Securities and Exchange Commission staff found “apparent failures” at each of the 10 credit rating agencies they examined, including Standard & Poor’s, Moody’s, and Fitch, the agency said on Friday in its first annual report on credit raters.
The SEC sent letters outlining the staff’s concerns to each of the ratings firms and demanded a remediation plan with 30 days, an agency official said in a conference call with reporters.
The SEC staff said concerns include failures to follow ratings methodologies, failures in making timely and accurate disclosures and failures to manage conflicts of interest.
The SEC’s report was required by last year’s Dodd-Frank financial oversight law.
The staff report did not single out by name any credit-rating agency for questionable actions, but it did describe specific problems it found.
Two of the three largest firms, for example, did not have specific policies in place to manage conflicts of interest when rating an offering from an issuer who is also a large shareholder of the firm.
The industry is dominated by Moody’s Corp, Standard & Poor and Fitch.
One of the large firms, the report said, did not have effective procedures in place to prevent leaks of ratings before they are published, the report said.