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Ratings Agencies Face Greater Scrutiny

NEW YORK CITY-The major agencies say they'll carefully scrutinize new regulations for NRSROs proposed by the Securities and Exchange Commission.

By Cody Lyon | Updated on September 18, 2009

NEW YORK CITY-The major ratings agencies say they’re going to carefully scrutinize new oversight rules announced by the Securities and Exchange Commission on Thursday. In a release, the SEC says it has adopted or proposed measures intended to “improve the quality of credit ratings by requiring greater disclosure, fostering competition, helping to address conflicts of interest, shedding light on rating shopping and promoting accountability.”

The release says the commission has adopted rules to provide greater information concerning ratings histories “and to enable competing credit rating agencies to offer unsolicited ratings for structured finance products, by granting them access to the necessary underlying data for structured products.” It has also amended its rules and forms to omit “certain references to credit ratings” by nationally recognized statistical rating organizations, including locally based Moody’s Investors Services, Fitch Ratings and Standard & Poor’s, among others.

Additionally, the SEC is proposing to strengthen compliance programs by requiring annual compliance reports and bolstering disclosure of potential sources of revenue-related conflicts. The commission has also proposed new rules that would require disclosure of information including what a credit rating covers, any material limitations on the scope of the rating and whether any “preliminary ratings” were obtained from other agencies—i.e. ratings shopping.

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