(Reuters) - Credit rating agency DBRS Inc will pay $5.81 million to settle U.S. Securities and Exchange Commission charges that after the financial crisis, it failed to monitor the accuracy of its mortgage securities ratings as it had promised, the regulator said on Monday.
According to the SEC, DBRS from 2009 to 2011 misrepresented that it would conduct monthly reviews of all its ratings on U.S. residential mortgage-backed securities and re-securitized real estate mortgage investment conduits, including quantitative analyses and reviews by a surveillance committee.
The SEC said New York-based DBRS lacked the staffing and technology to adhere to the surveillance methodology it published in April 2009, and that the committee reviewed only a “limited” number of the ratings.
Investors, politicians and regulators have pushed rating agencies to tighten oversight, after faulting them for fueling the financial crisis by inflating ratings or failing to downgrade risky or illiquid securities fast enough.
“Rating agencies play a critical role in the capital markets and have an obligation to investors to comply with their published rating and surveillance methodologies,” SEC enforcement chief Andrew Ceresney said in a statement. “Lack of resources is no excuse for failing to conduct surveillance promised in various SEC filings and other public documents.”
Without admitting or denying wrongdoing, DBRS agreed in the settlement to pay a $2.925 million civil fine, give up $2.742 million of rating surveillance fees from 2009 to 2011, and pay $147,482 in interest. It also agreed to be censured and hire an independent consultant to improve its internal controls.
“The company takes its regulatory obligations very seriously and is committed to providing independent credit ratings opinions of the highest quality,” DBRS said in a statement about the settlement.
DBRS Inc is a unit of Toronto-based DBRS Ltd, which was bought this year by a consortium led by Carlyle Group LP and private equity firm Warburg Pincus. It competes with rating agencies such as Moody’s Investors Service, Standard & Poor’s and Fitch Ratings.
Reporting by Jonathan Stempel in New York; Editing by David Gregorio