S&P’s CDO Rating Prompts Wells Notice From SEC

The U.S. Securities and Exchange Commission (SEC) is considering taking legal action against Standard & Poor's Ratings Services (S&P) in connection to alleged violations of federal securities law.

S&P's parent company, the McGraw-Hill Cos. Inc., disclosed Monday that it has received a ‘Wells notice’ from the SEC, indicating the agency's staff might recommend the commencement of a civil injunctive action. The notice relates to S&P's ratings for a 2007 offering of collateralized debt obligations (CDOs) known as "Delphinus CDO 2007-1."

SEC staff may advise that the agency seek civil money penalties or the disgorgement of fees, among other options, according to a McGraw-Hill statement.

"The Wells notice is neither a formal allegation nor a finding of wrongdoing," the company said. "It allows S&P the opportunity to provide its perspective and to address the issues raised by the staff before any decision is made by the commission on whether to authorize the commencement of an enforcement proceeding."

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