CCI staff share recent news, surveys, reports and analysis on risk, compliance, governance, infosec and leadership issues. Share details of your survey with us: editor@corporatecomplianceinsights.com.
SEC fines credit rating agencies $50M over recordkeeping failures, charges broker-dealer with whistleblower violations
The SEC entered September with a head of steam, fining six credit rating agencies nearly $50 million over recordkeeping failures and charging a broker-dealer and two affiliated investment advisers with violating whistleblower protection rules.
In its first announced action, the commission fined credit rating agencies Moody’s and S&P Global $20 million each for failing to maintain records of electronic communications; other fines included:
- Fitch Ratings, $8 million
- A.M. Best Rating Services, $1 million
- HR Ratings de México, $250,000
- Demotech, $100,000
With the exception of A.M. Best and Demotech, each agency will be required to retain a compliance consultant, as those organizations were found to have engaged in early good-faith compliance efforts, the SEC said in a statement.
Fines against the six credit rating agencies came just a few weeks after the SEC announced nearly $400 million in fines related to failed recordkeeping. In that action, three firms saw reduced fines after self-reporting their violations. The regulator’s intent is clear: Size doesn’t matter when it comes to communications compliance.
“While hefty penalties for tier-one banks are second nature to the SEC nowadays, the shifting focus to smaller players in the game is becoming ever more prevalent,” said Matt Smith, CEO of SteelEye, a finserv compliance provider. “These smaller firms, who don’t have the balance sheets to absorb such fines, face significant financial and reputational damage with noncompliance, whereas implementing effective communications surveillance systems is a fraction of the costs they could face.”
The SEC’s second action in as many days saw the commission announcing a $240,000 settlement with broker-dealer Nationwide Planning and two affiliated investment advisers — NPA Asset Management and Blue Point Strategic Wealth Management — for impeding brokerage customers and advisory clients from reporting securities law violations to the SEC.
Gartner: General counsel should plan for shifts in regulatory risk ahead of U.S. election
With uncertainty surrounding the impact of the upcoming U.S. presidential election on regulatory agendas worldwide, general counsel (GC) should prepare different scenarios contingent on the result now to anticipate the risks, according to a new Gartner analysis.
“GC typically respond to major events or rulings after they occur, but, to plan ahead, GC should analyze which regulations are critical to the business, anticipate the major differences between the two potential administrations and advise senior leaders and the board on the risks,” said Laura Cohn, research director in Gartner’s Legal and Compliance practice. “Stakeholders will want to know the risks and be prepared for them, no matter what the outcome of the election is.”
Given the differences in regulatory philosophies held by each political party, Gartner recommends GC determine:
- Which regulations and policies are most critical to the organization
- Where there is a likely and significant difference between the possible administrations
Considering such factors will help organizations focus their scenario-planning efforts ahead of the November election. Companies face a host of risks from political polarization, including legal and regulatory risks as well as economic risks. While some are systemic, meaning they would have an impact on organizations regardless of election outcomes, others are contingent on election results, Gartner says.
Clarity AI: Over half of EU funds need to divest or change ESG-related names
Time is running out for funds to comply with European Securities and Markets Authority (ESMA) guidelines around the use of ESG terms in fund names. Clarity AI research shows that more than half of the impacted funds are exposed to companies in breach of the Paris-aligned benchmark (PaB) criteria and will have to either divest from certain companies or industries, amend the name of their products or otherwise risk falling short of the guidelines’ expectations.
In August, ESMA published the translation for its long-awaited guidelines on the use of ESG and sustainability-related terms in funds’ names, kick-starting the clock for asset managers to comply with the guidelines: New funds will have three months to comply with the guidelines and existing funds already authorized in the EU will have another six months.
In a sample of about 3,200 funds, more than half contain breaches of the PaB exclusionary criteria, and would therefore need to divest assets or change their funds’ names to comply with the guidelines, Clarity AI research indicates.
In May 2024, ESMA finalized its long-awaited guidelines on the use of ESG or sustainability-related terms in fund names, commonly referred to as its fund “names rule.” The guidelines, originally consulted in November 2022, introduce requirements on funds that use ESG or sustainability-related terms in their names.
