By Aruna Viswanatha and Sarah N. Lynch
WASHINGTON, July 26 The U.S. Department of
Justice and securities regulators are probing potential
violations by credit-rating agency Standard & Poor's in
connection with its ratings of structured products, the company
said on Thursday.
McGraw Hill's S&P disclosed the investigations by
the civil division of the Department of Justice and the U.S.
Securities and Exchange Commission in a securities filing.
McGraw Hill said in the filing that it has been in talks
with the government about why it believes charges should not be
brought against S&P or its employees.
S&P has previously disclosed an SEC probe into its ratings
of a specific structured product known as "Delphinus CDO
It is unclear whether the SEC's investigation into the
ratings of Delphinus, a collateralized debt obligation that
soured during the financial crisis, is the same as the SEC and
DOJ probes that were disclosed by the company on Thursday.
Edward Sweeney, a spokesman for S&P, declined to comment
beyond the filing.
If the SEC and DOJ ultimately file charges against S&P, it
would mark the first enforcement action against any of the major
big three credit-rating agencies, which include S&P, Moody's
and Fimalac SA's Fitch Ratings.
Credit-rating agencies have been blamed for helping fuel the
2007-2009 financial crisis after they assigned glowing ratings
to complex products like CDOS, which are bundles of securitized
mortgages. Many of those mortgage-backed securities consisted of
subprime loans that went bad as homeowners defaulted.
Critics have complained about a lack of cases against
credit-raters for their roles in the financial crisis.
Earlier this month, Mizuho Financial Group settled
civil charges with the SEC alleging that its U.S. unit obtained
false credit ratings on the 2007 Delphinus CDO deal, which S&P
S&P was not charged by the SEC in that case, but the agency
said its investigation was ongoing.