The US Securities and Exchange Commission (SEC) announced on Tuesday, September 3, that it has charged six credit rating agencies with violations of record-keeping rules and imposed fines on these companies. SEC stated in its announcement that Moody’s Investors Service, S&P Global Ratings, Fitch Ratings, HR Ratings de Mexico, A.M. Best Rating Services, and Demotech and their staff have made significant errors in maintaining and preserving electronic communications.
The six companies have admitted to the facts listed in SEC’s charges, acknowledging that their actions violated the record-keeping provisions of federal securities laws. They have agreed to pay a total of over $49 million in civil fines to settle SEC’s allegations against them.
The announcement outlined the fines that the six companies are required to pay, with Moody’s and S&P to each pay $20 million, Fitch agreeing to pay $8 million, A.M. Best to pay $1 million, HR Ratings de Mexico agreeing to pay $250,000, and Demotech to pay $100,000.
According to the statement, A.M. Best and Demotech made significant efforts early on to comply with record-keeping requirements and cooperated with SEC’s investigation. Therefore, under the terms of the settlement, they are not required to hire compliance consultants. The other four companies are mandated to engage compliance advisors to help ensure their compliance with relevant laws and industry standards.
Sanjay Wadhwa, Deputy Director of SEC’s Enforcement Division, stated in the announcement, “We repeatedly see that failing to properly maintain and preserve necessary records hinders staff from ensuring companies fulfill their obligations and impacts the Commission’s ability to hold accountable those who don’t meet their duties, often to the detriment of investors.”
Wadhwa emphasized, “Today’s actions once again demonstrate that companies that make active efforts to comply with regulations and cooperate with investigations can reap tangible benefits.”