IT rating agency Standard & Poor’s could be hit with legal action from the US markets regulator for mis-rating a risky package of sub-prime mortgage bonds in 2007, it disclosed yesterday.
S&P said the Securities and Exchange Commission was considering recommending action against it for violating securities laws in its rating of a collaterised debt obligation (CDO) called Delphinus CDO 2007-1.
S&P rated almost $950m (£614m) of liabilities in the CDO in August 2007 but by December it had downgraded the package’s top-rated bonds. By January the CDO was in technical default and by the end of 2008 all its AAA bonds were classed as junk.
S&P warned it might have to pay civil penalties in the case.