SEC May Move Against S&P

The AP reports:

The staff of the Securities and Exchange Commission is considering recommending civil legal action against Standard & Poor’s over its rating of a 2007 collateralized debt offering.

Collateralized debt obligations, also known as C.D.O.’s, are securities tied to multiple underlying mortgage loans. The securities generally gain value if borrowers repay. But if borrowers default, investors lose money. Soured C.D.O.’s have been blamed for making the 2008 financial crisis worse. Ratings agencies have been accused of being lax in rating the investment.

The S.E.C. staff said it may recommend that the commission seek civil money penalties, disgorgement of fees or other actions.

S.& P. has been under fire for its recent downgrade of United States long-term debt, as well as several bad calls it made leading to the financial crisis and economic meltdown that began in 2008. The unit’s president stepped down last month.

McGraw-Hill Companies, which owns S.& P., said Monday that it received a so-called Wells notice from the S.E.C. on Thursday. A Wells notice is a warning to a company that the commission is considering enforcement action.

S.& P. said it has been cooperating with the commission and plans to continue cooperating on the matter.

Shares of McGraw-Hill ($MHP) are down about 1% today.

Posted by on September 26th, 2011 at 12:47 pm


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