SEC Proposes Broad New Rules for Rating Agencies

September 20, 2011 by · Leave a Comment
Filed under: The Rating Agencies 

In a recent public meeting Mary Shapiro, chairwoman of the Security and Exchange Commission (SEC), announced what she called a “massive proposal” designed to “help investors and other users of credit ratings better understand and assess the ratings” provided by rating agencies.

Included in the proposal, which is open to public comment for 60 days, are rules requiring periodic analyst performance exams, provisions that force the separation between analysts and rating agency marketers, and restrictions on ratings agency analysts taking jobs at firms seeking ratings.

Some believe the proposed rules changes do not go far enough. Specifically, the “issuer-pays” model that has allegedly led to conflicts of interest has not been eliminated. On the other hand, the rating agencies are opposed to the proposed rules. They challenge the SEC saying that the new “transparency” that is being forced upon them will lead, in practice, to assessments that are “opaque” or “formulistic.”

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