Standard & Poor's may face securities fraud charges for ratings given to six commercial mortgage-backed securities issued in 2011, the credit rating company said.
The potential civil lawsuit is the latest legal issue for the credit rating company, which along with its competitors have faced intense regulatory scrutiny following the financial crisis.
S&P, a unit of McGraw Hill, disclosed on Wednesday that it had received a Wells notice from the Securities and Exchange Commission indicating its enforcement division staff intended to recommend that the five member commission authorize civil charges against the company.
"S&P has been co-operating with the commission in this matter and intends to continue to doso," it said in a statement. S&P said the Wells notice related to the six securities "and public disclosure made by S&P regarding those ratings thereafter".
A Wells notice is no guarantee that the SEC will bring charges. In 2011 the SEC sent a Wells notice to S&P over its ratings of a collateralize debt obligation called Delphinus. No charges were brought against S&P, however Mizuho Securities and three former employees were charged for misleading investors in the CDO. Mizuho paid $127 million and the former employees also settled without admitting or denying wrongdoing.
The new Wells notice relates to CMBS sold in 2011. S&P withdrew ratings on a $1.5 billion CMBS after discovering inconsistencies in how its rating methodology was applied. That withdrawal prompted an internal review, which highlighted methodology inconsistencies for six other CMBS it rated in 2011.