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,, 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

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