Penalty Summary

The U.S. Securities and Exchange Commission (SEC) announced on Tuesday that it fined six credit rating agencies a total of $49 million for failing to properly handle electronic communications records. This action expands the SEC's crackdown on financial services companies failing to preserve text and other off-channel message records.

  • The SEC charged six rating agencies with violating record-keeping rules and said S&P Global and Moody's Investors Service will each pay $20 million in civil penalties, while Fitch Ratings will pay $8 million.
  • The rating agencies admitted to violating the SEC's record-keeping rules, the SEC said.
"We have repeatedly seen that failing to maintain and preserve required records can hinder staff's ability to ensure companies comply with their obligations, and the Commission's ability to hold those who fail to meet their obligations accountable, often at the expense of investors," said Sanjay Wadhwa, Deputy Director of the SEC's Enforcement Division, in a statement.

Background and Related Cases

Last month, the SEC fined Ameriprise Financial Services, Edward D. Jones, Raymond James, and 23 other financial services companies a total of $390 million for violating federal record-keeping laws. These companies admitted to the facts in the SEC's orders, the SEC said.

In September 2023, the SEC charged Robert W. Baird & Co., William Blair & Company, Interactive Brokers Corp., and seven other companies with record-keeping failures and imposed fines totaling $79 million.

Details of Violations

The SEC said that employees at some rating agencies, including senior staff, frequently communicated through messaging platforms such as text and WhatsApp to discuss a range of issues, including changing or withdrawing credit ratings.

Company Responses

"Moody's is fully committed to fulfilling our regulatory record-keeping obligations, and we are pleased to put this matter behind us," a Moody's spokesperson said via email.

S&P said in a statement that it "takes its regulatory compliance obligations very seriously and is committed to the integrity of its rating process and high-quality independent credit ratings." S&P added that the SEC noted its "remedial measures and its cooperation with SEC staff."

Fitch did not respond to a request for comment.

Other Penalties and Compliance Requirements

HR Ratings de México agreed to pay a $250,000 civil penalty, while A.M. Best Rating Services and Demotech will pay fines of $1 million and $100,000, respectively.

The SEC required these rating agencies (excluding A.M. Best and Demotech) to hire compliance consultants. The SEC said that these two companies "engaged in significant efforts to meet record-keeping requirements relatively early as registered credit rating agencies and otherwise cooperated with the SEC's investigation."