German credit rating agency Scope Ratings GmbH has been sanctioned for breaching regulatory requirements when it comes to handling conflicts of interest.
The European Securities and Markets Authority (ESMA) fined the firm €2.2 million for violating the rules governing credit rating agencies.
“This finding resulted from structural failures and specific breaches of the conflict of interest obligations in the CRA regulation,” ESMA said in a release.
Specifically, ESMA said it found structural weaknesses in Scope’s policies and procedures, internal controls and administrative arrangements.
It also found a breach involving a potential individual conflict of interest, and failing to disclose that it provided other services to an entity that it also rated.
“Scope failed to comply with their obligations when it comes to avoidance of potential conflicts of interest,” said Verena Ross, chairwoman of ESMA, in a release.
“Failures by credit rating agencies to properly identify, prevent and manage potential conflicts can damage the proper functioning of markets and create harm for investors,” she said.