06 Sep 2018
The US Securities and Exchange Commission (SEC) has fined Moody’s, one of the nation’s largest credit ratings agencies, a total of $16.25 million over rating deficiencies.
According to the SEC, Moody’s failed to document an ‘effective internal control structure’ regarding models that it had outsourced and used in rating US residential mortgage-backed securities (RMBS) from 2010 – 2013.
In addition, in 54 instances, the agency failed to document its rationale for issuing final RMBS ratings that deviated materially from model-implied ratings. It did not admit or deny the SEC’s charges.
As part of the deal, Moody’s agreed to pay $15 million to settle charges of internal controls failures involving the RMBS.
Separately, it agreed to pay $1.25 million and to review its policies, procedures, and internal controls regarding rating symbols.
Antonia Chion, Associate Director of the SEC’s Division of Enforcement, said:
“Investors expect and the law requires that symbols used by rating agencies be clearly defined and consistently applied.
“Today’s proceeding is the SEC’s first enforcing the Universal Ratings Symbol requirement and we will continue to pursue failures that render rating symbols unclear or inconsistent.”
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