SEC Fines S&P Global Ratings $2.5M Over Conflicts of Interest

The SEC order finds that, “as a result of the content, urgent nature, high volume and compressed timing of the communications, the S&P commercial employees became participants in the rating process during a time when they were influenced by sales and marketing considerations.”

Osman Nawaz, chief of the SEC’s Complex Financial Instruments Unit,. said Monday in a statement that “NRSROs are prohibited from issuing or maintaining a credit rating where an individual who participates in sales and marketing activity seeks to influence the determination of the rating.”

Credit rating agencies, Nawaz said, “play a systemically important role in the structured products markets, and the federal securities laws require them to insulate their analytical functions from the influence of business considerations.”

After discovering the circumstances surrounding the rating of the transaction, S&P self-reported the conduct at issue to the SEC, cooperated with the SEC’s investigation, and took remedial steps to enhance its conflicts of interest policies and procedures.

The order finds that, by issuing and maintaining these credit ratings, S&P violated certain rules promulgated under the Securities Exchange Act of 1934, which prohibit conflicts of interest at NRSROs, and also failed to establish, maintain and enforce written policies and procedures designed to ensure compliance with those rules.

Without admitting or denying the SEC’s findings, S&P agreed to pay a $2.5 million penalty and agreeing to the entry of a cease-and-desist order, a censure, and compliance with certain undertakings.