Freedom Of Speech?

October 30, 2009 by · Leave a Comment
Filed under: The Rating Agencies 

It is hard to envision our founding fathers, particularly Hamilton, agreeing that the ratings provided by the big three rating agencies provide are protected by the First Amendment. But no ratings agency has ever been successfully sued for misleading investors. They are simply presenting opinions.

This loophole needs to be closed and the SEC is taking public comment on new rules that make it clear that ratings agencies have a fiduciary responsibility to the investor community. This isn’t to mean that they can be sued every time an investment goes sour. Rather, if a ratings agency provides a rating they knew or should have known to be misleading after confirming that the information they received from the bond issuer was accurate, they should be held liable. This might end up being a “Full Employment Act” for lawyers.” Third paragraph: Insert comma after “overdue.

It is change long overdue and will go far to help restore faith in the rating agencies.

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