Ontario Commission des 22nd Floor 22e étage
Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest
Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8
April 25, 2022
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO
(the “Jurisdiction”)
AND
IN THE MATTER OF
THE PROCESS FOR DESIGNATION OF
CREDIT RATING ORGANIZATIONS IN MULTIPLE JURISDICTIONS
AND
IN THE MATTER OF
FITCH RATINGS, INC.
(the “Filer”)
AMENDED AND RESTATED DESIGNATION ORDER
Background
The principal regulator in the Jurisdiction previously designated the Filer, under its former name “Fitch, Inc.”, as a designated rating organization, as contemplated by National Instrument 25-101 Designated Rating Organizations (“NI 25-101”), pursuant to the October 2012 Designation (defined below).
The principal regulator in the Jurisdiction has received an application from the Filer for an amended and restated decision under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) that permits the addition of Fitch Ireland (as defined below) as a DRO affiliate of the Filer and the removal of the following entities as DRO affiliates of the Filer, as contemplated by NI 25-101:
a) Fitch Centroamerica, S.A. (Panama);
b) Fitch Costa Rica califacadora de riesgo, S.A. (Costa Rica);
c) Fitch Ratings Colombia, S.A. sociedad calificadora de valores (Colombia);
d) Fitch Italia S.P.A. (Italy);
e) Fitch Deutschland GmbH (Germany);
f) Fitch Polska S.A. (Poland);
g) Fitch France (France);
h) Fitch Ratings Finansal, Dereclnirme Hizmetleri A.S. (Turkey);
i) Fitch Southern Africa PTY Limited (South Africa);
j) Fitch North Africa SA (Tunisia);
k) Fitch Argentina calificadora de riesgo S.A. (Agentina);
l) Fitch Uruguay calificadora de riesgo, S.A. (Uruguay);
m) Fitch Chile clasificadora de riesgo limitada (Chile);
n) Fitch Venezuela, sociedad calificadora de riesgo, S.A. (Venezuela);
o) Fitch Republica Dominica S.R.L. (Dominican Republic);
p) Fitch Ratings (Thailand) Limited (Thailand);
q) PT Fitch Ratings Indonesia (Indonesia);
r) Fitch Ratings Espana S.A.U. (Spain); and
s) Fitch Ratings (Beijing) Limited (China);
(collectively, the “Removed Affiliates”).
Under the Process for Designation of Credit Rating Organizations in Multiple Jurisdictions (for a passport application):
a) the Ontario Securities Commission (the “Commission”) is the principal regulator (the “Principal Regulator”) for this application; and
b) the Filer has provided notice that Section 4B.6 of Multilateral Instrument 11-102 Passport System (“MI 11-102”) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories, Yukon and Nunavut (the “Passport Jurisdictions”).
Interpretation
Terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 25-101 have the same meanings in this decision, unless otherwise defined herein.
Representations
This decision is based on the following facts represented by the Filer:
The Filer
The Filer is a Delaware corporation with its principal office located at 33 Whitehall Street, New York, NY 10004, USA.
The Filer provides credit rating opinions, research and risk analysis to a broad range of financial institutions, corporate entities, government bodies and various structured finance product groups in North America, Europe, Africa, Australasia and South America.
The Filer is a wholly-owned subsidiary of Fitch Group, Inc., a Delaware corporation that is a wholly-owned subsidiary of Hearst Ratings II, Inc.
The Filer is a Nationally Recognized Statistical Rating Organization (“NRSRO”) regulated by the Securities and Exchange Commission (“SEC”), which includes related global offices that issue ratings under the Fitch Ratings global brand. Currently, the Filer, together with its affiliates (the “Credit Rating Affiliates”), rates more than 11,339 different companies and single-purpose vehicles that issue commercial paper, term debt and preferred shares in the global capital markets.
Fitch Ratings Ireland Limited (“Fitch Ireland”) is a company existing under the laws of Ireland and includes the branch offices of this Credit Rating Affiliate in France, Germany, Italy and Poland.
Fitch Ireland is a registered credit rating agency in the European Union. Fitch Ireland is a credit rating affiliate (as that term is defined in SEC Form NRSRO) of the Filer.
The Removed Affiliates (i) have ceased all rating activity, (ii) have ceased issuing credit ratings necessitating recognition under the Legislation or equivalent legislation of the Passport Jurisdictions or (iii) do not issue credit ratings.
On April 30, 2012, the Commission temporarily designated:
a) the Filer as a designated rating organization under the Legislation, and
b) certain affiliates of the Filer as DRO affiliates of the Filer (the “April 2012 Designation”).
The April 2012 Designation subsequently expired and was replaced by a permanent order dated October 31, 2012 (the “October 2012 Designation”).
The Filer was granted exemptive relief from certain aspects of NI 25-101 pursuant to an order granted by the Principal Regulator on October 31, 2012 (the “Exemption Order”).
The Filer's Compliance with NI 25-101
- The Filer has established a board of directors (the “Board”) which, pursuant to the rules made under the Securities Exchange Act of 1934 (“1934 Act”), oversees the management of the Filer, in accordance with its fiduciary responsibilities and standards established by law, including the following:
(a) the establishment, maintenance, and enforcement of policies and procedures for determining credit ratings;
(b) the establishment, maintenance, and enforcement of policies and procedures to address, manage and disclose any conflicts of interest;
(c) the effectiveness of the Filer's internal control system with respect to policies and procedures for determining credit ratings; and
(d) the compensation and promotion policies and practices of the Filer.
