In re Kroll Bond Rating Agency

 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 98654 / September 29, 2023 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21776 
 
 
In the Matter of 
 
Kroll Bond Rating Agency, 
LLC 
 
Respondent. 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTIONS 15E(d) AND 21C 
OF THE SECURITIES EXCHANGE ACT OF 
1934, MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER 
   
 
 
The Securities and Exchange Commission (“Commission”) deems it appropriate, in the 
public interest and for the protection of investors that public administrative and cease-and-desist 
proceedings be, and hereby are, instituted pursuant to Sections 15E(d) and 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”) against Kroll Bond Rating Agency, LLC (“KBRA” or 
“Respondent”).   
 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (“Offer”) that the Commission has determined to accept. Respondent admits the facts 
set forth in Section III below, acknowledges that its conduct violated the federal securities laws, 
admits the Commission’s jurisdiction over it and the subject matter of these proceedings, and 
consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings 
Pursuant to Sections 15E(d) and 21C of the Securities Exchange Act of 1934, Making Findings, 
and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 
 
On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding 
on any other person or entity in this or any other proceeding.  
 

 
2 
 
Summary 
1. Nationally recognized statistical rating organizations (“NRSROs”) and the credit 
ratings they issue play a unique and important role in our financial markets. The federal securities 
laws impose recordkeeping requirements on NRSROs to establish a framework of oversight to 
ensure that NRSROs responsibly discharge their role. The Commission has long said that 
recordkeeping requirements have proven integral to the Commission’s investor protection function 
because preserved records are the primary means of monitoring compliance with applicable federal 
securities laws.  
2. These proceedings arise out of widespread and longstanding failures by KBRA, an 
NRSRO, to adhere to certain NRSRO recordkeeping requirements. KBRA employees, including 
those at senior levels, have communicated using their own personal devices by text messages or 
other text messaging platforms, such as WhatsApp, since at least January 2020, both internally and 
externally (“off-channel communications”). The text messages included discussions of initiating, 
determining, maintaining, monitoring, changing, or withdrawing credit ratings (“credit rating 
activities”).  
3. KBRA failed to maintain or preserve messages concerning rating activities as 
required by NRSRO recordkeeping rules. Respondent’s failure was firm-wide and involved 
employees at all levels of seniority. As a result, KBRA violated Section 17(a) of the Exchange Act 
and Rule 17g-2(b)(7) thereunder. 
4. During the time period that KBRA failed to maintain and preserve off-channel 
communications their employees sent and received relating to credit rating activities, KBRA 
received and responded to Commission requests for documents in numerous Commission 
investigations and examinations. As a result, KBRA’s recordkeeping failures likely impacted the 
Commission’s ability to carry out its regulatory functions and investigate compliance deficiencies 
and violations of the federal securities laws across these investigations and examinations.   
5. KBRA has initiated a review of its recordkeeping failures and begun a program of 
remediation. As set forth in the Undertakings below, KBRA will retain an independent compliance 
consultant to review and assess KBRA’s remedial steps relating to KBRA’s recordkeeping 
practices, policies and procedures, related supervisory practices, and employment actions. 
Respondent 
6. KBRA (formerly known as Lace Financial Corp.) is a privately owned Delaware 
Limited Liability Company with its principal office in New York, New York. KBRA is registered 
with the Commission as an NRSRO. 
NRSRO Recordkeeping Requirements 
7. Section 17(a)(1) of the Exchange Act authorizes the Commission to issue rules 
requiring NRSROs to make and keep for prescribed periods, and furnish copies of, such records 

 
3 
 
as necessary or appropriate in the public interest, for the protection of investors or otherwise in 
furtherance of the purposes of the Exchange Act.  
8. Pursuant to this provision, the Commission adopted recordkeeping requirements 
specific to NRSROs. Those requirements include, among other provisions, Exchange Act Rule 
17g-2(b)(7), which requires an NRSRO to retain internal and external communications, including 
electronic communications, received and sent by the NRSRO and its employees that relate to credit 
rating activities. Rule 17g-2(c) specifies that this recordkeeping requirement applies for a period of 
three years. 
9. In adopting Rule 17g-2 in 2007, the Commission emphasized the importance of 
analogous recordkeeping requirements, stating, “the retention of written communications has 
played an important role in assisting the Commission in identifying legal violations and 
compliance issues with respect to other regulated entities.” Final Rule, Oversight of Credit Rating 
Agencies Registered as Nationally Recognized Statistical Rating Organizations, 72 Fed. Reg. 
33563, 33588 (June 18, 2007). The Commission also specifically emphasized the evidentiary 
relevance of internal NRSRO records, stating that “internal communications will play an important 
role in assisting the Commission in identifying legal violations and compliance issues in its 
oversight of NRSROs.” Id. 
KBRA’s Electronic Communications Policies and Procedures 
10. Since at least 2018 and through the present, KBRA issued firm cell phones, but it 
also permitted employees to use their own personal cell phones for business purposes, including 
accessing work email.   
11. Since at least August 2018, KBRA has maintained a Recordkeeping Policy 
identifying the types of written and electronic records retained by KBRA. The Recordkeeping 
Policy states that KBRA will retain, for at least seven years, external and internal communications 
received by KBRA and its employees that relate to credit rating activities. 
12. Since at least October 2020, KBRA has maintained a Record Retention Policy for 
Credit Rating Services and a Record Retention Procedure for Credit Rating Services (the “Record 
Retention Policy and Procedure.”) The Record Retention Policy and Procedure acknowledges that 
KBRA is legally required to retain written and electronic records relating to credit rating activities 
and sets forth a protocol for determining which records, including electronic communications, 
must be retained by law. 
13. However, prior to April 2022, KBRA had no policies or procedures designating the 
specific communications platforms that KBRA employees could or could not use to conduct 
business, including credit rating activities. In April 2022, KBRA enacted an Electronic 
Communications Concerning Credit Rating Activities Policy and Procedure (the “Electronic 
Communications Policy”). The Electronic Communications Policy recognizes that KBRA is 
legally required to retain electronic communications sent or received by KBRA employees that 

