| July 23
July 23 The parent of Standard & Poor's, which
is defending against a $5 billion lawsuit by the federal
government over its credit ratings, said on Wednesday it may
soon also face U.S. Securities and Exchange Commission charges
over another set of ratings.
In a regulatory filing, McGraw-Hill Financial Inc
said it received a "Wells notice" on July 22 indicating the SEC
is weighing filing civil charges for alleged securities law
violations over S&P's ratings of six commercial mortgage-backed
securities transactions issued in 2011.
A Wells notice indicates the agency believes civil charges
may be warranted, and gives a recipient a last chance to mount a
S&P said it has been cooperating with the agency, and will
continue to do so.
Catherine Mathis, an S&P spokeswoman, said it has been
reported the SEC was examining its decision in 2011 to "pull"
ratings of a CMBS transaction.
She added that the $5 billion lawsuit, brought last year by
the U.S. Department of Justice, does not include CMBS
S&P suffered a huge blow to its commercial mortgage-backed
securities business in 2011, after a major error on a $1.5
billion deal caused its market share to shrink.
In July of that year, the rater discovered a mistake in its
methodology, forcing it to withdraw ratings from a significant
CMBS bond offer by Goldman Sachs Group Inc and Citigroup
In November 2012, SEC examiners homed in on one of the three
largest U.S. credit rating agencies, saying the firm changed a
key financial ratio for asset-backed securities without telling
the public, and failed to consistently apply its rating
The rating agency, which was not identified, "may have been
influenced by market share and business considerations in its
application of the methodology used to rate asset-backed
securities," the SEC wrote in a report summarizing its recent
examinations of the agencies.
S&P was accused in the Justice Department lawsuit of helping
fuel the financial crisis, and causing losses for federally
insured banks and credit unions, by inflating ratings to boost
fees from issuers, and being slow to downgrade souring mortgage
The rating agency also faces related lawsuits by many U.S.
states. Its main U.S. rivals, Moody's Investors Service and
Fitch Ratings, do not face similar lawsuits.
If the SEC decides to charge S&P, it will mark the first
time the agency has ever sued a major credit-rating firm.
In an April interview with Reuters, SEC Enforcement Director
Andrew Ceresney said his agency was pursuing new actions against
rating agencies over shoddy disclosures and other violations of
(Reporting by Jonathan Stempel in New York and Sarah N. Lynch
in Washington, D.C. Editing by Andre Grenon)