SEC's WhatsApp probe expands as Moody's, S&P, Fitch hit with $48 mn fine

By Lydia Beyoud
 

Moody’s Corp., S&P Global Inc. and Fitch Ratings Inc. will pay a combined $48 million over allegations that the credit-rating companies failed to keep proper electronic communications — the latest fallout from US regulators’ so-called WhatsApp investigations.
 

The Securities and Exchange Commission said Tuesday that Moody’s and S&P will each pay $20 million to settle the cases, while Fitch will pay $8 million. The firms acknowledged violating the agency’s recordkeeping rules and will retain a compliance consultant, the SEC said in a statement. 

The fines add to the billions of dollars that big banks previously agreed to pay the Wall Street regulator to settle similar investigations into the use of messages on personal phones and WhatsApp. Financial firms are required to monitor and save communications involving their business to head off potential misconduct. 

“We have seen repeatedly that failures to maintain and preserve required records can hinder the staff’s ability to ensure that firms are complying with their obligations and the commission’s ability to hold accountable those that fall short of those obligations, often at the expense of investors,” said Sanjay Wadhwa, deputy director of the SEC’s enforcement unit.

In a statement, Moody’s said it is “fully committed” to upholding its record-keeping obligations and is pleased to put the issue behind it. 

“S&P Global Ratings remains committed to compliance with its regulatory obligations,” the company said in a statement. It noted that the regulator acknowledged the firm’s remedial actions and cooperation.

Fitch didn’t immediately respond to emailed requests for comment.

The agency also settled with HR Ratings de México for $250,000, A.M. Best Rating Services Inc. for $1 million and Demotech Inc. for $100,000. 

“HR Ratings has significantly strengthened its electronic recordkeeping policies and procedures,” the company said in a statement. “The settlement with the SEC underscores our firm commitment to upholding regulatory standards in every jurisdiction where we operate.”

A.M. Best said it’s pleased that the SEC recognized the firm’s “historical efforts to comply with recordkeeping requirements,” that the agency decided a compliance consultant isn’t necessary and that the matter is resolved. A representative for Demotech didn’t immediately respond to a request for comment.