A federal judge in Missouri has invalidated state investment regulations championed by Republican Secretary of State Jay Ashcroft as a means to expose financial institutions prioritizing “woke politics” over investment returns. The court ruling determined that the regulations, issued by Ashcroft’s office, impinged on the free speech rights of investment professionals and were precluded by federal law. The Missouri Chamber of Commerce and Industry hailed the decision as a victory for free enterprise, emphasizing that the regulations would have imposed undue burdens on investment firms of all sizes operating in Missouri.
The regulations, implemented in 2023 by Ashcroft, mandated that investment professionals seek written consent from clients before incorporating social or nonfinancial objectives into investment decisions. Ashcroft aimed to raise awareness about investment firms utilizing environmental, social, and governance principles. Following his announcement of candidacy for governor in April 2023, Ashcroft highlighted his efforts to compel banks and financial advisors to disclose ESG investments that prioritize social considerations over financial gains.
Subsequently, the Securities Industry and Financial Markets Association, representing broker-dealers, investment banks, and asset managers, legally challenged the rule. U.S. District Judge Stephen R. Bough, in a ruling on Wednesday, deemed the Missouri regulation preempted by federal laws governing investment brokers, as well as unconstitutionally ambiguous. Judge Bough also concluded that the rule infringed on the First Amendment rights of investment advisors and could have been more precisely tailored to address fraud and deception concerns.
Ashcroft expressed intentions of exploring appeal options, contending that the court’s decision jeopardizes Missouri investors. Meanwhile, the securities industry welcomed the court’s ruling as a significant win, noting that existing federal laws already mandate financial professionals to provide counsel in their clients’ best interests. SIFMA President and CEO Kenneth E. Bentsen Jr. remarked that the Missouri regulations were redundant and created unnecessary confusion.