“NRSROs are prohibited from issuing or maintaining credit ratings where individuals participating in sales and marketing activities seek to influence rating decisions. , and federal securities laws require the isolation of analytical functions from the impact of business considerations.”
The Securities and Exchange Commission has accused S&P Global Ratings of violating conflict of interest rules designed to prevent sales and marketing considerations from influencing credit ratings.
An SEC-registered statistical rating agency (NRSRO) has agreed to settle this matter by paying a $2.5 million fine and agreeing to comply with a cease and desist order, denunciation, and certain promises.
The SEC investigation follows S&P’s initiative to self-report problematic conduct to regulators. Rating agencies also cooperated with this investigation and have taken remedial actions to strengthen their conflict of interest policies and procedures.
S&P analytics employees pressured to maintain provisional ratings containing calculation errors
The issuer asked S&P to rate the jumbo mortgage-backed securities transaction in July 2017, according to the SEC, and S&P sales representatives responsible for managing the relationship with the issuer spent five days reviewing S&P’s analysis. I tried to pressure the person in charge. A person responsible for evaluating and assigning ratings.
S&P’s analytics employees were pressured to rate transactions consistent with preliminary feedback provided to customers by analytics employees, which included calculation errors It turns out.
The SEC has discovered that some of the emails sent by S&P sales representatives to S&P’s analytics team contain statements reflecting sales and marketing considerations.
The content, urgency, volume, and compressed timing of communications reportedly suggested that S&P’s commercial employees participated in the ratings process at a time influenced by sales and marketing considerations. doing.
Osman Nawaz, Chief of Complex Financial Products at the SEC, said: Credit rating agencies play a systematically important role in the structured products market, and federal securities laws require the isolation of analytical functions from the impact of business considerations. ”