Raters May Face SEC Civil Fraud Charges

WASHINGTON (TheStreet) -- The Securities and Exchange Commission is weighing civil fraud charges against some credit-rating firms for their role in developing the mortgage-bond deals that helped start the financial crisis, The Wall Street Journal reported.

The SEC is looking closely at the conduct of Standard & Poor's, a unit of McGraw-Hill (MHP), people familiar with the matter told the newspaper. They said the agency is also reviewing the role played by Moody's Investors Service, owned by Moody's (MCO), in relation to at least two mortgage-bond deals.

SEC officials are focusing on whether the ratings companies committed fraud by failing to do enough research to rate adequately the pools of subprime mortgages and other loans that underpinned the mortgage-bond deals, the Journal reported.

Michael Adler, a spokesman for Moody's, said: "Although Moody's is uncertain as to what The Wall Street Journal is referring, we would certainly cooperate with any requests we receive from the SEC."

A Standard & Poor's spokeswoman declined to comment for the newspaper.

-- Written by Joseph Woelfel



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