Standard & Poor’s will pay more than $58 million to settle charges of fraudulent misconduct in rating mortgage bonds, the U.S. Securities and Exchange Commission said on Wednesday.
S&P will also pay $19 million to settle cases filed by attorneys general in New York and Massachusetts.
The SEC case relates to the ratings on certain commercial mortgage-backed securities, or CMBS.
“Investors rely on credit rating agencies like Standard & Poor’s to play it straight when rating complex securities like CMBS,” said Andrew Ceresney, director of the SEC Enforcement Division, in a statement. “But Standard & Poor’s elevated its own financial interests above investors by loosening its rating criteria to obtain business and then obscuring these changes from investors.”
The SEC said it issued three separate orders. One order relates to misrepresentations about which criteria S&P used when rating certain deals. A second relates to what the commission called a “false and misleading article” about new criteria rolled out in 2012. The third comes from internal control failures in the monitoring of already rated residential mortgage bonds.
Separately, the SEC said it would initiate a case against an S&P executive for allegedly fraudulently misrepresenting how S&P calculated some ratings criteria.