The Securities and Exchange Commission continues its relentless assault on firms that have allowed employees to use text messages, WhatsApp, private email, or other “off-channel communications.” Last week, six rating agencies were caught in regulatory crosshairs.
Moody’s, S&P, Fitch, HR Ratings, A.M. Best, and Demotech had to pay $49 million in fines to the SEC.
The SEC’s off-channel task force is tracing messages from one firm to another and slapping fines on each link in the chain for violations. There are no findings of frauds. These fines are merely for record-keeping violations.
These cases do mark a new segment of record-keeping violations. These six firms are Nationally Recognized Statistical Rating Organizations and are subject to Rule 17g-2(b)(7) applicable to NRSROs.
More reading:
- SEC Charges Six Credit Rating Agencies with Significant Recordkeeping Failures
https://www.sec.gov/newsroom/press-releases/2024-114 - Rule 17g-2(b)(7)
- SEC Order – Moody’s Investors Service, Inc
- SEC Order – S&P Global Ratings
- SEC Order – Fitch Ratings, Inc.
- SEC Order – HR Ratings de México, S.A. de C.V.
- SEC Order – A.M. Best Rating Services, Inc.
- SEC Order – Demotech, Inc.
- Regulators have been targeting banks and other financial firms’ use of messaging apps
https://www.wsj.com/articles/credit-rating-providers-settle-with-sec-over-off-channel-communication-violations-518e59a5?st=vxgiuk6s16wrhdh&reflink=desktopwebshare_permalink