New York-The staff of the Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) is con­sid­er­ing rec­om­mend­ing civ­il le­gal ac­tion against the Stan­dard and Poor's debt rat­ings agency over its rat­ing of a 2007 col­lat­er­alised debt of­fer­ing. Col­lat­er­alised debt oblig­a­tions, al­so known as CDOs, are se­cu­ri­ties tied to mul­ti­ple un­der­ly­ing mort­gage loans. The CDO gen­er­al­ly gains val­ue if bor­row­ers re­pay. But if bor­row­ers de­fault, CDO in­vestors lose mon­ey. Soured CDOs have been blamed for mak­ing the 2008 fi­nan­cial cri­sis worse. Rat­ings agen­cies have been fault­ed for be­ing lax in rat­ing CDOs. The SEC staff said it may rec­om­mend that the com­mis­sion seek civ­il mon­ey penal­ties, dis­gorge­ment of fees or oth­er ac­tions.

S&P has been un­der fire for its re­cent down­grade of US debt, as well as sev­er­al bad calls it made lead­ing up to the fi­nan­cial cri­sis and eco­nom­ic melt­down that be­gan in 2008. The unit's pres­i­dent stepped down last month. Mc­Graw-Hill Com­pa­nies, which owns S&P, said yes­ter­day that it re­ceived a Wells No­tice from the SEC's staff on Thurs­day. In is­su­ing Wells no­tices, the SEC en­force­ment staff gives com­pa­nies the chance to make the case why charges are un­war­rant­ed. That means a for­mal de­ci­sion by SEC com­mis­sion­ers to file charges may not oc­cur. S&P said it had been co-op­er­at­ing with the com­mis­sion and plans to con­tin­ue co-op­er­at­ing on the mat­ter.

Mc­Graw-Hill shares fell 90 cents, or 2.1 per cent, to US$42.03 in morn­ing trad­ing. The news comes two weeks af­ter Mc­Graw-Hill an­nounced that it plans to split up in­to two pub­lic com­pa­nies with one fo­cused on ed­u­ca­tion and the oth­er cen­tred on mar­kets, fea­tur­ing the Stan­dard and Poor's unit. The de­ci­sion had been ex­pect­ed, as in­vestors have pushed the New York com­pa­ny to boost the com­pa­ny's stock price, which has dropped by more than 40 per cent since 2006. (AP)