WASHINGTON, DC—Standard & Poor's has agreed to a one-year suspension from rating conduit CMBS transactions, the SEC said Wednesday. The ratings agency will also pay nearly $80 million to settle state and federal charges stemming from the methodology it used in eight 2011 deals.

In a separate statement, New York City-based S&P says it neither admitted nor denied wrongdoing in the settlements, although the SEC noted that the company admitted specific facts in settling the methodology charges. It says the settlements with the SEC and the attorneys general of New York and Massachusetts do not affect any outstanding S&P Ratings credit ratings, and that it “takes compliance with regulatory obligations very seriously and continues to make investments in people and technology to strengthen its controls and risk management throughout the organization.”

The SEC, which calls its enforcement actions the first ever against a major ratings firm, says it issued three orders settling administrative proceedings against S&P. In one, S&P's public disclosures “affirmatively misrepresented” that it was using one approach to evaluate the debt service coverage ratio to rate six conduit fusion CMBS transactions and issue preliminary ratings on two others, while actually using a different, less conservative methodology for determining DSCR. The ratings agency received a Wells Notice this past July stemming from these '11 transactions.

The second order stemmed from S&P's 2012 publication of what the SEC calls “a false and misleading article” purporting to show that its new credit enhancement levels could withstand Great Depression-era levels of economic stress. A third order was issued in relation to what the SEC terms “internal controls failures” in S&P's surveillance of RMBS ratings between October 2012 and June 2014. S&P self-reported this particular misconduct to the SEC and cooperated with the investigation.

In addition to paying the SEC $58 million to settle the charges, S&P is also paying $12 million to New York State and $7 million to the Commonwealth of Massachusetts to settle parallel cases brought by the attorneys general of those states.

Instant Insights /

S&P Gets Year's Suspension from Conduit Deals

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