Recent SEC Settlement Doesn’t Change GQG’s Ratings

Last week’s settlement between the SEC and GQG Partners concerning nondisclosure agreements that the agency found to be in violation of its rules does not change our opinion of the firm or its funds. GQG Partners retains its Parent rating, and the GQG funds, including those it subadvises, such as Goldman Sachs GQG Partners International Opportunities GSIMX, retain their ratings for People and Process.

On Sept. 27, 2024, the SEC announced settled charges against GQG Partners. The SEC found that GQG had 12 candidates for employment sign nondisclosure agreements that violated a rule by not including specific language intended to provide protection for whistleblowers. GQG says that after the 12 candidates were hired, they signed new nondisclosure agreements that did contain the required language, but the SEC still considered the language in the earlier agreement to be problematic.

The SEC also found fault with some provisions of a settlement agreement that GQG had entered into with one former employee who had notified GQG of their plan to report alleged securities law violations. A GQG spokesperson told Morningstar that GQG hired an outside firm to investigate the employee’s contentions and found them to be unsubstantiated. The spokesperson said that GQG is not aware if that person did file a report. In any case, it was the language in the settlement agreement with the employee, not any investment-related issues, that the SEC cited in its order.

GQG neither admitted nor denied the SEC’s findings but agreed to be censured and pay a $500,000 penalty.

In recent weeks, the SEC has charged at least 10 other companies, including investment advisors, with violating the same provision intended to provide whistleblower protection.

Given that the episode appears to be limited in nature, does not involve investment-related concerns, and has been resolved, the People and Process ratings for GQG’s funds and the Parent rating for GQG Partners remain intact.