 
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relate to credit rating activities. The Electronic Communications Policy mandates that KBRA’s 
official email system is the only electronic communications system that KBRA employees are 
permitted to use for credit rating activities.  
14. In May 2023, KBRA amended the Electronics Communication Policy to also 
permit KBRA employees to send and receive messages relating to credit rating activities over the 
Slack communications platform, which KBRA made available to employees, both on firm-issued 
and personal devices, as a preserved communications platform. 
15. Since at least January 2018, KBRA has maintained a Compliance Department 
Monitoring Process to monitor employee email for compliance with applicable laws, regulations, 
and KBRA policies and procedures. To this day, however, the Compliance Department Monitoring 
Process is limited to employees’ business emails and does not cover other forms of electronic 
communications, such as text messaging, WhatsApp, or Slack messages. 
KBRA’s Recordkeeping Failures 
16. KBRA employees involved in determining credit ratings, including those at senior 
levels, have communicated internally for purposes relating to credit rating activities using text and 
WhatsApp messages since at least January 2020, which were not retained or monitored by KBRA. 
17. In March 2023, Commission staff commenced an investigation to determine 
whether KBRA was properly retaining messages relating to credit rating activities that were sent 
and received on personal or work-issued devices. KBRA cooperated with the investigation by 
voluntarily gathering and reviewing communications from the devices of a sampling of employees, 
including senior executives and group heads.   
18. The Commission staff’s investigation uncovered pervasive off-channel 
communications relating to credit rating activities at all seniority levels of KBRA’s credit rating 
business. The staff requested off-channel communications data from various KBRA personnel and 
found that all of these individuals had engaged in off-channel communications relating to credit 
rating activities over a multi-year period. Overall, these personnel sent and received numerous off-
channel communications relating to credit rating activities, involving other KBRA personnel and a 
credit rating customer.  
19. The majority of the messages were exchanged on employees’ personal cell phones, 
with some containing snapshots of internal KBRA documents and communications, such as a 
spreadsheet analyzing a specific transaction. Other messages were exchanged on KBRA-issued 
cell phones. 
20. For example, from November 9, 2021 to March 3, 2022, a senior executive 
exchanged numerous off-channel communications relating to credit rating activities with at least 
five KBRA colleagues, including several group heads and other senior employees.  

 
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21. As another example, from November 9, 2021 to September 9, 2022, a senior 
managing director exchanged numerous off-channel communications relating to credit rating 
activities with at least eleven KBRA colleagues, including group heads, as well as senior and 
junior employees under their supervision. Some of these messages discussed the need to issue a 
correction regarding a ratings error in a KBRA-published report. 
22. In addition, from December 7, 2021 to March 5, 2022, a senior managing director 
exchanged numerous off-channel communications relating to credit rating activities with at least 
five KBRA colleagues, including group heads and senior employees.  
23. Even after KBRA instituted the Electronics Communication Policy in April 2022—
which mandated that employees are only permitted to use KBRA’s official email system for credit 
rating activities—KBRA employees continued to send and receive messages relating to credit 
rating activities through other communications systems which were not retained, in violation of 
both KBRA’s internal policies and the recordkeeping requirements applicable to NRSROs.  
24. Between January 2020 and the present, KBRA received and responded to 
Commission requests for documents and was subject to annual examinations by the Commission’s 
Office of Credit Ratings, in which it was requested to produce documents and records to assist the 
Commission staff with identifying potential compliance deficiencies and violations of the federal 
securities laws.  By failing to maintain and preserve required records relating to its credit rating 
activities, KBRA likely deprived the Commission of these off-channel communications in various 
investigations and during examinations. 
KBRA’s Violation 
25. As a result of the conduct described above, KBRA willfully
2
 violated Section 
17(a)(1) of the Exchange Act and Rule 17g-2(b)(7) thereunder, which requires each NRSRO, for a 
period of three years, to retain internal and external communications, including electronic 
communications, received and sent by the NRSRO and its employees that relate to initiating, 
determining, maintaining, monitoring, changing, or withdrawing a credit rating.  
 
2
 “Willfully,” for purposes of imposing relief under Section 15E(d) of the Exchange Act, 
“‘means no more than that the person charged with the duty knows what he is doing.’” Wonsover 
v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. 
Cir. 1949)). There is no requirement that the actor “also be aware that he is violating one of the 
Rules or Acts.” Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). The decision in The Robare Group, 
Ltd. v. SEC, which construed the term “willfully” for purposes of a differently structured 
statutory provision, does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting 
forth the showing required to establish that a person has “willfully omit[ted]” material 
information from a required disclosure in violation of Section 207 of the Investment Advisers 
Act of 1940). 

