Standard & Poor’s will be suspended for a year from rating securities in the biggest piece of the commercial-mortgage bond market in a $60 million settlement with the U.S. Securities and Exchange Commission (SEC), according to a person with knowledge of the matter.
The deal, which the person said may be announced as soon as tomorrow, will be the agency’s toughest action against a major credit rater. The SEC, which has been examining whether the credit rater bent criteria to win business in 2011, will ban the company from grading securities backed by multiple commercial loans, the person said.
In addition to the SEC fine, the unit of McGraw Hill Financial Inc. is also facing a penalty to settle probes by Attorneys General in New York and Massachusetts, said the person and a second with knowledge of the talks. They both asked not to be identified because the discussions are private.
Catherine Mathis, a spokeswoman for McGraw Hill, declined to comment, as did Judy Burns of the SEC.
The SEC sent S&P a Wells notice in July, saying that investigators were pursuing an enforcement action tied to six commercial mortgage-backed securities, or CMBS, ratings from 2011, according to a regulatory filing. The alleged violations relate to the CMBS rankings and “public disclosure made by S&P regarding those ratings thereafter,” McGraw Hill said.
–With assistance from Keri Geiger in New York.