S&P is in settlement talks over CMBS ratings

Standard & Poor’s has set aside $60 million to settle possible charges related to regulatory investigations of its ratings of commercial mortgage backed securities.

During a conference call today, executives at the rating agency’s parent company, McGraw Hill, announced that it has recorded the $60 million charge in its third quarter earnings.

The charge relates to three investigations currently underway over CMBS rated by the S&P. In July the U.S. Securities and Exchange Commission sent McGraw Hill a notice that it could seek enforcement action with respect to the ratings of six CMBS transactions issued in 2011.

The $60 million could also be used to settle with the New York and Massachusetts Attorneys General, who are also conducting a probe into the rating agency’s CMBS ratings. In October, the New York State AG announced an investigation to determine if S&P failed to follow its own methodology in rating commercial-mortgage bonds in order to win business from banks. Massachusetts reportedly began its investigation in 2013.

McGraw Hill said during the earnings call today that no definitive settlement agreements have been reached to date and there is "no assurance that this amount will be sufficient to resolve these matters or that definitive settlement agreements will be reached.”

The company “is currently in active discussions to resolve matters pending before the SEC, as well as related investigations by the Attorneys General of New York and Massachusetts".  

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