Business

Rating Agency Used by Bryan Administration for SPV Bond Rating Charged by S.E.C. With Failure to Implement Internal Controls

Kroll Bond Rating Agency Inc., the firm used by the Bryan administration to rate the Internal Revenue Matching Fund (I.R.M.F.) bond through a so-called special purpose vehicle (SPV), was recently charged by the U.S. Securities and Exchange Commission on two matters relating to the rating of commercial mortgage-backed securities (CMBS), and of collateralized loan obligation combination notes (CLO Combo Notes). Kroll agreed to pay the S.E.C. more than $2 million to settle the charges. According to the order pertaining to CMBS ratings, Kroll allowed analysts to make adjustments that had material effects on the final ratings but did not require any analytical method for determining when and how those adjustments should be made. The charges were published in September by the News File Corporation (NFC), a newswire firm offering broad access to media houses such as Thomson Reuters, Bloomberg, Dow Jones and Yahoo! Finance. Reuters also covered the story. The revelation was one of the main c...