Lawmaker demands Moody's explain reported error

WASHINGTON (Reuters) - A senior Democratic lawmaker on Wednesday asked Moody's Corp (MCO.N) to explain a reported coding error that may have led the credit ratings agency to incorrectly assign triple-A ratings to some complex debt products.

Rep. Paul Kanjorski of Pennsylvania, chairman of a House subcommittee on capital markets, said the incident deserves close scrutiny and he expected securities regulators to review it and hold all parties accountable.

Shares of Moody's fell sharply on Wednesday after the Financial Times reported a computer coding error at Moody's affected ratings on its so-called constant proportion debt obligations.

"The news today about Moody's greatly concerns me," Kanjorski said in a statement to Reuters. "Moody's must come forward immediately to explain its actions and clarify what happened."

Kanjorski, whose subcommittee is studying industry practices in light of the subprime mortgage crisis, said if the error affected U.S. investors, the Securities and Exchange Commission should examine the situation.

"I also want to know when the commission learned of these problems and whether it might have affected Moody's application under the 2006 law for continued designation as a Nationally Recognized Statistical Rating Organization (NRSRO)," he said.

The SEC, which is responsible for ensuring that credit ratings agencies make adequate disclosures, is considering whether additional industry regulations are needed.

Last year, the SEC gained additional oversight powers over the credit rating agencies through a 2006 law aimed at increasing competition in the industry.

(Reporting by John Poirier, editing by Gary Crosse)