The rating agency also faces a one-year ban from rating certain commercial mortgage-backed securities. Standard & Poor’s (S&P) Ratings Services will pay more than $77 million to settle charges of “fraudulent misconduct” in rating mortgage bonds with US federal and state regulators. http://www.ai-cio.com/channel/REGULATION,_LEGAL/S_P_Settles_SEC_Ratings_Charges_for_$77M.html So much for independent, non-conflict of interest, and non-inflated securities ratings by one of the Big 3 Rating Agencies… :cool2:
I only have a tentative grasp of this issue. It's only a general sense of the conflict of interest issue, not the technical financial stuff but with all that said I'm left with the feeling at 77 million dollars is just about a slap on the wrist for these people. I can't believe that it will have any deterrent effect.
Evidently the SEC imposed fine is considered a cost in doing business for S&P. In the end, S&P will not essentially even pay the levied fines—that burden will be passed on to its shareholders /customers. Profits to rating agencies invited over-rating securities to investment grade securities. Moreover, rating agencies were paid by those they were to objectively rate, e.g., conflict of interest (agent /principal). In addition, agencies had a high turnover of analysts —many were later employed by the very same investment banks whose securities were offered through.