 
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KBRA’s Remedial Efforts 
26. In determining to accept the Offer, the Commission considered remedial acts 
promptly undertaken by KBRA and cooperation afforded the Commission staff.  In April 2022, 
prior to being contacted by Commission staff, KBRA enacted the Electronic Communications 
Policy to comply with NRSRO recordkeeping requirements.  In May 2023, KBRA deployed Slack 
as an additional communications platform and amended the Electronics Communications Policy 
accordingly. 
Undertakings 
27. As discussed, prior to this action, KBRA enacted the Electronic Communications 
Policy, enhanced its training on approved business communications methods, made significant 
changes to technology available to employees, and began implementing technologies to facilitate 
compliance with NRSRO recordkeeping requirements, including on personal devices. In addition, 
KBRA has undertaken to do the following: 
28. Independent Compliance Consultant. 
a. KBRA shall retain, within thirty (30) days of the entry of this Order, the 
services of an independent compliance consultant (“Compliance Consultant”) that is not 
unacceptable to the Commission staff. The Compliance Consultant’s compensation and 
expenses shall be borne exclusively by KBRA. 
b. KBRA will oversee the work of the Compliance Consultant.  
c. KBRA shall provide to the Commission staff, within sixty (60) days of the 
entry of this Order, a copy of the engagement letter detailing the Compliance Consultant’s 
responsibilities, which shall include a comprehensive compliance review as described 
below. KBRA shall require that, within ninety (90) days of the date of the engagement 
letter, the Compliance Consultant conduct: 
i. A comprehensive review of KBRA’s supervisory, compliance, and 
other policies and procedures designed to ensure that internal and 
external communications, including electronic communications, 
received and sent by KBRA and its employees that relate to credit rating 
activities are preserved in accordance with the requirements of the 
federal securities laws and NRSRO regulations and an assessment of 
KBRA’s framework for addressing instances of non-compliance among 
its employees. 
ii. A comprehensive review of training conducted by KBRA to ensure 
personnel are complying with the requirements regarding the 
preservation of communications relating to credit rating activities, 

 
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including those found on personal devices, in accordance with the 
federal securities laws and NRSRO regulations. 
iii. An assessment of any surveillance measures implemented by KBRA to 
ensure compliance, on an ongoing basis, with the requirements 
regarding the preservation of communications relating to credit rating 
activities, including those found on personal devices, in accordance with 
the federal securities laws and NRSRO regulations. 
iv. An assessment of the technological solutions that KBRA has begun 
implementing to facilitate compliance with the requirements regarding 
the preservation of communications relating to credit rating activities in 
accordance with the federal securities laws and NRSRO regulations, 
including an assessment of the likelihood that KBRA personnel will use 
the technological solutions going forward and a review of the measures 
employed by KBRA to track employee usage of new technological 
solutions. 
v. An assessment of the measures used by KBRA to prevent the use of 
unauthorized communications methods for communications relating to 
credit rating activities by employees. This assessment should include, 
but not be limited to, a review of the firm’s policies and procedures to 
ascertain if they provide for any significant technology and/or 
behavioral restrictions that help prevent the risk of the use of 
unapproved communications methods on personal devices to send or 
receive communications relating to credit rating activities in 
contravention of the requirements of the federal securities laws and 
NRSRO regulations. 
vi. A review of KBRA’s electronic communications surveillance routines 
to ensure the preservation of electronic communications relating to 
credit rating activities, including those found on personal devices, in 
accordance with the federal securities laws and NRSRO regulations, are 
incorporated into KBRA’s overall communications surveillance 
program. 
vii. A comprehensive review of the framework adopted by KBRA to 
address instances of non-compliance by KBRA personnel with KBRA’s 
policies and procedures concerning the use of approved 
communications methods, including on personal devices, for 
communications relating to credit rating activities in accordance with 
the federal securities laws and NRSRO regulations in the past.  This 
review shall include a survey of how KBRA determined which 
employees failed to comply with KBRA policies and procedures, the 

 
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corrective action carried out, an evaluation of who violated policies and 
why, what penalties were imposed, and whether penalties were handed 
out consistently across business lines and seniority levels. 
d. KBRA shall require that, within forty-five (45) days after completion of the 
review set forth in sub-paragraphs c.i through c.vii above, the Compliance Consultant shall 
submit a detailed written report of its findings to KBRA and to the Commission staff (the 
“Report”). KBRA shall require that the Report include a description of the review 
performed, the names of the individuals who performed the review, the conclusions 
reached, the Compliance Consultant’s recommendations for changes in or improvements to 
KBRA’s policies and procedures, and a summary of the plan for implementing the 
recommended changes in or improvements to KBRA’s policies and procedures. 
e. KBRA shall adopt all recommendations contained in the Report within 
ninety (90) days of the date of the Report; provided, however, that within forty-five (45) 
days after the date of the Report, KBRA shall advise the Compliance Consultant and the 
Commission staff in writing of any recommendations that KBRA considers to be unduly 
burdensome, impractical, or inappropriate. With respect to any recommendation that 
KBRA considers unduly burdensome, impractical, or inappropriate, KBRA need not adopt 
such recommendation at that time, but shall propose in writing an alternative policy, 
procedure, or disclosure designed to achieve the same objective or purpose.  
f. As to any recommendation concerning KBRA’s policies or procedures on 
which KBRA and the Compliance Consultant do not agree, KBRA and the Compliance 
Consultant shall attempt in good faith to reach an agreement within sixty (60) days after 
the date of the Report. Within fifteen (15) days after the conclusion of the discussion and 
evaluation by KBRA and the Compliance Consultant, KBRA shall require that the 
Compliance Consultant inform KBRA and the Commission staff in writing of the 
Compliance Consultant’s final determination concerning any recommendation that 
KBRA considers to be unduly burdensome, impractical, or inappropriate. KBRA shall 
abide by the determinations of the Compliance Consultant and, within sixty (60) days 
after final agreement between KBRA and the Compliance Consultant or final 
determination by the Compliance Consultant, whichever occurs first, KBRA shall adopt 
and implement all of the recommendations that the Compliance Consultant deems 
appropriate. 
g. KBRA shall cooperate fully with the Compliance Consultant and shall 
provide the Compliance Consultant with access to such of KBRA’s files, books, records, 
and personnel as are reasonably requested by the Compliance Consultant for review.  
h. KBRA shall not have the authority to terminate the Compliance Consultant 
or substitute another compliance consultant for the initial Compliance Consultant, 
without the prior written approval of the Commission staff. KBRA shall compensate the 

