been in compliance with all applicable laws and regulations, and intends to pursue the Wells Notice process, which will include the opportunity to respond to the Staff’s position.”

WisdomTree, which manages 79 ETFs that combine for more than $76 billion in total assets, said in a request for comment that it's cooperating with the SEC process. 

“We maintain that WTAM’s actions have been in compliance with all applicable laws and regulations and intend to pursue the Wells Notice process, which will include the opportunity to respond to the SEC staff’s position,” it said in an email.