Moody's says DoJ preparing complaint alleging rating violations
Get access to the best calls on Wall Street with StreetInsider.com's Ratings Insider Elite. Get your Free Trial here.
(Reuters) - Moody's Corp (NYSE: MCO), parent of ratings agency Moody's Investor Services, said on Friday the U.S. Justice Department was preparing a civil complaint against the company, alleging violations of federal law in the run-up to the financial crisis.
The complaint alleges Moody's violated the Financial Institutions Reform, Recovery and Enforcement Act while rating residential mortgage-backed securities and collateralized debt obligations.
Moody's has periodically received subpoenas and inquiries from government authorities, including the Department of Justice, over its handling of the mortgage bonds before the global credit crisis of 2008.
Credit rating agencies have come under fire for inflating ratings and understating risks on mortgage-backed securities in the run-up to the financial crisis to gain more business from the investment banks that issued those securities.
Rival Standard & Poor's agreed to pay the DoJ, 19 states and the District of Columbia a total of $1.5 billion to resolve lawsuits over ratings on securities that soured.
Moody's, S&P and Fitch Ratings dominate the ratings market.
The big three ratings agencies accounted for roughly 2.3 million of the 2.42 million credit ratings outstanding by the end of 2014, according to an SEC report.(http://reut.rs/2dUgzJE)
Moody's Corp also reported that third-quarter net income attributable to the company rose 10.2 percent to $255.3 million for the three months ended Sept. 30.
Revenue rose 10 percent to $917.1 million, reflecting higher levels of bank loan and speculative-grade bond issuance as strong investor demand and tighter credit spreads drove debt refinancing activity.
Moody's shares were down 0.6 percent at $107.50 in premarket trading. Up to Thursday's close, the stock has risen about 7.8 percent this year.
(Reporting By Sudarshan Varadhan in Bengaluru; Editing by Anil D'Silva)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Bill Barrett Corporation (BBG) Entered Confidentiality Agreement with Bonanza Creek Energy (BCEI) Pertaining to BCEI's Chapter 11 Proceeding
- Delphi Automotive (DLPH) to Take $300M Pre-Tax Charge Related to Summary Judgment in Unsecured Creditors Litigation
- Aqua America (WTR) Offers FY17 Guidance
Create E-mail Alert Related CategoriesReuters
Related EntitiesFitch Ratings
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!