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Judge reduces SEC trial against Morningstar



(Reuters) – A U.S. judge on Wednesday downplayed but refused to dismiss a lawsuit from the Securities and Exchange Commission accusing Morningstar Inc. of having analysts adjust credit rating models to about $ 30 billion in mortgage securities, resulting in lower payments to investors [19659002] U.S. District Judge Ronnie Abrams of Manhattan said the SEC likely argued that Morningstar Credit Ratings failed to provide users with a general understanding of its methodology for valuing commercial mortgage-backed securities and lacked effective internal control over its rating process.

also. a SEC allegation that Morningstar failed to identify the version of the methods used to determine individual credit ratings.

Judge Abrams also rejected a request from the SEC for an injunction, noting that Morningstar Credit Ratings no longer operates as a credit rating agency after its Operation. was integrated with DBRS Inc., under the trademark DBRS Morningstar.

Based in Chicago, Morningstar is also known for its investment analysis, including for funds, and asset management. Morningstar, its attorneys, and the SEC did not immediately respond to requests for comment. complaint in February last year, the SEC said Morningstar violated securities laws by allowing analysts to make secret adjustments to "key strains" underlying ratings for 30 CMBS transactions in 201

5 and 2016. issuers who paid for the ratings by lowering the resulting interest rates owed by investors

In May 2020, Morningstar agreed to pay $ 3.5 million to settle SEC fees. 19659002] The case is SEC v. Morningstar Credit Ratings LLC, U.S. District Court, Southern District of New York, no. 21-01359

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