SEC Considering Civil Fraud Charges Against Ratings Agencies

The SEC is considering civil fraud charges against some credit-rating companies for participating in the development of bad mortgage-bond deals, the Wall Street Journal is reporting Friday, citing people familiar with the matter. The people said that ratings agencies, including Standard & Poor's, were under investigation for giving high ratings for mortgage securities that ended up being terrible investments. According to the WSJ report, "The leading ratings companies have been criticized by lawmakers as "key enablers" of the financial meltdown, helping to fuel the $1 trillion Wall Street mortgage-securities machine before the boom ended." Securities regulators have faced increasing scrutiny over a lack of charges stemming from the financial crisis. Executives and the companies they work at have escaped largely unscathed since the meltdown of 2008. One of the exceptions would be the Goldman Sachs GS $550 million settlement with the SEC over a bad deal. In May, the SEC announced it was seeking public comment on proposals on the role that credit-rating agencies should play. Some investors were angry that ratings agencies failed to adequately research the securities that were given investment-grade ratings. Credit rating agencies typically rate issuers of debt. From sovereign nations to corporations to municipalities, the agencies rate debt on a scale. They have been blamed for perpetuating the financial meltdown by not raising red flags.