Securities Law

S&P to pay nearly $80M to settle claim over 2011 ratings of mortgage securities; bigger deal looms

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Standard & Poor’s has agreed to pay nearly $80 million to resolve claims that it failed to disclose a loosened approach to rating commercial mortgage-backed securities after the 2008 financial crisis, even as the ratings agency negotiates a bigger deal over its behavior before the downturn.

The settlement resolves allegations that S&P claimed it was taking a conservative approach to the ratings of eight commercial-backed securities deals in 2011, but actually used a loosened ratings standard, according to the New York Times DealBook blog and the Wall Street Journal (sub. req.). Also resolved are claims that S&P’s internal controls failed in its monitoring of home mortgage deals between 2012 and 2014, the stories say.

The deal also requires a one-year hiatus from rating certain bond deals, according to the stories.

The settlement is between S&P and the Securities and Exchange Commission, New York state and Massachusetts.

Meanwhile, S&P is reportedly negotiating a $1.37 billion settlement with the Justice Department and more than a dozen states for allegedly misrepresenting its ratings as independent and objective before the crisis, according to the stories.

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