 
9 
 
Compliance Consultant and persons engaged to assist the Compliance Consultant for 
services rendered under this Order at their reasonable and customary rates. 
i. For the period of engagement and for a period of two years from completion 
of the engagement, KBRA shall not (i) retain the Compliance Consultant for any other 
professional services outside of the services described in this Order; (ii) enter into any other 
professional relationship with the Compliance Consultant, including any employment, 
consultant, attorney-client, auditing or other professional relationship; or (iii) enter, without 
prior written consent of the Commission staff, into any such professional relationship with 
any of the Compliance Consultant’s present or former affiliates, employers, directors, 
officers, employees, or agents acting in their capacity as such.  
j. The Report and related written communications of the Compliance 
Consultant will likely include confidential financial, proprietary, competitive business or 
commercial information. Public disclosure of the Report could discourage cooperation, 
impede pending or potential government investigations or undermine the objectives of 
the reporting requirement. For these reasons, among others, the Report and the contents 
thereof are intended to remain and shall remain non-public, except (1) pursuant to court 
order, (2) as agreed to by the parties in writing, (3) to the extent that the Commission 
determines in its sole discretion that disclosure would be in furtherance of the 
Commission’s discharge of its duties and responsibilities, or (4) is otherwise required by 
law. 
29. One-Year Evaluation. KBRA shall require the Compliance Consultant to assess 
KBRA’s program for the preservation, as required under the federal securities laws and NRSRO 
regulations, of communications relating to credit rating activities, including those found on 
personal devices, commencing one year after submitting the Report required by Paragraph 28.d 
above. KBRA shall require this review to evaluate KBRA’s progress in the areas described in 
Paragraphs 28.c.i-vii above. After this review, KBRA shall require the Compliance Consultant to 
submit a report (the “One Year Report”) to KBRA and the Commission staff and shall ensure 
that the One Year Report includes an updated assessment of KBRA’s policies and procedures 
with regard to the preservation of communications relating to credit rating activities (including 
those found on personal devices), training, surveillance programs, and technological solutions 
implemented in the prior year period. 
30. Reporting Discipline Imposed.  For two years following the entry of this Order, 
KBRA shall notify the Commission staff as follows upon the imposition of any discipline imposed 
by KBRA, including, but not limited to, written warnings, loss of any pay, bonus, or incentive 
compensation, or the termination of employment, with respect to any employee found to have 
violated KBRA’s policies and procedures concerning the preservation of communications relating 
to credit rating activities, including those found on personal devices: within ten (10) days of the 
imposition of such discipline. 

 
10 
 
31. Recordkeeping.  KBRA shall preserve, for a period of not less than six (6) years 
from the end of the fiscal year last used, the first two (2) years in an easily accessible place, any 
record of compliance with these undertakings. 
32. Deadlines.  For good cause shown, the Commission staff may extend any of the 
procedural dates related to the undertakings. Deadlines for procedural dates shall be counted in 
calendar days, except that if the last day falls on a weekend or federal holiday, the next business 
day shall be considered to be the last day. 
33. Certification. KBRA shall certify, in writing, compliance with the undertakings set 
forth above. The certification shall identify the undertakings, provide written evidence of 
compliance in the form of a narrative, and be supported by exhibits sufficient to demonstrate 
compliance. The Commission staff may make reasonable requests for further evidence of 
compliance, and Respondent agrees to provide such evidence.  The certification and supporting 
material shall be submitted to Judith Weinstock, Assistant Regional Director, Division of 
Enforcement, Securities and Exchange Commission, 100 Pearl Street, Suite 20-100, New York, 
New York 10004-2616, with a copy to the Office of Chief Counsel of the Enforcement Division, 
no later than sixty (60) days from the date of the completion of the undertakings.   
 
 In view of the foregoing, the Commission deems it appropriate, in the public interest, and 
for the protection of investors to impose the sanctions agreed to in Respondent KBRA’s Offer. 
 
 Accordingly, pursuant to Sections 15E(d) and 21C of the Exchange Act, it is hereby 
ORDERED that: 
 
A. Respondent KBRA cease and desist from committing or causing any violations and 
any future violations of Section 17(a)(1) of the Exchange Act and Rule 17g-2(b)(7) thereunder.   
B. Respondent KBRA is censured.   
C. Respondent KBRA shall pay civil penalties of $4,000,000 to the Securities and 
Exchange Commission for transfer to the general fund of the United States Treasury, subject to 
Exchange Act Section 21F(g)(3). Payment shall be made in the following installments: 
1. Due within 30 days of the entry of this Order: $600,000; 
2. Due within 90 days of the entry of this Order: $425,000; 
3. Due within 180 days of the entry of this Order: $425,000; 
4. Due within 270 days of the entry of this Order: $425,000; 
5. Due within 360 days of the entry of this Order: $425,000; 
6. Due within 450 days of the entry of this Order: $425,000; 
7. Due within 540 days of the entry of this Order: $425,000; 
8. Due within 630 days of the entry of this Order: $425,000; and 

 
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9. The remainder within 720 days after the entry of this Order. 
 
Payments shall be applied first to post-order interest, which accrues pursuant to 31 U.S.C. 
§ 3717. Prior to making the final payment set forth herein, Respondent shall contact the staff of 
the Commission for the amount due. If Respondent fails to make any payment by the date agreed 
and/or in the amount agreed according to the schedule set forth above, all outstanding payments 
under this Order, including post-order interest, minus any payments made, shall become due and 
payable immediately at the discretion of the staff of the Commission without further application 
to the Commission. 
Payment must be made in one of the following ways:   
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
KBRA as a Respondent in these proceedings, and the file number of these proceedings; a copy of 
the cover letter and check or money order must be sent to Sheldon Pollock, Associate Regional 
Director, Division of Enforcement, Securities and Exchange Commission, 100 Pearl Street, Suite 
20-100, New York, New York 10004-2626.  
D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 
the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 
shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 
Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 
Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

 
12 
 
in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 
damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
E. Respondent shall comply with the undertakings enumerated in Section III above. 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
       Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 98654 / September 29, 2023 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21776 

 

 

In the Matter of 

 

Kroll Bond Rating Agency, 

LLC 

 

Respondent. 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 15E(d) AND 21C 

OF THE SECURITIES EXCHANGE ACT OF 

1934, MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-DESIST ORDER 

   

 

 

The Securities and Exchange Commission (“Commission”) deems it appropriate, in the 

public interest and for the protection of investors that public administrative and cease-and-desist 

proceedings be, and hereby are, instituted pursuant to Sections 15E(d) and 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”) against Kroll Bond Rating Agency, LLC (“KBRA” or 

“Respondent”).   

