The U.S. Securities and Exchange Commission is investigating Standard & Poor on suspicion of issuing a complex mortgage security identified as Delphinus in 2007, at a time when the housing market already was crumbling.

The action was based on a financial filing made by S&P's parent company, McGraw Hill.

Executives said they had received a notice of enforcement action from the SEC and would cooperate in the probe.

A report from The New York Times mentioned that it may be the first federal case against a ratings company should this progress into a case against Standard & Poor's.

The Delphinus issue was cited as an example of a flawed transaction in an April report by a congressional committee.

S&P was responsible for conducting an assessments of shaky mortgage securities that contributed to the financial collapse.

The SEC could issue a civil injunctive action against S&P and seek penalties, but there is no criminal probe at this point, say company officials.

However, it is merely a probe and there is no accusation or verdict of any unlawful activity.

"S&P has been under inspection for months as part of the SEC's inquiry into the mortgage securities that resulted in losses worth billions of dollars for banking institutions and private investment organizations," the New York Times also reported.

In the past, the commission has also filed cases against banks, particularly Goldman Sachs, for the marketing of similar mortgage covenants. But it has not yet undertaken such an action over positive ratings issued by as Standard & Poor's, Fitch Ratings or Moody's Investors.

The ratings company is also being investigated by the Justice Department on allegations of favor business interests over its duty to rate deals truthfully.

S&P's historic downgrade of the long-term credit of the U.S. government in August angered many in Washington.

Delphinus has been described as one of the many ill-fated mortgage securities called collateralized debt obligations that represented bundles of mortgage bonds.

The AAA ratings given to certain portions of the deal were considered essential to the capacity of the banks to sell them to investors. S&P obtained profits placing ratings on mortgage securities like Delphinus but there was no promised given to investors that their ratings were exact.