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The
complaint alleges Moody's violated the Financial Institutions
Reform, Recovery and Enforcement Act while rating residential
mortgage-backed securities and collateralized debt obligations.
Moody's has periodically received subpoenas and inquiries from
government authorities, including the Department of Justice,
over its handling of the mortgage bonds before the global credit
crisis of 2008.
Credit rating agencies have come under fire for inflating
ratings and understating risks on mortgage-backed securities in
the run-up to the financial crisis to gain more business from
the investment banks that issued those securities.
Rival Standard & Poor's agreed to pay the DoJ, 19 states and the
District of Columbia a total of $1.5 billion to resolve lawsuits
over ratings on securities that soured.
Moody's, S&P and Fitch Ratings dominate the ratings market.
The big three ratings agencies accounted for roughly 2.3 million
of the 2.42 million credit ratings outstanding by the end of
2014, according to an SEC report.(http://reut.rs/2dUgzJE)
Moody's Corp also reported that third-quarter net income
attributable to the company rose 10.2 percent to $255.3 million
for the three months ended Sept. 30.
Revenue rose 10 percent to $917.1 million, reflecting higher
levels of bank loan and speculative-grade bond issuance as
strong investor demand and tighter credit spreads drove debt
refinancing activity.
Moody's shares were down 0.6 percent at $107.50 in premarket
trading. Up to Thursday's close, the stock has risen about 7.8
percent this year.
(Reporting By Sudarshan Varadhan in Bengaluru; Editing by Anil
D'Silva)
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