A former executive of Standard & Poor’s sued the U.S. Securities and Exchange Commission on Friday to block the regulator from bringing administrative charges against her over credit ratings for commercial mortgage-backed securities.
The lawsuit by Barbara Duka, a former co-manager of U.S. commercial mortgage-backed securities at S&P, a unit of McGraw Hill Financial Inc, is the latest challenge to the SEC’s authority to pursue enforcement cases in-house, rather than in federal court.
The lawsuit, filed in federal court in Manhattan, comes three months after McGraw Hill took a $60 million charge and said it was in talks to resolve an SEC probe into its ratings for six commercial mortgage-backed securities transactions issued in 2011.
Duka, who left S&P in 2012, said she received a “Wells notice” in November indicating she might face an SEC administrative proceeding, and said the regulator is expected to vote on charging her on Jan. 20.
A Wells notice indicates the SEC believes civil charges may be warranted and gives a recipient a chance to mount a defense.
McGraw Hill last July disclosed having received its own Wells notice. The company faces related probes by theNew York and Massachusetts attorneys general.
SEC and McGraw Hill representatives declined to comment.
Several people have challenged the SEC in federal court over its use of administrative proceedings, which has grown since the 2010 Dodd-Frank Wall Street reform law let the regulator bring cases against a wider array of defendants in that setting.
SEC administrative law judges preside over the cases, which are typically fast-tracked and lack some protections that defendants typically enjoy in more traditional court settings.
In the lawsuit, Duka challenged the constitutionality of legal provisions that create and provide position and tenure protections for the administrative law judges.
Guy Petrillo, a lawyer for Duka at Petrillo Klein & Boxer, in a statement said that Duka did not act wrongfully and performed her duties in good faith.
“Anyone who would claim otherwise should be required to prove their claim in court and in public, as our Constitution requires,” Petrillo added.
The case is separate from lawsuits by the U.S. Justice Department and state attorneys general that accuse S&P of inflating credit ratings on toxic assets before the 2008 financial crisis.
S&P is expected to pay just over $1 billion to settle those lawsuits, a person familiar with the matter said this week.
The case is Duka v. U.S. Securities and Exchange Commission, U.S. District Court, Southern District of New York, No. 15-357.