Section 15E of the 1934 Act establishes the regulatory framework for NRSROs. Subsection 15E(t) of the 1934 Act imposes a number of corporate governance requirements on NRSROs, including requirements that the NRSRO have a board of directors, that at least half (and no fewer than two) members meet prescribed independence criteria, that compensation for independent members satisfy certain conditions, that independent members be appointed for pre-agreed fixed and non-renewable terms not exceeding five years, and that the board fulfill certain prescribed responsibilities.
The Board has four members. As required by the 1934 Act, two members meet the independence criteria set out in subsection 15E(t)(2) (B) of the 1934 Act and at least one independent director is a user of ratings from an NRSRO. At least two members of the Board (including one independent member) have in-depth knowledge and experience at a senior level regarding the markets for structured finance products.
The Filer has elected to rely on the Board to satisfy the requirements and functions prescribed by Part 3 of NI 25-101 and sections 2.22 through 2.25 of Appendix A of NI 25-101.
The Board of the Filer complies with the composition requirements in section 8 of NI 25-101 and section 2.22 of Appendix A to NI 25-101.
Fitch Ireland has established a board of directors (the “Ireland Board”). The Ireland Board has four members. The Ireland Board includes two non-executive independent directors. At least two members of the Ireland Board (including one independent member) have in-depth knowledge and experience at a senior level regarding the markets for structured finance products.
The Ireland Board complies with the composition requirements in section 8 of NI 25-101 and section 2.22 of Appendix A to NI 25-101.
The Filer has adopted and implemented the Fitch Code of Conduct (the “Fitch Code”), which is designed to be substantially aligned with the International Organization of Securities Commissions Code of Conduct Fundamentals for Credit Rating Agencies (the “IOSCO Code”). The Fitch Code has been revised to, in part, satisfy the requirements of NI 25-101. Each of the DRO affiliates of the Filer is subject to the Fitch Code.
The Filer has also implemented a range of globally applicable policies, procedures, and guidelines, as well as operational and internal control infrastructures (the “Global Policies”) that are designed to achieve the objectives set out in the IOSCO Code and/or satisfy regulatory requirements that the Filer implements globally. The Global Policies satisfy the requirements of NI 25-101.
The Filer has adopted a File Maintenance and Recordkeeping Policy for Analysts (the “Recordkeeping Policy”) which establishes guidelines for the management, maintenance and orderly disposition of analytical records. Pursuant to the Recordkeeping Policy, personnel located in Canada comply with the books and records requirements set out in Part 6 of NI 25-101 and the books and records requirements set out in Part 6 of NI 25-101.
The Filer has appointed a compliance officer who monitors and assesses compliance by the Filer and its DRO employees with the Fitch Code and with applicable laws and regulations, and to fulfill the designated compliance officer functions prescribed by Part 5 of NI 25-101. The designated compliance officer has a direct reporting relationship to the Board of the Filer.
The Fitch Code and the Global Policies meet in all material respects the objectives of NI 25-101 and enable the Filer to:
(a) accommodate the global nature of the Filer's operations;
(b) implement high level principles that govern the conduct of the Filer's credit rating activities and underlying regulatory requirements in the jurisdictions where the Filer conducts credit rating activities; and
(c) maintain and enforce globally consistent policies, procedures and internal controls that meet specific jurisdictional requirements, in addition to those which are reflected in the Fitch Code.
The Filer is in compliance in all material respects with the October 2012 Designation, the Exemption Order, NI 25-101 and the securities legislation applicable to credit rating organizations in each jurisdiction in Canada and in any other jurisdiction in which the Filer or its credit rating affiliates operate.
The Filer is subject to the requirements set out in the Legislation and the securities legislation in each of the Passport Jurisdictions.
On October 31, 2011, Fitch Ireland was registered as a credit rating agency in accordance with Regulation (EC) No. 1060/2009 of the European Parliament and of the European Council of 16 September 2009 on credit rating agencies.
The Credit Rating Affiliates listed in Appendix A to this Decision have been authorized, registered or otherwise regulated as a credit rating agency by a securities regulatory authority in the jurisdiction where they are located.
Decision
The Principal Regulator is satisfied that this decision meets the test set out in the Legislation for the Principal Regulator to make this decision.
The decision of the Principal Regulator under the Legislation is that:
a) the October 2012 Designation is hereby revoked;
b) the Filer is designated as a Designated Rating Organization under the Legislation; and
c) the Credit Rating Affiliates listed in Appendix A to this Decision are designated as DRO affiliates.
“Tim Moseley”
“Grant Vingoe”
Vice-Chair Ontario Securities Commission
Chair Ontario Securities Commission
OSC File #: 2020/0579
APPENDIX A Credit Rating Affiliates of Fitch, Inc.
FITCH RATINGS LIMITED (England)
FITCH RATINGS CIS LIMITED (England)
FITCH RATINGS BRASIL LTDA (Brazil)
FITCH MEXICO S.A. DE C.V. (Mexico)
FITCH AUSTRALIA PTY LIMITED (Australia)
FITCH RATINGS SINGAPORE PTE LTD (Singapore)
FITCH (HONG KONG) LIMITED (Hong Kong)
FITCH RATINGS JAPAN LIMITED (Japan)
FITCH RATINGS IRELAND LIMITED (Ireland)