SEC Eliminates Ratings Requirement

August 11, 2011 by · Leave a Comment
Filed under: SEC, The Ratings System 

In a 5-0 vote the Securities and Exchange Commission (SEC) proposed that key

documents intended to expedite the securities offering process no longer require a ratings reference. This action is part of broader initiative required by the Dodd-Frank financial reform law to eliminate ratings reference from all federal rules.

If the proposal is implemented, S-3 and F-3 “short form registration” documents that help to speed the offering process for selling securities “off the shelf” would no longer require that the company offering the bonds show the debt was given an investment-grade rating. Instead the SEC would require that the company be a “well-known, seasoned issuer.”

An SEC study suggests that if this regulation had been implemented between 2006 and 2008, 45 of about 1000 companies that issued debt securities would not have been eligible to use the expedited form.

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