SEC Fines S&P Global Ratings $2.5M for Conflict of Interest Violations

The Securities and Exchanges Commission (SEC) fined S&P Global Ratings $2.5 million for illegal conflicts of interest, according to the agency. In a press statement they announced that employees from the commercial side of S&P tried to pressure analysts on the rating side into giving a customer a favorable rating on a large securities transaction. 

S&P is a credit rating agency registered with the SEC as a nationally recognized statistical rating organization. Along with this registration come certain rules, codified in the Securities Exchange Act of 1934, the release explained; yeS&P must keep a wall of separation between employees who rate securities and exchanges and those who sell their services.

Per the statement, in 2017 S&P was contracted to give a rating to a jumbo residential mortgage backed security transaction. Through the course of this contract, communications uncovered by the SEC reveal that managers from the commercial side of the company pressured and were otherwise overly involved in the analysts’ work providing a rating for the transaction in question. Based on the volume and urgency of these communications, the SEC ruled this behavior to be an illegal conflict of interest.

When this issue was discovered within S&P, the company self-reported to the SEC. Following the investigation and ruling, S&P agreed to a fine of $2.5 million, to the entry of a cease-and-desist order, to a censure, and to certain oversight. However, they did not admit to any wrongdoing.