Hong Kong SFC Moody’s China Action

On 17 October 2017, court dismissed Moody’s leave to appeal to the final court of appeal.

As Moody’s misconduct can be established on basis that preparation and publication of
the Report, formed part and parcel of the carrying on of the business of credit ratings.


On 5 April, HK SFC fined Moody's $11mn for reporting China red flags.


  • Follows special report on red flags for emerging-market companies: a focus on China.
  • Moody's July 2011 report purportedly identified risk factors of mainland rated issuers.
  • the action follows determination of the securities and futures appeals tribunal (SFAT).

Alleged Violations

  • Failed to provide explanations for the red flags assigned by it to the rated companies.
  • Painted unfair, unclear and misleading picture of companies in justifying the red flags.
  • Chose to list red flags assigned to each company, and highlight 6 with largest number.
  • Classed “negative outliers” to make report actionable, despite assessment of analysts,
    showing no significant correlation between number of flags and companies’ credit risk.


  • In publishing, Moody’s was doing regulated activity of providing credit rating services.
  • As preparation and publication of report was part of the credit rating service provided.
  • Found substantive breaches of principles of code of conduct to act honestly and fairly.
  • Determined Moody’s should have public reprimand and a pecuniary penalty of $11mn.