SEC Charges Ratings Agency With Disclosure And Internal Controls Failures Relating To Undisclosed Model Adjustments

The Securities and Exchange Commission today filed a civil action alleging that former credit ratings agency Morningstar Credit Ratings LLC violated disclosure and internal controls provisions of the federal securities laws in rating commercial mortgage-backed securities (CMBS). Credit ratings are used by market participants to help evaluate credit risk, price certain securities, and guide the investment decisions of individuals and institutional investors alike. To promote transparency in the process, the federal securities laws require credit rating agencies to publicly and accurately describe the procedures and methodologies used to determine credit ratings, and to implement effective internal controls to ensure that they follow those procedures and methodologies.