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Moody's Stock Slides On Probes Of Credit Rating Agencies

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DES MOINES, Iowa — Shares of rating agency Moody's Corp. fell Thursday as government agencies began looking into credit rating companies' actions during the financial crisis.

Shares slid $1.13, or 4.4 percent, to $24.79 in morning trading. Shares of McGraw-Hill, which owns credit rating agency Standard & Poor's, declined 82 cents, or 2.9 percent, to $27.38.

The Securities and Exchange Commission scheduled an afternoon meeting to discuss possible regulatory changes that could affect ratings services.

William Blair & Co. analyst John Neff maintained his "Market Perform" rating on the stock in a note to investors released Wednesday. He said the issues scheduled to be discussed by the SEC do not change his long-term positive outlook for Moody's stock.

Among the issues the SEC has planned to discuss include additional disclosure requirements around ratings history and performance and conflicts of interest.

The commission also is considering rescinding an expert opinion exemption that protects ratings services from legal liability for the accuracy of its credit ratings.

Neff said regulatory and legislative calls for increased legal liability are ill-advised. Any changes would likely be procedural, he said.

"Whatever the requirements, we believe Moody's and other rating agencies would simply follow and document the required steps, thus avoiding any real increase in liability, and would do so with little incremental cost," he wrote.

California Attorney General Jerry Brown also said in a statement Wednesday that he plans to launch an investigation into the role credit rating agencies played in fueling the financial crisis. He was to discuss the probe in a statement planned for Thursday morning.