FT: SEC Investigating S&P's Downgrade of US Debt

Friday, 12 Aug 2011 07:16 AM
By Forrest Jones

The Securities and Exchange Commission has asked Standard and Poor’s to hand over a list of people who knew the agency was going to downgrade U.S. ratings before it was announced to see if possible insider trading took place.

Sources familiar with the issue tell the Financial Times that the SEC’s enforcement division isn't after the S&P nor do they have evidence of specific trading activity that would suggest a leak.

An examination department, which oversees ratings agencies, asked for names.

Should a formal investigation evolve, a bigger issue could arise – Standard and Poor’s license.

The Credit Rating Agency Reform Act of 2006 states that an agency could have its license revoked if it leaks information prior to disclosing a move on a rating public, MarketWatch reports.

The ratings agency must also have policies and procedures to prevent such a disclosure.

“If it is true that they told hedge funds and briefed banks and told a few people ahead of everyone else that would appear to be a clear violation 2006 Act,â€