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Moody's shares drop on news of possible SEC action


NEW YORK, May 10 (Reuters) - Shares of Moody's Corp fell as much as 12 percent on Monday after the company said its ratings unit could face enforcement action from the U.S. Securities and Exchange Commission. The SEC's so-called Wells Notice adds to the regulatory scrutiny Moody's and its rival, McGraw-Hill Cos' Standard & Poor's, are already facing after criticism that they failed to spot the problems that led to the global financial crisis. Moody's disclosed the Wells Notice in a filing late on Friday. "The market has certainly reacted pretty violently," said analyst Bill Bergman of Morningstar in Chicago. "It's another step down the path that poses material risks for shareholders of Moody's as well as McGraw-Hill." Morningstar has high uncertainty ratings on both stocks, he said. Moody's shares were down 10.9 percent at $20.82 in morning trading after dropping as low as $20.52 earlier in the session. McGraw-Hill shares fell 6.4 percent to $28.34. According to Moody's quarterly filing, the SEC is considering launching an administrative case and "cease-and-desist" proceedings against the company, alleging it misled regulators in a 2007 application to remain a nationally recognized rating agency. The company said it had filed a response with the SEC, defending its application as accurate. Moody's said it had received the Wells Notice on March 18. (Reporting by Elinor Comlay; Editing by Lisa Von Ahn) Keywords: MOODYS/SHARES (elinor.comlay@thomsonreuters.com; +1 646 223 6116) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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