Jay Ashcroft seeks $1.2 million to defend anti-ESG investing rules in federal court • Missouri Independent (2024)

  • Government + Politics
  • Legislature

Legislative Democrats are questioning the cost of hiring outside counsel for lawsuit over rules issued when lawmakers declined to pass a bill imposing the rules by statute

State lawmakers were informed last week that it will cost taxpayers $1.2 million to defend a rule on investment brokers that Secretary of State Jay Ashcroft says is designed to stop “politically motivated” financial advisers who want to “fritter away Missourians’ money.”

Ashcroft issued a new rule in July targeting environmental, social and governance, or ESG, investing. His rule requires brokers and investment advisers to obtain annual, written consent to recommend an investment, or actually place any client funds in account that “incorporates a social objective or other non financial objective” for a reason “not solely focused on maximizing a financial return.”

Shortly after the rule took effect, it was challenged in federal court by the Security Industries and Financial Markets Association, which claims Ashcroft is imposing conditions on the industry that violate federal law and the Constitution’s First Amendment.

On Jan. 5, U.S. District Judge Stephen Bough denied Ashcroft’s motion to dismiss the case. Ashcroft’s office hired outside counsel, Ed Greim of the prominent Republican law firm Graves Garrett, who filed a formal answer in the case on Friday.

So far, the state has paid $167,000 to Graves Garrett. Ashcroft wants authority to spend up to $400,000 by July 1, and another $800,000 in the coming fiscal year. That request drew sharp questioning last week from Democrats on the House Appropriations Subcommittee on General Administration.

State Rep. Maggie Nurrenbern of Kansas City, ranking Democrat on the subcommittee, asked Ashcroft why he went ahead with the rule when lawmakers declined to pass legislation last year on ESG investing.

Missouri’s secretary of state reins in environmentally minded investing

“Taxpayers are stuck with a $1.2 million bill for rules that you chose to promulgate,” Nurrenbern said to Ashcfoft. “And again, we know because the federal courts, they’ve already ruled that yes, there are grounds to sue. We’re going to be in this for a long haul. I just think that’s so unfortunate to pass that burden on to taxpayers.”

Ashcroft, however, said the lawsuit is a smokescreen by brokers who want to hide their decision making from investors.

“It’s pretty sad that we have Missouri investment companies that don’t want to tell their investors how they’re investing their money,” Ashcroft said.

Other Democrats denounced the request as taxpayer support for Ashcroft’s campaign for the Republican nomination for governor.

“I don’t want Missourians to foot the bill for his campaign stunt, especially when we could use that money to better invest in the children, seniors and public servants of this state,” Democratic state Rep. Deb Lavender of Manchester said in a news release.

In most instances, a state action that brings a court challenge is defended by the attorney general’s office with no additional cost to taxpayers. The case is a complex one in federal court and required specialized help, Ashcroft spokesman JoDonn Chaney said in a statement to The Independent.

“As this is a federal case, Secretary Ashcroft advised the attorney general’s office that he would be seeking outside counsel due the specificity of the lawsuit,” Chaney said. “The executive decision to hire Graves Garrett was based on the firm’s expertise and experience in dealing with securities related issues.”

In correspondence with Bailey’s office, Ashcroft was denied money from the state Legal Expense Fund to pay Graves Garrett. Frank Jung, Ashcroft’s general counsel, wrote that outside counsel was needed to get the expertise to defend the lawsuit and that Ashcroft expected help paying the bill.

The attorney general’s office accepted that decision, but Jay Atkins, Bailey’s chief of staff, wrote that he office could not support it with money from the Legal Expense Fund.

“Eligibility for coverage under the (fund) requires the Attorney General’s Office (“AGO”) to investigate, defend and maintain authority over claims made against the state,” Atkins wrote. “Retaining independent counsel removes AGO oversight and thus negates coverage under the (fund.)”

Under the current budget, Ashcroft has the flexibility to spend otherwise unused funds in his account but wants legislative approval to do so to make his spending fully transparent, Chaney said.

In a commentary published last year in the National Review, Ashcroft wrote that his rule is intended to counter President Joe Biden’s veto of a federal law governing ESG investing.

“What’s more, my rule requires that companies get clients’ consent before investing their money in ESG products,” he wrote. “Now, no politically motivated financial adviser can fritter away Missourians’ money without their full knowledge and express approval.”

In the lawsuit, the association argues that Ashcroft’s rules require brokers and advisers to make statements that they may not believe to be true, such as that a particular investment may not bring the biggest financial return possible.


Many investors have objectives other than a maximum return, the lawsuit argues, including estate planning, tax considerations, charitable giving, faith or values-based goals, or local community investment preferences, the lawsuit states.

Federal law preempts most state regulation of brokers and financial advisers, according to the complaint filed in the lawsuit by attorneys Angela Kennedy and William Ray Price.

“The irony of the rules could hardly be more pronounced,” the attorneys wrote. “Financial professionals may be deemed to be engaging in ‘dishonest’ conduct for refusing to agree to statements in a state-mandated script they do not believe to be true.”

Ashcroft is targeting a class of investments he doesn’t like regardless of the returns or wishes of the clients. Federal law bars brokerage firms and advisers from putting their interests ahead of customers, the lawsuit states.

“The rules require speech that is by no means politically neutral,” the attorneys wrote. “In fact, the Secretary has argued the Rules are important to counter political or policy positions that he opposes.”


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As an expert in government, politics, and legal matters, I can provide a comprehensive analysis of the situation described in the article. My knowledge in these fields allows me to shed light on the complexities of the legal dispute and the political dynamics at play.

Firstly, the article discusses a legal challenge to a rule issued by Missouri Secretary of State Jay Ashcroft regarding investment brokers. Ashcroft implemented a rule targeting Environmental, Social, and Governance (ESG) investing, requiring brokers and investment advisers to obtain annual, written consent before recommending or placing client funds in accounts with non-financial objectives. This rule has sparked a lawsuit by the Security Industries and Financial Markets Association, which argues that the rule violates federal law and the Constitution's First Amendment.

To defend against this legal challenge, Ashcroft's office has hired outside counsel, Ed Greim of the prominent Republican law firm Graves Garrett. The cost of hiring external legal support has raised concerns among Legislative Democrats, with the current expenditure reaching $167,000. Ashcroft seeks authority to spend up to $400,000 by July 1 and an additional $800,000 in the upcoming fiscal year, leading to questioning from Democrats on the House Appropriations Subcommittee on General Administration.

The Democrats are critical of Ashcroft's decision to promulgate the rule despite the legislature's previous refusal to pass legislation on ESG investing. State Rep. Maggie Nurrenbern and other Democrats argue that taxpayers should not bear the $1.2 million burden resulting from Ashcroft's rule, characterizing it as a campaign stunt for his Republican gubernatorial nomination bid.

The legal dispute involves complex issues, with the Security Industries and Financial Markets Association claiming that Ashcroft's rules compel brokers and advisers to make statements they may not believe to be true. The association argues that federal law preempts most state regulation in this domain. Ashcroft contends that the rules are necessary to counteract political or policy positions he opposes and ensure transparency in investment decisions.

The involvement of outside counsel, the political implications of the lawsuit, and the clash between state and federal regulations add layers of complexity to this case. As an enthusiast in these matters, I can provide nuanced insights into the legal, political, and financial aspects of the situation.

Jay Ashcroft seeks $1.2 million to defend anti-ESG investing rules in federal court • Missouri Independent (2024)
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