The Securities and Exchange Commission today charged S&P Global Ratings, a nationally recognized statistical rating organization (NRSRO) registered with the Commission, with violating conflict of interest rules designed to prevent sales and marketing considerations from influencing credit ratings.
The SEC’s order finds that an issuer engaged S&P to rate a jumbo residential mortgage backed security transaction in July 2017. Over a five-day period in August 2017, S&P commercial employees—employees responsible for managing the relationship with the issuer—on several occasions attempted to pressure the S&P analytical employees—employees responsible for evaluating and assigning the rating—to rate the transaction consistent with preliminary feedback the analytical employees had given the customer that turned out to include a calculation error. Despite sending the communications through the compliance department as required by S&P’s policies and procedures at that time, some emails sent by the S&P commercial employees to the S&P analytical team contained statements reflecting sales and marketing considerations. The 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.
‘Enforcement 40’ for 2020
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