SEC Charges Ratings Agency With Internal Controls Failures in Connection With Ratings of CMBS and CLO Combo Notes

The Securities and Exchange Commission today announced that the credit ratings agency Kroll Bond Rating Agency Inc. (KBRA) has agreed to pay more than $2 million to settle separate charges relating to the rating of commercial mortgage-backed securities (CMBS) and of collateralized loan obligation combination notes (CLO Combo Notes). According to the order pertaining to CMBS ratings, KBRA permitted analysts to make adjustments that had material effects on the final ratings but did not require any analytical method for determining when and how those adjustments should be made. Further, the order finds that there was no requirement for recording the rationale for those adjustments.