STOCK in the credit ratings agency Moody’s fell sharply last night following news that the business is being probed by Wall Street watchdog the Securities and Exchange Commission (SEC) for possibly misleading regulators three years ago.
Moody’s disclosed in a regulatory filing late on Friday that the SEC had warned in a “Wells notice” that it might be moving towards pressing charges.
The stock closed down 6.8 per cent at $21.77 (£14.65).
The investigation comes because, in 2008, Moody’s acknowledged a computer error led to incorrect ratings on 11 European fixed-income investments worth about $1bn. Moody’s also said employees failed to fix the errors immediately after discovering them.
The SEC said Moody’s might have provided false and misleading statements in its license application in 2007 based on the erroneous ratings discovered in 2008. However, the company said its initial license application was accurate.
The investigation comes as ratings agencies like Moody’s and Standard & Poor’s continue to face scrutiny and criticism related to their role in the credit crisis.