ESMA Slaps This Fintech with €420K Fine for Name-Dropping Violations

The
European Securities and Markets Authority (ESMA) has imposed a
€420,000 fine on Modefinance for improperly suggesting the regulator had
endorsed its credit rating activities, the EU financial markets watchdog
announced Monday.

ESMA Fines Modefinance
€420,000 for Misleading Statements

The Italian
credit rating agency published statements on its websites between September
2018 and October 2021 claiming ESMA had “certified” or
“validated” models used in its scoring and credit rating activities,
according to the regulator’s findings.

Verena Ross, the Chairwoman of ESMA

“Modefinance
used ESMA’s name to incorrectly suggest ESMA’s endorsement of its credit rating
activities,” said Verena Ross, ESMA Chairwoman. “This could mislead
investors and could have an impact on the proper functioning of EU financial
markets.”

ESMA
determined the breach of the Credit Rating Agencies Regulation resulted from
negligence by Modefinance. The regulator considered both aggravating and
mitigating factors in calculating the fine amount and issued a public notice
alongside the monetary penalty.

The Credit
Rating Agencies Regulation explicitly prohibits firms from using ESMA’s name in
ways that indicate or suggest endorsement or approval of credit ratings or
related activities.

Recent Regulatory Actions

ESMA
released detailed
guidelines in February 2025
that establish knowledge and competency
requirements for staff at crypto-asset service providers, representing an
important development in the professionalization of the crypto industry under
the MiCA regulatory framework. The consultation document outlines minimum
qualification standards and ongoing professional development obligations for
employees who provide crypto-asset information and advice to clients.

In a
separate initiative, ESMA
has developed a strategy to transition from the current T+2 settlement cycle to
T+1 by 2027
, effectively reducing the settlement timeframe by 50%. This
planned change aims to boost market efficiency, mitigate risks, and bring EU
practices in line with global standards, ultimately enhancing the efficiency of
post-trade processes across European markets.

According
to ESMA’s
annual analysis examining data from 386 firms across 30 EU and EEA
jurisdictions
, Cyprus hosts 20% of all firms providing cross-border
investment services in the region. This concentration substantially exceeds
other financial centers, with Luxembourg and Germany following at 15% and 14%
respectively. The distribution of retail clients, however, shows a different
pattern, with Germany leading at approximately 1.63 million retail clients
receiving cross-border investment services, representing about 20% of the 8
million total clients identified in the study.

The
European Securities and Markets Authority (ESMA) has imposed a
€420,000 fine on Modefinance for improperly suggesting the regulator had
endorsed its credit rating activities, the EU financial markets watchdog
announced Monday.

ESMA Fines Modefinance
€420,000 for Misleading Statements

The Italian
credit rating agency published statements on its websites between September
2018 and October 2021 claiming ESMA had “certified” or
“validated” models used in its scoring and credit rating activities,
according to the regulator’s findings.

Verena Ross, the Chairwoman of ESMA

“Modefinance
used ESMA’s name to incorrectly suggest ESMA’s endorsement of its credit rating
activities,” said Verena Ross, ESMA Chairwoman. “This could mislead
investors and could have an impact on the proper functioning of EU financial
markets.”

ESMA
determined the breach of the Credit Rating Agencies Regulation resulted from
negligence by Modefinance. The regulator considered both aggravating and
mitigating factors in calculating the fine amount and issued a public notice
alongside the monetary penalty.

The Credit
Rating Agencies Regulation explicitly prohibits firms from using ESMA’s name in
ways that indicate or suggest endorsement or approval of credit ratings or
related activities.

Recent Regulatory Actions

ESMA
released detailed
guidelines in February 2025
that establish knowledge and competency
requirements for staff at crypto-asset service providers, representing an
important development in the professionalization of the crypto industry under
the MiCA regulatory framework. The consultation document outlines minimum
qualification standards and ongoing professional development obligations for
employees who provide crypto-asset information and advice to clients.

In a
separate initiative, ESMA
has developed a strategy to transition from the current T+2 settlement cycle to
T+1 by 2027
, effectively reducing the settlement timeframe by 50%. This
planned change aims to boost market efficiency, mitigate risks, and bring EU
practices in line with global standards, ultimately enhancing the efficiency of
post-trade processes across European markets.

According
to ESMA’s
annual analysis examining data from 386 firms across 30 EU and EEA
jurisdictions
, Cyprus hosts 20% of all firms providing cross-border
investment services in the region. This concentration substantially exceeds
other financial centers, with Luxembourg and Germany following at 15% and 14%
respectively. The distribution of retail clients, however, shows a different
pattern, with Germany leading at approximately 1.63 million retail clients
receiving cross-border investment services, representing about 20% of the 8
million total clients identified in the study.

This post is originally published on FINANCEMAGNATES.

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