SEC Charges Credit Rating Agencies with Recordkeeping Failures

In September, the Securities and Exchange Commission (SEC) charged six nationally recognized statistical rating organizations (NRSROs) with recordkeeping failures by the entities and employees to maintain and preserve electronic communications. According to the press release, each entity admitted to the facts set forth in each respective SEC order and are working to implement “improvements to their compliance policies and procedures to address these violations.” The NRSROs involved in the settlements include:

• Moody’s Investors Service, Inc.
• S&P Global Ratings
• Fitch Ratings, Inc.
• HR Ratings de México, S.A. de C.V.
• A.M. Best Rating Services, Inc.
• Demotech, Inc.

The combined civil penalties total over $49 million for violations of Section 17(a)(1) of the Securities Exchange Act of 1934 and Rule 17g-2(b)(7) which, in part, requires a NRSRO to make and retain complete and current books and records. In addition to civil penalties, Moody’s, S&P Global Ratings, Fitch, and HR Ratings de México are required to retain a compliance consultant, as well as “conduct comprehensive reviews of their policies and procedures relating to the retention of electronic communications found on their personnel’s personal devices and their respective frameworks for addressing non-compliance by their personnel with those policies and procedures.”

Click here to read the Commission’s press release covering the Rating Agencies’ charges.