Moody's: Workers Violated Code

Moody's(MCO - Cramer's Take - Stockpickr) shares slid more than 8% Tuesday, after the ratings agency said it may fire some employees involved with the inaccurate rating of European debt instruments.

The Financial Times reported in May that a computer error at Moody's resulted in 11 constant-proportion debt obligations (CPDOs) receiving inaccurate ratings. The company did not immediately disclose the error, but eventually downgraded the instruments. The news though sent the stock from $45.77 down to $34.16 in a matter of days.

Moody's said on Tuesday employees violated Moody's Code of Professional Conduct by changing the ratings after discovering the error due to factors not relevant to the rating process. The company has initiated disciplinary proceedings, it said.

"I am deeply disappointed by the conduct that occurred in this incident," Moody's Chairman and CEO Raymond McDaniel said in a company statement. "The integrity of our rating process is core to Moody's values and is essential to the market. If an error occurs, it is crucial that rating committees consider possible rating changes and disclosures in an appropriate manner."

The 11 CPDOs affected had an aggregate value of slightly less than $1 billion. Moody's is reviewing its rating model for the affected CPDOs and other analytical models and methodologies and, to date, has found on other problems.

Moody's also on Tuesday announced that the head of its global structured finance business, Noel Kirnon, would leave the company by the end of July. Andrew Kimball will serve as the acting head.