Standard & Poor's Ratings Services agreed to pay a total of $77 million to settle federal securities law violations involving its ratings of commercial mortgage-backed securities to the SEC, and to the offices of the New York and Massachusetts attorneys general.
The Securities and Exchange Commission announced the settlement in a news release Wednesday, in which S&P agreed to pay $58 million to the SEC, $12 million to the New York attorney general's office and $7 million to the Massachusetts attorney general's office as a result of a series of federal securities law violations.
Among the violations was a misrepresentation of the type of methodology used to rate six conduit fusion CMBS transactions and two preliminary ratings issuances in 2011, according to the SEC. As part of that settlement, S&P has agreed not to rate conduit fusion CMBS for one year. A conduit fusion deal combines a diversified pool of loans, with one or more investment-grade-rated large loans.
“Investors rely on credit rating agencies like Standard & Poor's to play it straight when rating complex securities like CMBS,” said Andrew J. Ceresney, director of the SEC enforcement division, in the news release. “But Standard & Poor's elevated its own financial interests above investors by loosening its rating criteria to obtain business and then obscuring these changes from investors. These enforcement actions, our first-ever against a major ratings firm, reflect our commitment to aggressively policing the integrity and transparency of the credit ratings process.”
S&P spokeswoman Catherine Mathis said in an e-mailed news release that the company “is pleased to have concluded these matters. It takes compliance with regulatory obligations very seriously and continues to make investments in people and technology to strengthen its controls and risk management throughout the organization.” The company had no further comment.
Officials at the SEC could not be immediately reached for further comment.