ESMA imposes $4.35 million fine on Moody’s for failure to disclose conflicts of interests

On Tuesday, the European Union’s markets watchdog, the European Securities and Markets Authority (ESMA) said, it has fined Moody’s $4.35 million (3.7 million euros) for breaching rules which includes failure to disclose conflicts of interests.

“All of the breaches resulted from negligence on the part of the company,” said ESMA while adding, the fine was for five of the credit rating agency’s entities based out of Britain, France, Italy, Spain and Germany.

It went on to say, Moody’s had “inadequate internal policies and procedures to manage shareholder conflicts of interest. The breaches took place between 2013 and 2017”.

“ESMA found that MIS (Moody’s Investors Service) had no intent to infringe the EU regulation and there was no impact on the quality of any ratings,” said a spokesperson for Moody’s.

The breaches were of a rule that prevents agencies from issuing ratings on companies in which they own 10% or more of its shares, or where they have a board position, said ESMA.

A couple of years ago, ESMA had imposed a fine of 5.1 million euros on Fitch for similar breaches.

“ESMA believes it is crucial, to ensure independent good quality ratings and to protect investors, that (ratings agencies) carefully identify and subsequently eliminate or manage and disclose conflicts of interest to avoid interference by shareholders with the rating process,” said the watchdog.

($1 = 0.8503 euros)



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