PAY BACK TIME : SEC May Recommend Legal Action Against S&P
The staff of the Securities and Exchange Commission is considering recommending civil legal action against the Standard & Poor's debt ratings agency over its rating of a 2007 collateralized debt offering
Collateralized debt obligations , also known as CDOs, are securities tied to multiple underlying mortgage loans. The CDO generally gains value if borrowers repay. But if borrowers default, CDO investors lose money. Soured CDOs have been blamed for making the 2008 financial crisis worse. Ratings agencies have been accused of being lax in rating CDOs.
The SEC staff said it may recommend that the commission seek civil money penalties, disgorgement of fees or other actions.