logo
Plus   Neg
Share
Email

SEC : Moody's To Pay $16 Mln Over Flawed Credit Ratings

The U.S. Securities and Exchange Commission said Tuesday that Moody's Investors Service Inc., one of the nation's largest credit ratings agencies, has agreed to pay a total of $16.25 million in penalties to settle charges involving internal control failures and failing to clearly define and consistently apply credit rating symbols. It marks the first time the SEC has filed an enforcement action involving rating symbol deficiencies.

Moody's agreed to pay $15 million to settle charges of internal controls failures involving models it used in rating U.S. residential mortgage-backed securities or RMBS and will retain an independent consultant to assess and improve its internal controls.

Moody's separately agreed to pay $1.25 million and to review its policies, procedures, and internal controls regarding rating symbols. Moody's did not admit or deny the SEC's charges.

According to the SEC, Moody's failed to establish and document an effective internal control structure as to models that Moody's had outsourced from a corporate affiliate and used in rating RMBS from 2010 through 2013.

Moreover, Moody's failed to maintain and enforce existing internal controls that should have been applied to the models. Ultimately, Moody's corrected more than 650 RMBS ratings with a notional value exceeding $49 billion, due, in part, to errors in the models. Also, in 54 instances, Moody's failed to document its rationale for issuing final RMBS ratings that deviated materially from model-implied ratings.

In the SEC's order relating to rating symbols, for 26 ratings of securities known as "combo notes" with a total notional value of about $2 billion, Moody's assigned ratings to combo notes in a manner that was inconsistent with other types of securities that used the same rating symbols.

For comments and feedback contact: editorial@rttnews.com

Business News

Editors Pick
Workers at Volkswagen AG's only factory in the U.S. have voted against forming a factory-wide union, dealing yet another blow to efforts by the United Auto Workers union to organize plants owned by foreign automakers. According to preliminary results announced on Friday, 833 workers at Volkswagen's plant in Chattanooga, Tennessee, reportedly voted against union representation. International Business Machines Corp. and Cúram Software, acquired by the tech giant in 2011, have agreed to pay $14.8 million to settle alleged violations of the False Claims Act, the Justice Department said in a statement. According to the DOJ, IBM and Cúram allegedly made material misrepresentations to the State of Maryland during a contract award process in 2011 and 2012. Lyrics website Genius Media Group Inc. has accused Google of copying some song lyrics directly from its website without permission, for the tech giant's search results. Genius told the Wall Street Journal that it is seeing falling traffic for the past several years as Google has been publishing lyrics in search pages on its own platform, with some of them lifted directly from the Genius website.
Follow RTT