SEC Charges Credit Rating Agencies DBRS and KBRA for Failing to Preserve Records

The Securities and Exchange Commission announced charges against credit rating agencies DBRS, Inc. and Kroll Bond Rating Agency (KBRA) for the failure to preserve electronic records over long periods of time. Specifically, both firms failed to retain communication through text messages between employees and senior executives concerning credit rating activities on their personal or work-issued devices. Additionally, the SEC charged DBRS with failing to disclose and internal control provisions when rating certain commercial mortgage-backed securities (CMBS). To settle the charges, DBRS was fined $8 million and KBRA was fined $4 million. DBRS also agreed to retain an independent compliance consultant and KBRA agreed to retain an independent compliance consultant for a comprehensive review of their policies and procedures relating to the retention of electronic communications. The investigations were conducted by staff from the Complex Financial Instruments Unit and the New York Regional Office and SEC Staff from the Office of Credit Ratings assisted with the investigation.