S&P Agrees to Settle SEC Charges Related to CMBS Ratings for $58M


The S&P agreed to settle the charges related to CMBS ratings filed by the Securities and Exchange Commission (SEC) for $58 million.

The credit ratings agency also agreed to pay $17 million to settle a similar case filed by the New York Attorney General’s Office and $2 million to resolve the charges filed by the Massachusetts Attorney General’s Office.

Allegations against S&P

The SEC alleged that the S&P Ratings Services committed fraudulent misconduct in its ratings of certain commercial mortgage-backed securities (CMBS). The commission found that the credit ratings agency used a different methodology in rating six conduit fusion CMBS transactions and preliminary rating for two more transaction in 2011.

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According to the SEC, the S&P affirmatively misrepresent in its public disclosures that it was using one approach but was actually using a different methodology. As part of the settlement, S&P agreed to stop rating conduit fusion CMBS for one year.

In addition, the SEC found that the S&P tried to re-enter the market fir rating conduit fusion CMBS in mid-2012 by overhauling its criteria despite having been suspended in late 2011.


According to the commission, the credit ratings agency published a false and misleading article claiming that its new credit enhancement levels can survive Great Depression-era levels of economic distress.

The SEC emphasized that the original author was concerned that the CMBS group of the S&P turned the article into a sales pitch for the new criteria because they removed certain information from the original study.

The commission said the credit ratings agency failed to accurately describe certain aspects of its new criteria. The S&P agreed to publicly retract its false and misleading Great-Depression-related study and correct the inaccurate descriptions about its criteria.

Furthermore, the SEC found that the S&P committed failures in internal controls related to the surveillance of residential mortgage-backed securities (RMBS) ratings.  The commission said the agency did not follow its internal policies in changing its surveillance criteria by applying ad hoc workaround that were not fully disclosed to investors.

“Race to the bottom behavior”

In a statement, Andrew Ceresney, director of enforcement division at SEC commented that the S&P “elevated its own financial interests above investors by loosening its ratings criteria to obtain business…”

On the other hand, Michael Osnato, chief, complex financial instruments unit, SEC enforcement division said, “These CMBS-related enforcement actions against S&P demonstrate that ‘race to the bottom’ behavior by ratings firms will not be tolerated by the SEC and other regulators.  When ratings standards are compromised in pursuit of market share, a firm’s disclosures cannot tell a different story.”


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Marie received her Bachelors Degree in Mass Communication from New Era University. She is a former news writer and program producer for Nation Broadcasting Corporation (NBC-DZAR 1026), a nationwide AM radio station. She was also involved in events management. Marie was also a former Young Ambassador of Goodwill during the 26th Ship for Southeast Asian Youth Program (SSEAYP). She loves to read, travel and take photographs. She considers gardening a therapy.

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