EUROPE - The European Commission has decided to launch formal proceedings against US ratings agency Standard & Poor's for issues relating to its monopoly on the issuance of international securities identification numbers (ISIN).
ISIN numbers are used to identify securities issued throughout the world. S&P offers ISIN numbers through its CUSIP Service Bureau, the only issuer in the US and as such, "the only operator to receive first-hand information from all US Securities issuers," the EC said. It compiles that information into a descriptive database, which is then licensed to news and data agencies, according to the EC.
"The issue is bundling," said Jonathan Todd, EC spokesman. Todd said a user who wants an ISIN number may also automatically be paying for the S&P ISIN database.
The EC said in a statement: "Allegedly financial institutions are obliged to pay for a service that they are not interested in and do not actually use."
The EC continued: "Moreover, it is alleged that S&P forces its contractual partners, the information services providers, to cut off financial institutions from data feeds on US securities unless the latter enter into licensing agreements with S&P for the use of US ISINs."
S&P Spokesman Martin Winn said: The complaint that prompted this inquiry is without merit. It misrepresents the activities of the CUSIP Service Bureau and ignores the fact that CSB's licensing practices and charges are wholly transparent, in line with industry practices, and based on fair, reasonable and non-discriminatory terms. We are cooperating with the European's Commission's inquiry and look forward to explaining CSB's role and business practices."
He added: "CSB offers free access to individual identifiers via its website, to enable market participants to administer cross-border securities transactions. It requires a license only when a market participant uses CSB databases or their content for other commercial uses."
The proceedings were initiated by a complaint filed in July by the European Fund and Asset Management Association, its French and German counterparts, and various data user associations.
A formal proceeding does not indicate that S&P has done broken any rules but, if they are found guilty, the firm could face some hefty fines.
If a company is found guilty, they may be required to change their practices or fined up to 10% of their global revenue, said Todd.
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