S&P Global Ratings has agreed to a censure and to pay a $2.5 million penalty to settle a charge by the Securities and Exchange Commission that the ratings agency violated conflict-of-interest rules.
The SEC’s order asserted that in August 2017, S&P employees responsible for managing issuer relationships attempted to pressure S&P analytical employees to rate a jumbo residential mortgage-backed security transaction in July 2017. The order found 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.
"[Ratings organizations] are prohibited from issuing or maintaining a credit rating where an individual who participates in sales and marketing activity seeks to influence the determination of the rating," said Osman Nawaz, chief of the SEC’s Complex Financial Instruments Unit, said in a press release.
After discovering the circumstances surrounding the rating of the transaction, S&P self-reported the conduct at issue to the SEC, cooperated with the SEC’s investigation, and took remedial steps to enhance its conflicts of interest policies and procedures.
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