Moody's Says It Received Wells Notice From SEC
One of the nation's largest credit rating agencies—which has come under fire for its role in the financial crisis—says it is facing an enforcement action by the Securities and Exchange Commission.
Moody's Investors Service, one of only 10 so-called "Nationally Recognized Statistical Rating Organizations" or NRSRO's, disclosed in a quarterly SEC filing Friday night that the SEC is considering instituting "cease and desist" proceedings in connection with the firm's initial 2007 application for NRSRO status. The filing does not say what the consequences of such an action would be, but the NRSRO designation is crucial.
The NRSROs, which include Moody's , Standard and Poor's and Fitch among others, have been criticized for their overly positive ratings on what turned out to be toxic mortgage-backed securities during the housing boom. Get after-hours Moody's stock quotes here.
In its filing, Moody's says it received a so-called Wells Notice from the SEC on March 18, saying the SEC staff is considering recommending "administrative cease-and-desist proceedings" against the firm in connection with its initial 2007 application for NRSRO status.
At issue, according to the Moody's filing, is the company's determination in 2007 that members of one of its European rating committees "engaged in conduct contrary to Moody's Code of Professional Conduct."
The filing does not say what the committee members did, but says the SEC believes the fact that the employees engaged in it is proof Moody's NRSRO application is false and misleading.
In its filing, Moody's says it disagrees with the SEC's position, and says the application was accurate. And, the filing says, Moody's believes the enforcement action is unwarranted.