Italian credit rating agency, Modefinance S.r.l., is being sanctioned by the European Securities and Markets Authority (ESMA), over the alleged improper use of the regulator’s name.
ESMA imposed a €420,000 fine against Modefinance for breaching the rules that govern rating agencies by using ESMA’s name “misleadingly” in statements about its rating activities, the regulator said.
Specifically, the regulator found that the rating agency breached regulatory requirements against making statements suggesting that ESMA has approved or endorsed its ratings. The statements were published on its websites between September 2018 and October 2021, and indicated that ESMA had “certified” or “validated” the model used in its scoring and credit rating activities.
In a notice, ESMA said that the regulator’s board of supervisors concluded that the company’s rating model represented an “essential part” of its rating activities and that suggesting that the regulator had approved the model, in turn, implied endorsement of its rating activities.
“Modefinance used ESMA’s name to incorrectly suggest ESMA’s endorsement of its credit rating activities. This could mislead investors and could have an impact on the proper functioning of EU financial markets,” said Verena Ross, ESMA’s chair, in a statement.
In setting the sanction, the board considered that the breach occurred repeatedly, but also that the firm voluntarily took action to prevent similar breaches, the regulator noted.
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