 

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (“Offer”) that the Commission has determined to accept. Respondent admits the facts 

set forth in Section III below, acknowledges that its conduct violated the federal securities laws, 

admits the Commission’s jurisdiction over it and the subject matter of these proceedings, and 

consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings 

Pursuant to Sections 15E(d) and 21C of the Securities Exchange Act of 1934, Making Findings, 

and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below. 

 

On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding 

on any other person or entity in this or any other proceeding.  

 



 

2 

 

Summary 

1. Nationally recognized statistical rating organizations (“NRSROs”) and the credit 

ratings they issue play a unique and important role in our financial markets. The federal securities 

laws impose recordkeeping requirements on NRSROs to establish a framework of oversight to 

ensure that NRSROs responsibly discharge their role. The Commission has long said that 

recordkeeping requirements have proven integral to the Commission’s investor protection function 

because preserved records are the primary means of monitoring compliance with applicable federal 

securities laws.  

2. These proceedings arise out of widespread and longstanding failures by KBRA, an 

NRSRO, to adhere to certain NRSRO recordkeeping requirements. KBRA employees, including 

those at senior levels, have communicated using their own personal devices by text messages or 

other text messaging platforms, such as WhatsApp, since at least January 2020, both internally and 

externally (“off-channel communications”). The text messages included discussions of initiating, 

determining, maintaining, monitoring, changing, or withdrawing credit ratings (“credit rating 

activities”).  

3. KBRA failed to maintain or preserve messages concerning rating activities as 

required by NRSRO recordkeeping rules. Respondent’s failure was firm-wide and involved 

employees at all levels of seniority. As a result, KBRA violated Section 17(a) of the Exchange Act 

and Rule 17g-2(b)(7) thereunder. 

4. During the time period that KBRA failed to maintain and preserve off-channel 

communications their employees sent and received relating to credit rating activities, KBRA 

received and responded to Commission requests for documents in numerous Commission 

investigations and examinations. As a result, KBRA’s recordkeeping failures likely impacted the 

Commission’s ability to carry out its regulatory functions and investigate compliance deficiencies 

and violations of the federal securities laws across these investigations and examinations.   

5. KBRA has initiated a review of its recordkeeping failures and begun a program of 

remediation. As set forth in the Undertakings below, KBRA will retain an independent compliance 

consultant to review and assess KBRA’s remedial steps relating to KBRA’s recordkeeping 

practices, policies and procedures, related supervisory practices, and employment actions. 

Respondent 

6. KBRA (formerly known as Lace Financial Corp.) is a privately owned Delaware 

Limited Liability Company with its principal office in New York, New York. KBRA is registered 

with the Commission as an NRSRO. 

NRSRO Recordkeeping Requirements 

7. Section 17(a)(1) of the Exchange Act authorizes the Commission to issue rules 

requiring NRSROs to make and keep for prescribed periods, and furnish copies of, such records 



 

3 

 

as necessary or appropriate in the public interest, for the protection of investors or otherwise in 

furtherance of the purposes of the Exchange Act.  

8. Pursuant to this provision, the Commission adopted recordkeeping requirements 

specific to NRSROs. Those requirements include, among other provisions, Exchange Act Rule 

17g-2(b)(7), which requires an NRSRO to retain internal and external communications, including 

electronic communications, received and sent by the NRSRO and its employees that relate to credit 

rating activities. Rule 17g-2(c) specifies that this recordkeeping requirement applies for a period of 

three years. 

9. In adopting Rule 17g-2 in 2007, the Commission emphasized the importance of 

analogous recordkeeping requirements, stating, “the retention of written communications has 

played an important role in assisting the Commission in identifying legal violations and 

compliance issues with respect to other regulated entities.” Final Rule, Oversight of Credit Rating 

Agencies Registered as Nationally Recognized Statistical Rating Organizations, 72 Fed. Reg. 

33563, 33588 (June 18, 2007). The Commission also specifically emphasized the evidentiary 

relevance of internal NRSRO records, stating that “internal communications will play an important 

role in assisting the Commission in identifying legal violations and compliance issues in its 

oversight of NRSROs.” Id. 

KBRA’s Electronic Communications Policies and Procedures 

10. Since at least 2018 and through the present, KBRA issued firm cell phones, but it 

also permitted employees to use their own personal cell phones for business purposes, including 

accessing work email.   

11. Since at least August 2018, KBRA has maintained a Recordkeeping Policy 

identifying the types of written and electronic records retained by KBRA. The Recordkeeping 

Policy states that KBRA will retain, for at least seven years, external and internal communications 

received by KBRA and its employees that relate to credit rating activities. 

12. Since at least October 2020, KBRA has maintained a Record Retention Policy for 

Credit Rating Services and a Record Retention Procedure for Credit Rating Services (the “Record 

Retention Policy and Procedure.”) The Record Retention Policy and Procedure acknowledges that 

KBRA is legally required to retain written and electronic records relating to credit rating activities 

and sets forth a protocol for determining which records, including electronic communications, 

must be retained by law. 

