Not that there's a bandwagon or anything, but NY AG Eric Schneiderman is reportedly investigating S&P (MHP), Moody's (MCO) and Fitch (FMLCF.PK) over their ratings of mortgage bonds. Schneiderman is also looking at whether the firms implemented agreements in 2008 to make certain reforms, which they signed to settle an earlier inquiry but which expired in 2011 and could stymie the AG's ability to take fresh action.
Moody's (MCO), S&P (MHP) and Fitch (FMLCF.PK) have failed in a bid to dismiss a lawsuit that accuses them of fraud in their ratings of Rhinebridge, an investment vehicle that failed in 2007. District Judge Shira Scheindlin said in a ruling that the agencies could be liable if they misstated their opinions or if the ratings were false or misleading. Morgan Stanley (MS), which helped create the vehicle, must also face the suit.
The SEC yesterday criticized ratings agencies in an annual report, saying that S&P (MHP), Moody's (MCO), Fitch (FMLCF.PK) and two smaller firms don't always follow their own standards when rating deals. All nine firms reviewed in the report had "poor documentation" and "inaccuracies" when counting analysts' votes in a decision. The SEC hasn't determined whether its findings represent a "material regulatory deficiency."
The ESMA, the EU's markets watchdog, finds several shortcomings in the "Big 3" ratings agencies during an examination of Moody's (MCO), S&P (MHP) and Fitch (FMLCF.PK), including a lack of transparency, and sets out areas for improvement. The ESMA hasn't yet determined whether the agencies have broken any rules.
Prosecutors in Trani in Italy add Fitch (FMLCF.PK) to an investigation into alleged market manipulation by ratings agencies following their negative reports about the country. The probe already included S&P (MHP) and Moody's (MCO), and was extended to Fitch after it warned of a 2-notch downgrade for Italy.
The biggest U.S. banks will have to end their reliance on ratings agencies to assess the risk of their assets under proposed rules aimed at weakening the influence of the agencies. Some analysts reckon the regulations could reduce the demand for the services of S&P (MHP), Moody's (MCO) and Fitch (FMLCF.PK).
The Justice Department is reportedly investigating whether S&P (MHP) improperly rated dozens of mortgage securities prior to the financial crisis. The probe began before S&P downgraded the U.S. The SEC is also investigating S&P for any wrongdoing, and possibly Moody's (MCO) and Fitch (FMLCF.PK) as well.
S&P (MHP) is pushing back against a plan to make credit raters disclose "significant errors" in how they calculate their ratings. How much sympathy S&P will get following its "$2T error" is another matter. Interestingly, Moody's (MCO) and Fitch (FMLCF.PK) haven't raised major concerns.