In what could be the first regulatory action against one of the major credit agencies in connection with the 2008 subprime mortgage crisis, the U.S. Securities and Exchange Commission (SEC) has disclosed that it may take action against Standard & Poor's (S&P) for securities law violations following its positive ratings for a 2007 offering of repackaged mortgage bonds that soon thereafter defaulted. S&P's parent company, McGraw-Hill Cos Inc., (McGraw-Hill) announced that it received a Wells notice from the SEC on September 22, 2011 in connection with this offering.

McGraw-Hill stated that the Wells notice from the SEC focuses on S&P's ratings of an August 2007 collateralized debt obligation known as "Delphinus CDO 2007-1."  S&P's "AAA" rating on the offering covered $947 million in liabilities and was underwritten by Mizuho International, a Japanese bank. By December 2007, S&P began to downgrade top bonds from the offering and by January 4, 2008, the deal was in technical default. At the end of 2008, the ratings on the offering were at "junk" status.

S&P announced that if the SEC pressed charges, it would likely attempt to settle.  Additionally, it noted that it may also have to alter its ratings practices going forward to pay civil penalties. A spokesman for ratings agencies Moody's Investor Service and Fitch Ratings, which also rated Delphinus CDO 2007-1, stated that their respective companies did not receive Wells notices in this matter. ("SEC Mulls Charges Against S&P in CDO Case,", September 26, 2011).