Morningstar presses court to dismiss SEC's mortgage ratings lawsuit

CARE Ratings

20/04/2021 15:40

By Chris Prentice
    WASHINGTON, April 20 (Reuters) - Ratings and research firm
Morningstar Inc  MORN.O  has asked a New York judge to dismiss a
lawsuit filed by the top U.S. securities regulator over ratings
of commercial mortgage-backed securities, according to a court
document.
    The U.S. Securities and Exchange Commission (SEC) sued
Morningstar's former ratings business in February, saying the
firm violated disclosure and internal controls requirements in
30 commercial mortgage-backed securities transactions from 2015
to 2016 when the agency allowed analysts to make undisclosed
adjustments to key stresses in its modeling.  urn:newsml:reuters.com:*:nL1N2KM2N5
    The SEC "does not like that (the firm's) former methodology
included these adjustments" but Morningstar's analytical
independence is protected by Congress, lawyers for the company
said in the filing, which was filed on Monday. Morningstar said
the regulator is overstepping its authority and the firm met all
disclosure requirements.
    A spokeswoman for the company declined to comment beyond the
filing. An SEC official also declined to comment.
    Ratings agencies came under criticism after the last
financial crisis as inflated ratings of mortgage-backed
securities helped fuel a U.S. housing bubble. Congress later
charged the SEC with overseeing the ratings agencies, but the
agency struggled with the oversight due to insufficient
resources and technology changes, Reuters has previously
reported.

 (Reporting by Chris Prentice
Additional reporting by Jonathan Stempel in New York
Editing by Paul Simao)
 ((christine.prentice@thomsonreuters.com; +1 (202) 843-6464;))