The Securities and Exchange Commission told Moody's Investors Service that it may face enforcement action for misleading regulators in a license application, an escalation of the pressure on a major player in the credit crisis.
In its annual report released late Friday, Moody's Corp., the parent of the New York rating firm, disclosed that the SEC is considering a recommendation to start an administrative case against Moody's based on a 2007 application to the SEC to remain an officially recognized credit-rating firm. The firm said it had received a so-called Wells Notice in March.
The SEC, according to Moody's filing, is arguing that Moody's failed to adhere to policies it detailed in its application.
The threat of an SEC case is the latest setback for Moody's, which has been buffeted by criticisms about its failure to properly rate billions of dollars worth of mortgage-related securities and other complex debt products.
In this case, the SEC is focusing on Moody's approach to problems it discovered in its models for rating certain exotic European debt products, which weren't mortgage-related. Allegations at the time were that Moody's failed to immediately downgrade securities because it would have been embarrassing to the firm, or possibly hurt certain market participants. This contradicted Moody's stated policy that no factor other than a bond's credit worthiness should dictate its rating.
No comments:
Post a Comment