EconomyMarkets

U.S. SEC sues Morningstar over ratings of commercial mortgage-backed securities By Reuters

© Reuters. FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door

WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission (SEC) on Tuesday sued Morningstar Credit Ratings LLC for allegedly violating U.S. securities laws in its ratings of commercial mortgage-backed securities, the regulator said in a statement.

Morningstar’s credit ratings business allegedly violated disclosure and internal controls requirements in 30 commercial mortgage-backed securities transactions from 2015 to 2016 when the agency allowed analysts to make undisclosed adjustments to key stresses in its modeling, the SEC said.

A spokesperson for Morningstar Inc did not respond immediately to request for comment.

Ratings agencies came under criticism after the U.S. financial crisis as inflated ratings of mortgage-backed securities helped fuel a U.S. housing bubble. In the wake of the crisis Congress charged the SEC with overseeing the ratings agencies, but the agency struggled with the oversight due to insufficient resources and technology changes, Reuters previously reported.

Morningstar previously paid $3.5 million to settle SEC charges it violating conflict of interest rules designed to separate credit ratings and analysis from sales and marketing.

U.S. laws require rating agencies to disclose their ratings methodologies and stick to those frameworks, the SEC said on Tuesday. But according to the SEC’s allegations Morningstar analysts frequently made undisclosed adjustments to lower the stress applied to their models.

Those change benefited issuers that had paid for the ratings, allowing them to pay investors less interest, the SEC said.

The lawsuit was filed in the Southern District of New York against Morningstar Credit Ratings LLC. Morningstar Inc now operates credit ratings through its subsidiary DBRS Morningstar.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.


Source link

Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button