UPDATE 2-Moody's says got Wells Notice from SEC

* SEC sent Moody’s Wells Notice in March

* SEC says 2007 application was misleading

* Moody’s says it disagrees (Adds details on case, background on Buffett, Goldman)

NEW YORK, May 7 (Reuters) - Moody's Corp MCO.N disclosed on Friday that its credit rating unit could face enforcement action from the U.S. Securities and Exchange Commission for allegedly misleading regulators in a 2007 application to remain a nationally recognized rating agency.

Moody’s said in a filing late on Friday that the SEC is mulling starting an administrative case and “cease-and-desist” proceedings, and that a so-called “Wells Notice” was received from the SEC on March 18.

Regulators send Wells Notices to firms or people to alert them of the likelihood that the government will file an enforcement action against them. Companies or people being investigated have the right to argue why they should not be charged by filing a “Wells submission.”

According to Moody’s filing, the SEC claims the Moody’s description of its procedures for determining credit ratings was “false and misleading” because of Moody’s own finding that a policy had been violated internally.

In the filing, Moody’s said it disagrees with the SEC and said it had sent a response explaining why its application was accurate and why it believes enforcement is uncalled for.

The SEC is specifically looking at Moody’s response to its own finding that in April 2007, members of a European rating surveillance committee had violated its code of conduct.

Moody's relatively short six-week lag in disclosing that it got a Wells Notice stands in sharp contrast to Goldman Sachs Group Inc's GS.N failure to disclose that it had received a Wells Notice in September and was facing potential civil liability in the Abacus CDO case. Those facts came to light only after the SEC announced fraud charges last month.

At the annual meeting of Berkshire Hathaway Inc BRKa.NBRKb.N last week, Warren Buffett defended his firm's maintenance of its stake in Moody's, which is now below 14 percent. Buffett also said that the agencies "made the same" mistake that he, politicians, mortgage brokers and others did in overestimating the health of the housing market.

Like rival Standard & Poor's, owned by McGraw-Hill Cos Inc MHP.N, Moody's Investors Service has been criticized for failing to spot the problems that led to the global financial crisis, and it is facing increased regulation.

Moody’s acknowleged in the filing that credit rating agencies “are the subject if intense scrutiny” following the U.S. subprime mortgage crisis.

Moody’s also said in the filing that it is facing litigation from market participants related to how the securities it has rated have performed and said the cost of defending itself “has significantly increased”.

In the filing, Moody’s said its Wall Street Analytics unit was co-operating with an SEC and U.S. Department of Justice investigation into services it provided to financial institutions regarding the valuations of some of the financial instruments they held.

The filing did not provide details and a spokesperson for Moody’s could not immediately be reached for comment.

In February, Moody’s warned of rising compliance costs. (Reporting by Phil Wahba; Editing by Gary Hill)