Credit Ratings Agencies :: Stock Broker Fraud Blog

Home > Credit Ratings Agencies

April 4, 2008

The Association For Financial Professionals Wants SEC Chairman Cox To Push Harder For Reform Of Credit Rating Agencies

The Association for Financial Professionals is calling on Securities and Exchange Commission head Christopher Cox to use the SEC’s authority to push for the reform of the credit rating agencies.

In a letter from the AFP, CEO Jim Kaitz urged Cox to use the authority that Congress granted the SEC with the Credit Rating Agency Reform Act of 2006, which gives the SEC permission to hold the agencies accountable for providing timely and accurate ratings.

SEC Director of Trading and Markets Erik Sirri has said, however, that although the SEC can hold credit rating systems accountable for their ratings, it does not have the authority to interfere with the way that agencies assign ratings, which is a key issue that is impacting the current subprime mortgage market crisis.

The AFP, made of 16,000 financial professionals, wants the SEC to tackle the abusive and unfair practices that negatively affect the legitimacy of the credit rating system.

Sirri says the SEC is developing rules that could address the prohibition or disclosure of conflicts of interests at the agencies and the need to have different ratings for structured financial products and corporate securities. The SEC is also thinking about removing references to credit rating agencies from its own rules (there are more than 30 references) so market participants won’t rely on the agencies as much.

SEC based on the SEC’s examination of the nine SEC-registered credit-rating agencies or nationally recognized statistical rating organizations (NRSROs).

The securities fraud lawyers at Shepherd Smith and Edwards have more than a century of combined experience in securities law and the securities industry. We have helped thousands of victims of investor fraud recoup their losses.

Related Web Resources:

AFP Urges SEC to Fully Exercise Oversight Authority Over Credit Rating Agencies, PRNewswire, March 24, 2008

List of Credit Ratings Agencies, DefaultRisk.com

Association for Financial Professionals

Posted by Shepherd Smith & Edwards | Permalink | Email This Post

Posted In: Credit Ratings Agencies

Bookmark:

October 11, 2007

Merrill Lynch, Morgan Stanley and Bear Stearns Suffer Losses as Ratings Agencies Are Grilled over Sub-prime's

Merrill Lynch will soon report third quarter earnings which analysts have revised downward. An analyst at competitor Goldman Sachs says that Merrill’s earnings for the third quarter will be about $1.80 per share, down from $1.95 and lowered Merrill's stock price target to $94 from $108. The Goldman analyst predicted that Merrill will have $4 billion in write-downs, primarily from the fixed income division, resulting in a net loss of $1.5 billion for the quarter.

Other analysts' expectations were even even lower: Fox Pitt Kelton's analyst lowered earnings per share estimate for Merrill to $1.20, from a previous estimate of $1.91, “while noting that forecasting confidence is low in periods such as these.” He also expected the firm to experience $3.5 billion “in gross negative marks and realized losses” on leveraged loans, CDOs, and mortgages resulting in $2.2 billion in net losses and attributes the more positive net loss estimate to “$700 million in hedging gains; $500 million in loan fees; and $100 million in gains on liability marks.”

Morgan Stanley reported last week that it suffered a 17 percent drop in profit compared to the third quarter last year, earning $1.44, about ten cents below analysts’ estimates, with loan losses of $1 billion the culprit.

Bear Stearns has been center stage in mortgage related investment problems which have hit the investment community. That firm reported last week that it experienced a 61 percent drop in profits compared to the third quarter last year. This was mostly caused by multi-million dollar losses in mortgage focused hedge funds.

Meanwhile, Goldman Sachs, beat all analyst’s earnings per share predictions by more than $1.50, with $6.13 earnings per share in the third quarter, claiming that credit hedging had mitigated the firms loss. Lehman Brothers reported better than expected earnings of $1.54 per share despite $700 million in losses related to the credit crunch.

In the wake of the mortgage backed securities meltdown, Congress is investigating credit rating agencies over how and why ratings on such securities failed to reflect the danger. The SEC Chairman testified that the SEC is examining whether agencies including Moodys Investors Service and Standard & Poors were “unduly influenced” by issuers and underwriters that paid for the credit ratings. A union pension fund is suing the Moody’s credit rating agency over its “excessively high ratings” of bonds backed by subprime mortgages.

Shepherd Smith and Edwards represents investors nationwide in claims against securities firms. We have represented investors in more than 1,000 securities cases, including against Merrill Lynch, Morgan Stanley and Bear Stearns. To learn whether might assist you with a claim contact us to arrange a free consultation with one of our attorneys.

Posted by Shepherd Smith & Edwards | Permalink | Email This Post

Posted In: Bear Stearns , Credit Ratings Agencies , Merrill Lynch , Morgan Stanley

Bookmark:

September 24, 2007

SEC Investigates Credit Rating Agencies’ Policies Regarding Debt-Related Securities

The SEC and NY Attorney General Andrew Cuomo are conducting a probe of credit rating agencies to examine their policies regarding debt-related securities.

Standard & Poor’s (S & P), Fitch Ratings Inc., and Moody’s Investors Service have all been contacted by the SEC and questioned about their procedures and policies on rating collateral debt obligations (CDOs) and residential mortgage-backed securities (RMBS).

On September 5, before the House Financial Services Committee, SEC Market Regulation Director Erik R. Sirri announced that the probe was taking place. He also said that the commission was examining the advisory services that agencies might have provided to mortgage originators and underwriters, as well as rating performance, disclosures, and what the designated ratings signify.

Sirri also informed the committee members that the SEC was looking at two kinds of conflicts of interest at the agencies. One conflict deals with how agencies are paid—either by the customers that are rated or the underwriters. The second conflict deals with the significance of the ratings and the agencies’ methods.

The investigation could result in investors and others filing lawsuits against the firms. Also on September 5, Charles McCreevy, the European Union Internal Market Commissioner, said that the rating agencies worked too slowly to downgrade structured financial instruments. He also mentioned the conflicts of interest. He wants the roles of the agencies to be more clear-cut.

The New York Attorney General’s office has sent subpoenas to the agencies. S & P and Moody have promised to cooperate with the investigation.

If you are an investor that has lost money because of the inappropriate actions of a credit rating agency, a brokerage firm, or any other company or individual affiliated with the securities industry, you should speak with a securities litigation law firm that is experienced in successfully handling securities fraud cases and can help you recover your investment.

Shepherd Smith and Edwards has helped thousands of investors in the United States recover their loss. Contact Shepherd Smith and Edwards today for your free consultation.

Related Web Resources:

SEC to review role of credit rating agencies, CNN.com, September 7, 2007

Standard and Poor's

Moody's Investors Service

FitchRatings Inc.

Attorney General Andrew Cuomo, New York State

U.S. Securities and Exchange Commission

Posted by Shepherd Smith & Edwards | Permalink | Email This Post

Posted In: Credit Ratings Agencies

Bookmark: