The Securities and Exchange Commission (SEC) today charged Inspire Investing LLC, an investment adviser based in Meridian, Idaho, with making misleading statements and for compliance failures related to the execution of its “biblically responsible investing” strategy.
“Investors must be able to rely on advisers acting consistently with their represented investment process or strategy.”
SEC’s Corey Schuster
According to the SEC’s order, Inspire Investing represented that it used a data-driven methodology to evaluate companies and that it would not invest in companies that had “any degree of participation” in certain enumerated business practices that Inspire determined did not align with biblical values. However, the SEC’s order finds, from at least 2019 to March 2024, Inspire Investing in fact relied on a manual research process and did not typically perform research on individual companies to evaluate them for eligibility under its investing criteria.
According to the SEC’s order, Inspire Investing also lacked written policies and procedures setting forth a process for evaluating companies’ activities as part of its investment process, which at times resulted in inconsistent application of its investment criteria. As a result, Inspire Investing invested in companies engaged in activities that did not align with Inspire Investing’s own stated criteria and in which the advisory firm represented that it would not invest.
“Investors must be able to rely on advisers acting consistently with their represented investment process or strategy,” said Corey Schuster, Co-Chief of the Asset Management Unit in the Division of Enforcement. “Here, Inspire Investing’s investment screening process was not what it represented to investors, resulting in it making investments that were contrary to its stated investment criteria.”
Inspire Investing consented to the entry of the SEC’s order finding that it violated the antifraud provisions of the Investment Company Act of 1940 and Investment Advisers Act of 1940. Without admitting or denying the SEC’s findings, Inspire Investing agreed to a censure and cease-and-desist order, to pay a $300,000 penalty, and to retain an independent compliance consultant.
Inspire Investing released a statement today saying it is “pleased to have resolved the SEC’s inquiry into its historical screening policies and procedures.”
The release notes that in recent years, the SEC has investigated a significant number of investment firms offering screened investments, including secular firms with ESG or similar strategies, as well as faith-based firms.
“As a prominent provider of faith-based investing solutions, Inspire Investing was included in this process with a non-public fact-finding inquiry beginning in September 2022. We are pleased with the resolution of this matter,” the statement said, adding that they have full confidence that the enhancements the firm has made and will continue to make to its processes and procedures puts it and its clients on solid ground in the current regulatory landscape.
“The SEC Order takes no issue with the conservative, biblical values Inspire applies to screening categories. Inspire remains committed to providing unapologetically biblical investment screening on issues of critical importance to faith-based investors around the world, including abortion and LGBT activism.”
Statement from Inspire Investing
“The SEC Order takes no issue with the conservative, biblical values Inspire applies to screening categories. Inspire remains committed to providing unapologetically biblical investment screening on issues of critical importance to faith-based investors around the world, including abortion and LGBT activism,” the statement continued.
The SEC Order notes Inspire Investing is a registered investment adviser that currently advises eight exchange-traded funds (“Inspire ETFs”), and separately managed accounts that employ what it refers to as a “biblically responsible investing” strategy that purported to exclude investments in companies that engage in certain enumerated business practices which Inspire determined “do not align with biblical values.”
Inspire stated that it uses a science- and data-driven proprietary methodology to provide a positive or negative score for companies based on their business practices, and marketed that it would not invest in companies that have any degree of participation in certain enumerated activities or products that Inspire determined did not align with biblical values.
“In practice, however, Inspire misrepresented its research process, did not apply its investment criteria consistently, invested in companies that should have been excluded based on Inspire’s stated investment criteria, and had a research process that failed to prevent departures from its stated investment criteria. Inspire also failed to reasonably adopt designed policies and procedures related to its investment process,” the SEC Order states.
“The SEC Order raises no issues with our financial condition or the performance of our funds. The weaknesses identified by the SEC were in relation to the definitions and disclosure being provided in fund prospectuses and other materials matching the details of our previous data set, collection processes and procedures in use at the time, which the firm has already taken steps to address prior to the Order,” Inspire’s statement continues. “We are pleased that the SEC recognized our cooperation in the investigation and our remediation efforts. We continue our ongoing commitment to enhance and refine the Inspire Impact Score methodology to provide a potently biblical tool for guiding faith-based investment decisions now and into the future.”
The SEC’s investigation was conducted by Jonathan I. Katz, with assistance from Joan Price, and was supervised by Jeffrey A. Shank, Schuster, and Andrew Dean of the Enforcement Division’s Asset Management Unit.
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