Morningstar Seeks to Uphold Analytical Independence of Credit Ratings in Response to SEC Complaint

February 17, 2021

Investors and capital markets will benefit from clarity on the limitations of the SEC’s regulatory authority regarding analytical independence

CHICAGO, Feb. 17, 2021 – Morningstar Credit Ratings, LLC (MCR), a subsidiary of Morningstar, Inc. (Nasdaq: MORN) and a former credit rating agency, today published an in-depth response to the United States Securities and Exchange Commission’s (SEC) complaint against MCR.

MCR’s published position paper in response to the complaint is available here. Key points include:

  • Analytical independence is a cornerstone of the diversity of opinion in credit ratings. 
  • U.S. federal securities laws guarantee the analytical independence of credit rating agencies. In this case, the SEC overstepped its regulatory limitations by imposing requirements that would regulate the substance of credit rating methodologies.

Morningstar prides itself on the integrity and independence of its research and analysis and will continue to be motivated by the objective of bringing clarity and diverse opinions to the market.

The complaint relates to MCR’s legacy commercial mortgage backed securities rating methodology that was voluntarily retired in 2018; it was last used to rate a CMBS transaction in 2017. No MCR credit ratings are currently outstanding and MCR no longer issues or monitors credit ratings.

The SEC alleges technical violations of the rules that formerly applied to MCR when it was a credit rating agency. In fact, MCR complied with the regulatory requirements in question; the SEC’s position in this case is inconsistent with its own rules and the SEC’s stated policies. The SEC does not allege that MCR improperly determined any credit rating or that there was any investor harm related to MCR’s use of its legacy methodology.

Answers to frequently asked questions are available here.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $215 billion in assets under advisement and management as of Sept. 30, 2020. The Company has operations in 29 countries. For more information, visit Follow Morningstar on Twitter @MorningstarInc.

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