Examiners at the U.S. Securities and Exchange Commission are checking to ensure that Standard & Poor's followed all of its policies leading up to its downgrade of long-term U.S. debt, according to people familiar with the matter.

Compliance, Inspections and Examinations is part of its new authority under the Dodd-Frank Wall Street overhaul law.

Among other things, the law gives the SEC the power to continuously monitor credit-rating agencies and conduct annual inspections at each firm.

A SEC spokesman declined comment on the review.

McGraw-Hill's Standard and Poor's has faced tough criticism from lawmakers, market players and the U.S. Treasury Department since it announced its decision to downgrade the long-term U.S. debt from a AAA to a AA-plus earlier this month.

S&P cut the long-term U.S. credit rating by one notch on concern about the government's budget deficit and rising debt burden. The Obama administration accused S&P of making an error in its calculations leading to the unprecedented downgrade.

S&P has vigorously denied it made any mistakes.

S&P spokesman Ed Sweeney had no comment on the SEC review.

In the course of our business, we are in regular communication with regulators, but we do not discuss particular interactions we might have with them, Sweeney said in a statement last week, after the review was first reported by Financial Times.

The SEC first began regulating credit-rating agencies in 2006, but the Dodd-Frank law gave the agency greater authority after S&P, Moody's Corp and Fimalac's SA's Fitch Ratings gave overly rosy ratings to toxic subprime mortgage-backed securities.

The law allows the SEC to write rules that aim to reduce conflicts of interest and help enhance the integrity of ratings.

But while the SEC is allowed to police the raters to make sure they abide by their own procedures, the agency is strictly prohibited from meddling in the ratings process itself or second-guessing a rating.

Instead, the SEC is limited to reviewing whether or not S&P complied with its own written procedures and policies. That could include things such as ensuring they protect market-sensitive information and making sure the committee properly met to discuss the rating decision. The SEC office can refer cases to enforcement authorities if it finds problems.

It's a review, not an investigation, said one of the sources familiar with the mater, adding that the review was also focused on transparency of the process.

Separately, the SEC is conducting a broader review of the work of S&P and other ratings agencies as required by the Wall Street reform law. The SEC is expected to issue a report in September discussing its findings in all of its credit-rating agency exams.

The SEC is expected to issue a report in September discussing its findings in all of its credit-rating agency exams.

(Editing by Bernard Orr)