13. However, prior to April 2022, KBRA had no policies or procedures designating the 

specific communications platforms that KBRA employees could or could not use to conduct 

business, including credit rating activities. In April 2022, KBRA enacted an Electronic 

Communications Concerning Credit Rating Activities Policy and Procedure (the “Electronic 

Communications Policy”). The Electronic Communications Policy recognizes that KBRA is 

legally required to retain electronic communications sent or received by KBRA employees that 



 

4 

 

relate to credit rating activities. The Electronic Communications Policy mandates that KBRA’s 

official email system is the only electronic communications system that KBRA employees are 

permitted to use for credit rating activities.  

14. In May 2023, KBRA amended the Electronics Communication Policy to also 

permit KBRA employees to send and receive messages relating to credit rating activities over the 

Slack communications platform, which KBRA made available to employees, both on firm-issued 

and personal devices, as a preserved communications platform. 

15. Since at least January 2018, KBRA has maintained a Compliance Department 

Monitoring Process to monitor employee email for compliance with applicable laws, regulations, 

and KBRA policies and procedures. To this day, however, the Compliance Department Monitoring 

Process is limited to employees’ business emails and does not cover other forms of electronic 

communications, such as text messaging, WhatsApp, or Slack messages. 

KBRA’s Recordkeeping Failures 

16. KBRA employees involved in determining credit ratings, including those at senior 

levels, have communicated internally for purposes relating to credit rating activities using text and 

WhatsApp messages since at least January 2020, which were not retained or monitored by KBRA. 

17. In March 2023, Commission staff commenced an investigation to determine 

whether KBRA was properly retaining messages relating to credit rating activities that were sent 

and received on personal or work-issued devices. KBRA cooperated with the investigation by 

voluntarily gathering and reviewing communications from the devices of a sampling of employees, 

including senior executives and group heads.   

18. The Commission staff’s investigation uncovered pervasive off-channel 

communications relating to credit rating activities at all seniority levels of KBRA’s credit rating 

business. The staff requested off-channel communications data from various KBRA personnel and 

found that all of these individuals had engaged in off-channel communications relating to credit 

rating activities over a multi-year period. Overall, these personnel sent and received numerous off-

channel communications relating to credit rating activities, involving other KBRA personnel and a 

credit rating customer.  

19. The majority of the messages were exchanged on employees’ personal cell phones, 

with some containing snapshots of internal KBRA documents and communications, such as a 

spreadsheet analyzing a specific transaction. Other messages were exchanged on KBRA-issued 

cell phones. 

20. For example, from November 9, 2021 to March 3, 2022, a senior executive 

exchanged numerous off-channel communications relating to credit rating activities with at least 

five KBRA colleagues, including several group heads and other senior employees.  



 

5 

 

21. As another example, from November 9, 2021 to September 9, 2022, a senior 

managing director exchanged numerous off-channel communications relating to credit rating 

activities with at least eleven KBRA colleagues, including group heads, as well as senior and 

junior employees under their supervision. Some of these messages discussed the need to issue a 

correction regarding a ratings error in a KBRA-published report. 

22. In addition, from December 7, 2021 to March 5, 2022, a senior managing director 

exchanged numerous off-channel communications relating to credit rating activities with at least 

five KBRA colleagues, including group heads and senior employees.  

23. Even after KBRA instituted the Electronics Communication Policy in April 2022—

which mandated that employees are only permitted to use KBRA’s official email system for credit 

rating activities—KBRA employees continued to send and receive messages relating to credit 

rating activities through other communications systems which were not retained, in violation of 

both KBRA’s internal policies and the recordkeeping requirements applicable to NRSROs.  

24. Between January 2020 and the present, KBRA received and responded to 

Commission requests for documents and was subject to annual examinations by the Commission’s 

Office of Credit Ratings, in which it was requested to produce documents and records to assist the 

Commission staff with identifying potential compliance deficiencies and violations of the federal 

securities laws.  By failing to maintain and preserve required records relating to its credit rating 

activities, KBRA likely deprived the Commission of these off-channel communications in various 

investigations and during examinations. 

KBRA’s Violation 

25. As a result of the conduct described above, KBRA willfully2 violated Section 

17(a)(1) of the Exchange Act and Rule 17g-2(b)(7) thereunder, which requires each NRSRO, for a 

period of three years, to retain internal and external communications, including electronic 

communications, received and sent by the NRSRO and its employees that relate to initiating, 

determining, maintaining, monitoring, changing, or withdrawing a credit rating.  

 
2 “Willfully,” for purposes of imposing relief under Section 15E(d) of the Exchange Act, 

“‘means no more than that the person charged with the duty knows what he is doing.’” Wonsover 

v. SEC, 205 F.3d 408, 414 (D.C. Cir. 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. 

Cir. 1949)). There is no requirement that the actor “also be aware that he is violating one of the 

Rules or Acts.” Tager v. SEC, 344 F.2d 5, 8 (2d Cir. 1965). The decision in The Robare Group, 

Ltd. v. SEC, which construed the term “willfully” for purposes of a differently structured 

statutory provision, does not alter that standard. 922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting 

forth the showing required to establish that a person has “willfully omit[ted]” material 

information from a required disclosure in violation of Section 207 of the Investment Advisers 

Act of 1940). 



 

6 

 

KBRA’s Remedial Efforts 

26. In determining to accept the Offer, the Commission considered remedial acts 

promptly undertaken by KBRA and cooperation afforded the Commission staff.  In April 2022, 

prior to being contacted by Commission staff, KBRA enacted the Electronic Communications 

Policy to comply with NRSRO recordkeeping requirements.  In May 2023, KBRA deployed Slack 

as an additional communications platform and amended the Electronics Communications Policy 

accordingly. 

