What's Behind the Downgrade?

The Securities and Exchange Commission has asked credit rating agency Standard & Poor’s to disclose who within its ranks knew of its decision to downgrade US debt before it was announced last week, as part of a preliminary look into potential insider trading, people familiar with the matter say.

The inquiry was made by the SEC’s examination staff, which has oversight of credit rating firms, one person familiar with the matter said. The exam staff can make referrals to the SEC’s enforcement division if it believes any laws have been violated, but the inquiry might not result in a referral.

This person said they were looking at who had the information as a starting point. The person added that the agency is not aware of a leak from an S&P insider, nor was it aware of an aberrational trade.

Proving someone leaked information about the downgrade, or traded ahead of it, could be challenging. Many traders anticipated the downgrade and bets could occur across numerous securities or currencies without inside information. In a traditional insider trading case, there is often a more predictable correlation between a company’s stock price and a particular development.
http://www.cnbc.com/id/44099845