Yahoo Finance Moody's Reaches $864M Accord Tied With Pre-Crisis Ratings
Moody’s Corporation MCO reached an $864-million settlement with the U.S. authorities to resolve claims tied with its credit ratings for Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDO) assigned during the financial crisis period.
The New York-based credit rating giant entered into an agreement with the U.S. Department of Justice (DOJ) and the attorneys general of 21 U.S. states as well as the District of Columbia. Of the total amount, Moody's is set to pay $437.5 million federal civil penalty – the second largest payment of this kind ever made to the government by a ratings agency. The remaining amount will be divided among the participating states as well as the District of Columbia.
In a statement released last Friday, Moody’s noted that it “stands behind the integrity of its ratings, methodologies and processes, and the settlement contains no finding of any violation of law, nor any admission of liability.”
Also, as part of the settlement, Moody’s has agreed to maintain several existing compliance measures for the next five years as well as implement and maintain certain other measures, over the same time frame. Among these several measures, Moody’s is required to separate its commercial and credit rating functions by excluding analytical personnel from any commercial related affairs.
Notably, the agreement resolves the pending state court lawsuits in Connecticut, MS, and South Carolina and other possible claims by the DOJ, 18 states and the District of Columbia.
Moody’s stated that it estimates an impact of about $702 million after-tax charge or around $3.62 per share to be recorded in its fourth-quarter 2016 results.
Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said, “Our investigation revealed, and Moody’s has now acknowledged, that Moody’s used a more lenient standard than it had itself published.”
Resolving similar claims, another rating giant – Standard & Poor’s Financial Services LLC – had reached a $1.5-billion accord in 2015.
Moody’s shares, which increased 12.7% in a year’s time, underperformed the 20.1% gain for the Zacks categorized Miscellaneous Financial Services industry.
Moody’s currently carries a Zacks Rank #4 (Sell).
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CBOE Holdings, Inc. CBOE: Over the last 30 days, the Zacks Consensus Estimate for fourth-quarter 2016 increased 1.8% to 59 cents per share and climbed nearly 1% to $2.38 for 2016. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Financial Engines, Inc. FNGN: The Zacks Consensus Estimate for fourth-quarter 2016 climbed 4.8% to 22 cents, over the past 30 days. In addition, it moved up 1.2% to 82 cents for 2016. The company carries a Zacks Rank #2 (Buy).
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