(The Center Square) – Securities fraud in environmental, social and governance policies is being committed in Mississippi by investment giant BlackRock, says the state in a cease and desist letter.
Mississippi Secretary of State Michael Watson, with jurisdiction over securities, gave the company 30 days to respond to his office’s Wednesday letter. Penalties could include massive fines for what the Republican says is the misleading of investors.
“You’ve got a company with trillions of dollars of assets under management and they’re playing political games with Mississippi’s hard-earned money,” Watson told The Center Square. “BlackRock speaks out of both sides of its mouth depending on who they’re talking to. One day, it’s about maximizing return and the next day it’s about holding a company hostage to further their decarbonization efforts.
“Mississippians deserve to know the facts about their investments on the front end. BlackRock didn’t play by those rules and that’s why we’ve ordered them to quit committing securities fraud in our state.”
There are two primary claims that Watson’s office makes against BlackRock. it says the company is defrauding investors with funds that are not related to environmental, social and governance policies, yet BlackRock’s ethos incorporated those principles. The company has backtracked on some of those claims and says it wants to “act in the best interest of our clients and to be solely focused on their investment objectives.”
A second claim is that in its funds related to environmental, social and governance policies, the company touts these investments are beneficial to investors. The state says in its letter, “These statements are untrue, or omit to state material facts to make them not misleading, because the consideration of ESG factors does not provide an indication of better financial returns or current or future risk profiles.”
BlackRock denied any wrongdoing in a statement sent to The Center Square.
“Many policymakers and government officials have ideas on how we should invest our clients’ assets,” BlackRock said in a statement. “We are always bound to invest consistent with our clients’ choices, their best financial interests, and applicable law.
“Our only agenda is maximizing risk-adjusted returns consistent with the funds’ investment objectives. We operate in one of the most highly regulated industries in the country and are committed to following the law in every respect.”
Tennessee and Texas have already taken regulatory action against BlackRock.
“My hope is, once you start bringing more attention to this, more states will start paying attention,” Watson said. “Eventually, we all work together to push back as hard as we can. Hopefully BlackRock will pay attention and quit committing securities fraud in Mississippi.”
He also said that the letter gives the state the opportunity to get more information on BlackRock’s investment policies. Watson said his office will provide information to the state’s defined benefit pension system, the Public Employees’ Retirement System of Mississippi, and assist them in divesting those funds if securities fraud has been committed in the state.
BlackRock is managing nearly $9 trillion in assets, more than 65 times Mississippi’s entire gross domestic product of $138 billion. Yet, the state has fought the David vs. Goliath battle before.
Watson, a former state senator from Pascagoula, was on the Senate floor during passage of the state’s abortion ban law, known as the Heartbeat Bill. That law later became the center of the Dobbs case that superseded the Roe v. Wade decision and sent abortion policy back to the state legislatures.
“People would tell me that you’re wasting money, you’re wasting time, you’re not going to make a difference,” Watson said of the Heartbeat Bill. “And here we are, we flipped the abortion world on its head and saved a lot of lives because of it. Little old Mississippi, we rose up and we did something great. I think it takes courage, the ability to do the right thing no matter what the consequences.”
