Market Overview

SEC Investigating S&P Over Debt Downgrade

The Securities and Exchange Commission has requested that ratings agency Standard & Poor's disclose which employees knew of its controversial decision to downgrade U.S. debt before it was announced, the Financial Times reported Friday.

Citing people familiar with the matter, the Financial Times is reporting that the SEC's move is part of a preliminary examination into potential insider trading.

S&P has been the center of unwanted attention since its downgrade, as global markets have gyrated violently since. U.S. stock markets in particular have been quite volatile, with 300-400 point swings in the Dow Jones Industrial Average now the norm.

The new inquiry was made by the SEC's examination staff, which has oversight of credit rating firms, the Times reports. The SEC, however, is unaware of a leak from an S&P insider.

Ratings firms have faced increasing scrutiny over how ratings are decided since the mortgage debacle of 2007-8. Then, ratings firms infamously held prime AAA ratings on now-defunct mortgage-backed securities.

S&P's decision to cut U.S. debt to AA+, though, was met with great hostility from both sides of the aisle.

In fact, U.S. Senate Banking committee has started looking into the decision by S&P to downgrade the U.S. credit rating, Reuters reported Monday.

Posted-In: S&P SECNews Downgrades Politics Legal Analyst Ratings General

 

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