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Secretary Of State Connie Lawson Announces Nearly $13 Million For Indiana From Settlement
Updated January 16, 2017 7:22 AM
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(INDIANAPOLIS) - Secretary of State Connie Lawson today announced a $12.77 million settlement for Indiana, involving 20 other states, the District of Columbia, and the U.S. Department of Justice.

The settlement resolved the Secretary of State's investigation, in collaboration with the Attorney General, of allegations that Moody's Corporation, Moody's Investors Service, Inc., and Moody's Analytics, Inc. misled investors when it rated structured finance securities leading up to and through the 2008 financial crisis.

The settlement with Moody's, a corporation made up of companies specializing in business and financial services, is the result of an investigation into the company's conduct and its representations of independence and objectivity in the rating of structured finance securities. Structured finance securities, including residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs), are complex investments that derive their value from the monthly payments on underlying debt instruments, such as consumer mortgages.

These securities, particularly those backed by subprime mortgages, were at the center of the financial crisis of the mid-to-late 2000s. Despite repeated statements emphasizing its independence and objectivity, the states and Department of Justice allege that Moody's allowed their analysis to be influenced by their desire to earn lucrative fees from their investment bank clients, when they assigned credit ratings to toxic assets packaged and sold by the Wall Street investment banks.

"I am pleased that Moody's has been brought to account for its misleading ratings through the enforcement of Indiana's securities law," Secretary Lawson said. "Our investors expect and deserve accuracy and integrity from companies like Moody's, and I am proud of our efforts, made in cooperation with the Attorney General's office, that allowed justice to be served."

Attorney General Hill thanked Deputy Attorneys General Justin Hazlett, Amanda Lee and their team for the role each played in this resolution. Indiana's $12.77 million share of the nearly $864 million multi-state settlement will go toward consumer and investor protection and related purposes.

In addition to the monetary settlement, Moody's entities have agreed to significant compliance terms to ensure they conduct their ratings activities independently and objectively - including an annual certification by the CEO of Moody's Corporation, which will be provided to Indiana every year for the next four years, certifying that Moody's is following certain compliance requirements.

This case resembles a 2015 settlement with Standard & Poor's. That year, the Secretary of State and Attorney General recovered $21.5 million from a settlement after suing the company for similar deceptive conduct.

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