SEC: Ratings Agencies Fail in Some Processes

The U.S. Securities and Exchange Commission has found a number of failures and inconsistencies among the top credit rating agencies, including Standard & Poor's and Moody's.

Specifically, the SEC asserted that agencies sometime fail to follow their own ratings processes, make accurate disclosures or manage conflicts of interest. The federal authority's yearly review of the firms is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

"We expect the credit rating agencies to address the concerns we have raised in a timely and effective way, and we will be monitoring their progress as part of our ongoing annual examinations," said Norm Champ, deputy director of the SEC's Office of Compliance Inspections and Examinations.

In the wake of the 2008 financial collapse, a number of ratings agencies were criticized for awarding top or inaccurate ratings to mortgage-backed securities and financial products. Those ratings served as a green light for investors who contributed to further inflation of the housing bubble.

More recently, Standard & Poor's has come under fire for downgrading U.S. credit following the political brinkmanship that prolonged Congressional deficit debate in late July and nearly caused a default on federal debt.