Undertakings 

27. As discussed, prior to this action, KBRA enacted the Electronic Communications 

Policy, enhanced its training on approved business communications methods, made significant 

changes to technology available to employees, and began implementing technologies to facilitate 

compliance with NRSRO recordkeeping requirements, including on personal devices. In addition, 

KBRA has undertaken to do the following: 

28. Independent Compliance Consultant. 

a. KBRA shall retain, within thirty (30) days of the entry of this Order, the 

services of an independent compliance consultant (“Compliance Consultant”) that is not 

unacceptable to the Commission staff. The Compliance Consultant’s compensation and 

expenses shall be borne exclusively by KBRA. 

b. KBRA will oversee the work of the Compliance Consultant.  

c. KBRA shall provide to the Commission staff, within sixty (60) days of the 

entry of this Order, a copy of the engagement letter detailing the Compliance Consultant’s 

responsibilities, which shall include a comprehensive compliance review as described 

below. KBRA shall require that, within ninety (90) days of the date of the engagement 

letter, the Compliance Consultant conduct: 

i. A comprehensive review of KBRA’s supervisory, compliance, and 

other policies and procedures designed to ensure that internal and 

external communications, including electronic communications, 

received and sent by KBRA and its employees that relate to credit rating 

activities are preserved in accordance with the requirements of the 

federal securities laws and NRSRO regulations and an assessment of 

KBRA’s framework for addressing instances of non-compliance among 

its employees. 

ii. A comprehensive review of training conducted by KBRA to ensure 

personnel are complying with the requirements regarding the 

preservation of communications relating to credit rating activities, 



 

7 

 

including those found on personal devices, in accordance with the 

federal securities laws and NRSRO regulations. 

iii. An assessment of any surveillance measures implemented by KBRA to 

ensure compliance, on an ongoing basis, with the requirements 

regarding the preservation of communications relating to credit rating 

activities, including those found on personal devices, in accordance with 

the federal securities laws and NRSRO regulations. 

iv. An assessment of the technological solutions that KBRA has begun 

implementing to facilitate compliance with the requirements regarding 

the preservation of communications relating to credit rating activities in 

accordance with the federal securities laws and NRSRO regulations, 

including an assessment of the likelihood that KBRA personnel will use 

the technological solutions going forward and a review of the measures 

employed by KBRA to track employee usage of new technological 

solutions. 

v. An assessment of the measures used by KBRA to prevent the use of 

unauthorized communications methods for communications relating to 

credit rating activities by employees. This assessment should include, 

but not be limited to, a review of the firm’s policies and procedures to 

ascertain if they provide for any significant technology and/or 

behavioral restrictions that help prevent the risk of the use of 

unapproved communications methods on personal devices to send or 

receive communications relating to credit rating activities in 

contravention of the requirements of the federal securities laws and 

NRSRO regulations. 

vi. A review of KBRA’s electronic communications surveillance routines 

to ensure the preservation of electronic communications relating to 

credit rating activities, including those found on personal devices, in 

accordance with the federal securities laws and NRSRO regulations, are 

incorporated into KBRA’s overall communications surveillance 

program. 

vii. A comprehensive review of the framework adopted by KBRA to 

address instances of non-compliance by KBRA personnel with KBRA’s 

policies and procedures concerning the use of approved 

communications methods, including on personal devices, for 

communications relating to credit rating activities in accordance with 

the federal securities laws and NRSRO regulations in the past.  This 

review shall include a survey of how KBRA determined which 

employees failed to comply with KBRA policies and procedures, the 



 

8 

 

corrective action carried out, an evaluation of who violated policies and 

why, what penalties were imposed, and whether penalties were handed 

out consistently across business lines and seniority levels. 

d. KBRA shall require that, within forty-five (45) days after completion of the 

review set forth in sub-paragraphs c.i through c.vii above, the Compliance Consultant shall 

submit a detailed written report of its findings to KBRA and to the Commission staff (the 

“Report”). KBRA shall require that the Report include a description of the review 

performed, the names of the individuals who performed the review, the conclusions 

reached, the Compliance Consultant’s recommendations for changes in or improvements to 

KBRA’s policies and procedures, and a summary of the plan for implementing the 

recommended changes in or improvements to KBRA’s policies and procedures. 

e. KBRA shall adopt all recommendations contained in the Report within 

ninety (90) days of the date of the Report; provided, however, that within forty-five (45) 

days after the date of the Report, KBRA shall advise the Compliance Consultant and the 

Commission staff in writing of any recommendations that KBRA considers to be unduly 

burdensome, impractical, or inappropriate. With respect to any recommendation that 

KBRA considers unduly burdensome, impractical, or inappropriate, KBRA need not adopt 

such recommendation at that time, but shall propose in writing an alternative policy, 

procedure, or disclosure designed to achieve the same objective or purpose.  

f. As to any recommendation concerning KBRA’s policies or procedures on 

which KBRA and the Compliance Consultant do not agree, KBRA and the Compliance 

Consultant shall attempt in good faith to reach an agreement within sixty (60) days after 

the date of the Report. Within fifteen (15) days after the conclusion of the discussion and 

evaluation by KBRA and the Compliance Consultant, KBRA shall require that the 

Compliance Consultant inform KBRA and the Commission staff in writing of the 

Compliance Consultant’s final determination concerning any recommendation that 

KBRA considers to be unduly burdensome, impractical, or inappropriate. KBRA shall 

abide by the determinations of the Compliance Consultant and, within sixty (60) days 

after final agreement between KBRA and the Compliance Consultant or final 

determination by the Compliance Consultant, whichever occurs first, KBRA shall adopt 

and implement all of the recommendations that the Compliance Consultant deems 

appropriate. 

g. KBRA shall cooperate fully with the Compliance Consultant and shall 

provide the Compliance Consultant with access to such of KBRA’s files, books, records, 

and personnel as are reasonably requested by the Compliance Consultant for review.  

h. KBRA shall not have the authority to terminate the Compliance Consultant 

or substitute another compliance consultant for the initial Compliance Consultant, 

without the prior written approval of the Commission staff. KBRA shall compensate the 



 

9 

 

Compliance Consultant and persons engaged to assist the Compliance Consultant for 

services rendered under this Order at their reasonable and customary rates. 

