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Moody’s ‘regularly ignored’ compliance chief’s advice
30.09.09
The former head of compliance at credit ratings agency Moody's today claimed that he was regularly ignored when he warned that the firm was not properly monitoring the ratings on municipal bonds.
Scott McCleskey will testify to a Congress committee investigating the ratings industry later today.
He said in a letter, sent to America's Securities and Exchange Commission last March, that although high-profile bond issuers such as New York City were regularly reviewed the vast majority of municipal issuers were not. “I feel that in the current economic environment this failure could have far-reaching systemic consequences,” he wrote.
“While I was there, I found that my guidance was routinely ignored if that guidance meant making less money.”
He also claimed that even when Moody's, prompted by the credit crisis, began to tackle the issue of municipal bond ratings, the size of the team was inadequate to look at all the issuers of bonds.
McCleskey also claimed that some municipal bonds had not been reviewed at all more than 20 years after they were first issued.
Reader views (2)
What Compliance department ignored!!!
In a financial services company ?
Never!!!
In the UK compliance staff are an FSA requirement.
Boards hire them as its an obligation. They don't generally want to hear anything more form them except everything is OK.
If its not OK they certainly do not care what the solution might be if it interferes with their business plans.
True compliance is weak in most (not all) firms because although good business should be done in a compliant way the business leaders do NOT think that way. They just cannot its incompatible with their nature.
- The Enforcer, London
There can be no serious recovery, until the G20 reform the rating agencies. They got the 2000 Telecoms and 2007/8 banking ratings very wrong. Might it partly be the rating agencies are being paid by the people they are rating.
- Andrew, London
