ESMA Imposes Fine on Modefinance S.r.l. for Misleading Use of Its Name

The European Securities and Markets Authority (ESMA) has fined the Italian credit rating agency Modefinance S.r.l. EUR 420,000 for breaching the Credit Rating Agencies Regulation (CRA Regulation). The penalty was imposed after the company was found to have misleadingly used ESMA’s name in statements regarding its credit rating activities.

Misuse of ESMA’s Name

According to ESMA, Modefinance published multiple statements between September 2018 and October 2021 on its websites, suggesting that ESMA had “certified” or “validated” the company’s credit rating model. These claims, which were later corrected in September 2023, were deemed misleading as they could have given the impression that ESMA had endorsed Modefinance’s credit rating activities.

ESMA’s Chair, Verena Ross, highlighted the potential consequences of such statements, stating that they could mislead investors and affect the functioning of financial markets within the European Union.

Details of the Violation and Financial Penalty

Background on Modefinance

Modefinance S.r.l., headquartered in Italy, has been registered as a credit rating agency by ESMA since 2015. Despite being a small-sized agency, it holds the tenth largest market share among credit rating agencies in the European Union, with a reported share of 0.61%.

Appeal Process

Modefinance has the right to appeal ESMA’s decision to the Board of Appeal of the European Supervisory Authorities. However, an appeal does not automatically suspend the decision unless the Board of Appeal decides otherwise.

ESMA’s Role and Regulatory Framework

ESMA has been responsible for supervising credit rating agencies in the EU since 2011. It ensures compliance with the CRA Regulation and has the authority to impose enforcement actions, including fines and public notices. The authority’s broader role includes enhancing investor protection, maintaining stable financial markets, and ensuring effective market supervision.

As part of the European System of Financial Supervision, ESMA collaborates with the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and national financial regulators to oversee market practices.

For further information, ESMA has made relevant documents and contact details available to the public.