i. For the period of engagement and for a period of two years from completion 

of the engagement, KBRA shall not (i) retain the Compliance Consultant for any other 

professional services outside of the services described in this Order; (ii) enter into any other 

professional relationship with the Compliance Consultant, including any employment, 

consultant, attorney-client, auditing or other professional relationship; or (iii) enter, without 

prior written consent of the Commission staff, into any such professional relationship with 

any of the Compliance Consultant’s present or former affiliates, employers, directors, 

officers, employees, or agents acting in their capacity as such.  

j. The Report and related written communications of the Compliance 

Consultant will likely include confidential financial, proprietary, competitive business or 

commercial information. Public disclosure of the Report could discourage cooperation, 

impede pending or potential government investigations or undermine the objectives of 

the reporting requirement. For these reasons, among others, the Report and the contents 

thereof are intended to remain and shall remain non-public, except (1) pursuant to court 

order, (2) as agreed to by the parties in writing, (3) to the extent that the Commission 

determines in its sole discretion that disclosure would be in furtherance of the 

Commission’s discharge of its duties and responsibilities, or (4) is otherwise required by 

law. 

29. One-Year Evaluation. KBRA shall require the Compliance Consultant to assess 

KBRA’s program for the preservation, as required under the federal securities laws and NRSRO 

regulations, of communications relating to credit rating activities, including those found on 

personal devices, commencing one year after submitting the Report required by Paragraph 28.d 

above. KBRA shall require this review to evaluate KBRA’s progress in the areas described in 

Paragraphs 28.c.i-vii above. After this review, KBRA shall require the Compliance Consultant to 

submit a report (the “One Year Report”) to KBRA and the Commission staff and shall ensure 

that the One Year Report includes an updated assessment of KBRA’s policies and procedures 

with regard to the preservation of communications relating to credit rating activities (including 

those found on personal devices), training, surveillance programs, and technological solutions 

implemented in the prior year period. 

30. Reporting Discipline Imposed.  For two years following the entry of this Order, 

KBRA shall notify the Commission staff as follows upon the imposition of any discipline imposed 

by KBRA, including, but not limited to, written warnings, loss of any pay, bonus, or incentive 

compensation, or the termination of employment, with respect to any employee found to have 

violated KBRA’s policies and procedures concerning the preservation of communications relating 

to credit rating activities, including those found on personal devices: within ten (10) days of the 

imposition of such discipline. 



 

10 

 

31. Recordkeeping.  KBRA shall preserve, for a period of not less than six (6) years 

from the end of the fiscal year last used, the first two (2) years in an easily accessible place, any 

record of compliance with these undertakings. 

32. Deadlines.  For good cause shown, the Commission staff may extend any of the 

procedural dates related to the undertakings. Deadlines for procedural dates shall be counted in 

calendar days, except that if the last day falls on a weekend or federal holiday, the next business 

day shall be considered to be the last day. 

33. Certification. KBRA shall certify, in writing, compliance with the undertakings set 

forth above. The certification shall identify the undertakings, provide written evidence of 

compliance in the form of a narrative, and be supported by exhibits sufficient to demonstrate 

compliance. The Commission staff may make reasonable requests for further evidence of 

compliance, and Respondent agrees to provide such evidence.  The certification and supporting 

material shall be submitted to Judith Weinstock, Assistant Regional Director, Division of 

Enforcement, Securities and Exchange Commission, 100 Pearl Street, Suite 20-100, New York, 

New York 10004-2616, with a copy to the Office of Chief Counsel of the Enforcement Division, 

no later than sixty (60) days from the date of the completion of the undertakings.   

 

 In view of the foregoing, the Commission deems it appropriate, in the public interest, and 

for the protection of investors to impose the sanctions agreed to in Respondent KBRA’s Offer. 

 

 Accordingly, pursuant to Sections 15E(d) and 21C of the Exchange Act, it is hereby 

ORDERED that: 

 

A. Respondent KBRA cease and desist from committing or causing any violations and 

any future violations of Section 17(a)(1) of the Exchange Act and Rule 17g-2(b)(7) thereunder.   

B. Respondent KBRA is censured.   

C. Respondent KBRA shall pay civil penalties of $4,000,000 to the Securities and 

Exchange Commission for transfer to the general fund of the United States Treasury, subject to 

Exchange Act Section 21F(g)(3). Payment shall be made in the following installments: 

1. Due within 30 days of the entry of this Order: $600,000; 

2. Due within 90 days of the entry of this Order: $425,000; 

3. Due within 180 days of the entry of this Order: $425,000; 

4. Due within 270 days of the entry of this Order: $425,000; 

5. Due within 360 days of the entry of this Order: $425,000; 

6. Due within 450 days of the entry of this Order: $425,000; 

7. Due within 540 days of the entry of this Order: $425,000; 

8. Due within 630 days of the entry of this Order: $425,000; and 



 

11 

 

9. The remainder within 720 days after the entry of this Order. 

 

Payments shall be applied first to post-order interest, which accrues pursuant to 31 U.S.C. 

§ 3717. Prior to making the final payment set forth herein, Respondent shall contact the staff of 

the Commission for the amount due. If Respondent fails to make any payment by the date agreed 

and/or in the amount agreed according to the schedule set forth above, all outstanding payments 

under this Order, including post-order interest, minus any payments made, shall become due and 

payable immediately at the discretion of the staff of the Commission without further application 

to the Commission. 

Payment must be made in one of the following ways:   

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

KBRA as a Respondent in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Sheldon Pollock, Associate Regional 

Director, Division of Enforcement, Securities and Exchange Commission, 100 Pearl Street, Suite 

20-100, New York, New York 10004-2626.  

D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes. To preserve 

the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it 

shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

http://www.sec.gov/about/offices/ofm.htm


 

12 

 

in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

E. Respondent shall comply with the undertakings enumerated in Section III above. 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

       Secretary