SEC Investigating S&P's Downgrade of U.S. Debt

Officials at the Securities and Exchange Commission are investigating the downgrade of U.S. government debt by Standard & Poors, according to people familiar with the matter. The regulator is checking to confirm that S&P followed all of its own policies. Under new financial legislation, Compliance, Inspections and Examinations is a component of the SEC's purview. Reuters reports that "Among other things, the law gives the SEC the power to continuously monitor credit-rating agencies and conduct annual inspections at each firm." S&P's downgrade of United States government debt was met with anger and confusion, especially from politicians in Washington who had just passed legislation to raise the debt ceiling. S&P now holds a AA+ rating on the nation's debt, instead of the established AAA. There have been additional reports that the SEC is investigating S&P over insider information issues. S&P spokesman Ed Sweeney had no comment on the SEC review. "In the course of our business, we are in regular communication with regulators, but we do not discuss particular interactions we might have with them," Sweeney said in a statement last week, after the review was reported by The Financial Times. Ratings agencies has faced heightened scrutiny is the wake of the financial meltdown of 2008. The agencies famously rated mortgage-backed securities with top-ranked ratings, but later downgraded them by multiple notches after poor performance of the underlying securities was exposed.