The SEC Speaks Out

February 5, 2010 by · Leave a Comment
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Well , we got our answer from the SEC. today.

Chairman Mary Shapiro  answered the Journal in a letter to the editor. It seems that  the SEC doesn’t want the NRSROs to be the end-all for credit measurements. They are “seeking to reduce an undue reliance on the ratings” and that money managers do their own independent credit quality  analysis. The NRSRO rating should  just be a baseline measurement, a minimum level, or as she describes, a floor.

Shouldn’t the SEC stay out of this?

If you invest in anything, you should bear the risk. If there is fraud or mismanagement, the SEC. licensing and regulatory surveillance functions will find it. EC opinion on NRSRO credit evaluations puts them, and the U.S.  back in the endorsement business.

We will end up back in the same money market crisis again. We need to get out of the taxpayers-backstopping-investors cycle.  If you invest in a money market fund, you should earn the money market rate. Its up to you to decide if you want to take the risk

On her second point, I applaud Chairman Shapiro for clarifying the “floating NAV” proposal, and their investigation of its utility.

SEC is On the Job With Ratings and NAV ProposalWall Street Journal, February 4, 2010

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