Moody’s to pay $16M penalty for flawed rating models

August 29, 2018

Moody’s Investors Service is paying $16.3 million to settle a Securities & Exchange Commission probe on whether it failed to consistently apply credit rating symbols used by investment analysts to assess residential mortgage-backed securities.

Moody’s is one of three major credit ratings firms in the United States, along S&P Global and Hearst subsidiary Fitch Ratings.

The SEC stated Moody’s ultimately corrected more than 650 RMBS ratings with a notional value of $49 billion after errors were discovered. Moody’s also failed to document its rationale for issuing final RMBS ratings that deviated materially from model-implied ratings, according to the SEC.

Alex.Soule@scni.com; 203-842-2545; @casoulman

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