UPDATE 1-SEC won't pursue fraud case against Moody's

* SEC says computer glitch caused inflated ratings

* Jurisdictional issue cited as reason not to pursue case

* Moody's shares surge on news, then fall back

NEW YORK, Aug 31 (Reuters) - The U.S. Securities and Exchange Commission decided against pursuing a fraud case against Moody's Corp (MCO.N) over a computer glitch that caused ratings on some European debt to be inflated.

In a statement on Tuesday, the regulator cited uncertainty about jurisdiction as the reason not to pursue the case against the parent of Moody's Investors Service.

Moody's spokesman Michael Adler did not immediately return a call seeking comment.

Shares of Moody's, which had been trading lower, surged on the news, and traded as much as 5.1 percent higher before retreating. In late afternoon trading, they were up 3 cents at $21.21 on the New York Stock Exchange. (Reporting by Jonathan Stempel in New York; Editing by Steve Orlofsky)