June 3 (Bloomberg) -- Moody's Investors Service, Standard & Poor's and Fitch Ratings are near an agreement with New York Attorney General Andrew Cuomo to end an investigation into the credit-rating companies' role in the subprime-mortgage crisis, according to people with knowledge of the joint agreement.

The settlement would allow the rating firms to avoid sanctions, said the people, who declined to be identified before a public announcement that may come as early as this week. The companies won't admit wrongdoing and will have six months to implement policies such as a new fee structure and increased disclosure about the deals they rate, the people said.

Cuomo would terminate his nine-month probe of the ratings companies, started as part of a broader investigation into the mortgage industry. Cuomo said in February he was focused on ``the role played by the ratings agencies in the mortgage meltdown'' that caused more than $386 billion in credit losses and writedowns at banks. Investors had anticipated Cuomo would force bigger changes, and Moody's Corp. and McGraw-Hill Cos., parent of S&P, rose in New York trading.

``There was a lot of worry about the stuff going on,'' said Ed Atorino, an analyst at Benchmark Co. in New York. He recommends buying shares of Moody's and McGraw-Hill. ``Anything they can do to align their regulations and standards with the regulators would do a lot to removing that overhang'' in the stock, he said.

Shares Rise

Moody's of New York, down 44 percent in the past year, gained $1.80, or 4.9 percent, to $38.45 in New York Stock Exchange composite trading after the Wall Street Journal reported the accord. McGraw-Hill, also based in New York, advanced 38 cents to $41.20, and is down 41 percent in 12 months. Fitch is owned by France's Fimalac SA.

Benjamin Lawsky, Cuomo's special assistant, declined to comment. Fitch spokesman Brian Bertsch declined to comment. Moody's spokesman Tony Mirenda didn't immediately return a call seeking comment.

``S&P is pleased to work with New York Attorney General Andrew M. Cuomo and other rating agencies on these important measures, which we believe will help ensure our ratings process continues to be of the highest quality,'' S&P President Deven Sharma said in an e-mailed statement today. Spokesman Ed Sweeney declined to elaborate.

SEC Rules

The ratings companies would be paid by bond issuers for any preliminary work reviewing the structure of U.S. subprime- mortgage securities, as well as for a rating on debt, the people said. That way the firms would be paid even if they aren't selected to give a final rating, reducing the incentive to give a favorable assessment. Currently, the companies are paid only if they are selected to give a ranking, the people said.

The companies will also be required to disclose on their Web sites details of collateral backing U.S. subprime mortgage debt they assess, and the issuer of the debt, the people said.

``Stock investors may be thinking that the rating agencies are going to get paid whether they screwed up or not,'' said Andrew Harding, who helps manage $18 billion as chief investment officer for fixed income at Allegiant Asset Management in Cleveland.

A settlement with New York would come days before the U.S. Securities and Exchange Commission releases new planned rules for the ratings companies, scheduled for June 11.

Cuomo reached accords earlier this year with Fannie Mae and Freddie Mac, the two biggest buyers of U.S. mortgages.

S&P and Fitch confirmed the subpoenas in September. Moody's declined to comment on whether it had been contacted by Cuomo.

Investigation Expanded

Cuomo expanded his investigation into the mortgage crisis to ratings companies to probe why they gave top grades to subprime- mortgage securities and collateralized debt obligations that later plummeted in value. CDOs package pools of debt such as subprime securities and split them into new pieces with varying ratings. Subprime loans are given to borrowers with poor credit.

Cuomo has power under state law to proceed against the companies or their executives through civil lawsuits or criminal charges.

S&P this year announced 27 initiatives, including hiring an ombudsman and demanding disclosure of collateral in structured- finance securities, to help address criticism by regulators and lawmakers. It also said it would reduce conflicts of interest through measures such as preventing analysts from covering issuers for more than five years.

Moody's separated its credit-ratings operations from its marketing and analytics and Fitch is reassessing the way it grades certain types of debt.

To contact the reporter on this story: Karen Freifeld in New York state Supreme Court at kfreifeld@bloomberg.net

Last Updated: June 3, 2008 19:27 EDT