Standard & Poor's may face SEC charges over ratings

Wed Jul 23, 2014 7:05pm EDT
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By Jonathan Stempel and Sarah N. Lynch

(Reuters) - The parent of Standard & Poor's, which is defending against a $5 billion lawsuit by the federal government over its credit ratings, said on Wednesday it may soon also face U.S. Securities and Exchange Commission charges over another set of ratings.

In a regulatory filing, McGraw-Hill Financial Inc said it received a "Wells notice" on July 22 indicating the SEC is weighing filing civil charges for alleged securities law violations over S&P's ratings of six commercial mortgage-backed securities transactions issued in 2011.

A Wells notice indicates the agency believes civil charges may be warranted, and gives a recipient a last chance to mount a defense.

S&P said it has been cooperating with the agency, and will continue to do so.

Catherine Mathis, an S&P spokeswoman, said it has been reported the SEC was examining its decision in 2011 to "pull" ratings of a CMBS transaction.

She added that the $5 billion lawsuit, brought last year by the U.S. Department of Justice, does not include CMBS securities.

S&P suffered a huge blow to its commercial mortgage-backed securities business in 2011, after a major error on a $1.5 billion deal caused its market share to shrink.

In July of that year, the rater discovered a mistake in its methodology, forcing it to withdraw ratings from a significant CMBS bond offer by Goldman Sachs Group Inc and Citigroup Inc.   Continued...

A view shows the Standard & Poor's building in New York's financial district February 5, 2013.  REUTERS/Brendan McDermid