Standard not Poorer after ESMA enforcement

Should credit ratings agencies and other financial service firms be worried following the European Securities and Markets Authority’s enforcement action against Standard & Poor (S&P) for breaches of the CRA Regulation (EC) 1060/2009? Adam Epstein, partner at Mishcon de Reya Solicitors, says while the development represents a warning shot to the agencies, the sanction does not send out the message many wanted.

S&P’s Credit Market Services France SAS and S&P’s Credit Market Services Europe Limited have been publically censured in a notice by ESMA. ESMA’s decision to censure S&P results from an investigation into the erroneous publication of an email on 10 November 2011 by S&P to subscribers of its Global Credit Portal which stated ‘France (Republic of) (Unsolicited Ratings): DOWNGRADE’, although S&P’s rating of the country had not been downgraded.

What is the background to the enforcement action?

Since July 2011, ESMA has been responsible for the regulation of credit rating agencies in the EU. It has the power to impose sanctions on credit rating agencies for a variety of failings. This action was against two S&P companies, and it relates to an email alert erroneously released on 10 November 2011. The email had the heading ‘France (Republic of) (Unsolicited Ratings): DOWNGRADE’, when in fact S&P’s credit rating of France had not changed. The email alert was sent out due to technical specifications which meant that its systems wrongly treated as a rating a completely different type of assessment pr