SEC Announces Charges Against Standard & Poor’s for Fraudulent Ratings Misconduct

Written by: Robert Heim

On January 21, 2015, the Securities and Exchange Commission announced a series of federal securities law violations by Standard & Poor’s Ratings Services involving fraudulent misconduct in its ratings of certain commercial mortgage-backed securities (CMBS).  S&P agreed to pay more than $58 million to settle the SEC’s charges, plus an additional $19 million to settle parallel cases announced today by the New York Attorney General’s office ($12 million) and the Massachusetts Attorney General’s office ($7 million). The SEC issued three orders instituting settled administrative proceedings against S&P.  One order, in which S&P made certain admissions, addressed S&P’s practices in its conduit fusion CMBS ratings methodology.  The SEC alleged that S&P’s public disclosures affirmatively misrepresented that it was using one approach when it actually used a different methodology in 2011 to rate six conduit fusion CMBS transactions and issue preliminary ratings on two more transactions.  As part of this settlement, S&P agreed to take a one-year timeout from rating conduit fusion CMBS.

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