AFP Press Release

AFP's Jim Kaitz Calls for Actions to Restore Investor Confidence in Rating Agencies and Global Capital Markets

Chairman Baker, Jim Kaitz, President and CEO, AFP, and Alex Pollock, Resident Fellow, AEI

Bethesda, MD - September 14, 2004 - At a hearing today on “The Ratings Game: Improving Transparency and Competition Among the Credit Rating Agencies, AFP President Jim Kaitz emphasized that, “Restoring issuer and investor confidence in the credit ratings process is critical to global capital markets”. Kaitz testified before the House Financial Services Committee Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises.

Kaitz pointed out that, despite repeated calls, the Securities and Exchange Commission (SEC) has not taken action to make the process of recognizing rating agencies more transparent nor adopted rules that would foster competition and innovation in the ratings market. In June of 2003, the SEC issued a concept release on rating agencies and the use of credit ratings under the federal securities laws. That concept release asked 56 questions about the nationally recognized statistical rating organization (NRSRO) designation, recognition criteria, the examination and oversight of NRSROs, conflicts of interests, and anticompetitive, unfair and abusive practices. According to Kaitz, “More than 15 months after this concept release and more than a decade after a similar concept release in 1994, the SEC has yet to provide a single answer of its own.”

To address many of the questions raised by the SEC and market participants, the Association for Financial Professionals in April of this year, along with treasury associations from the United Kingdom and France, released an Exposure Draft of a Code of Standard Practices for Participants in the Credit Rating Process. The Code contains recommendations for regulators, as well as rating agencies and issuers. “AFP developed the draft Code in an effort to improve investor and issuer confidence in the credit rating agencies and the ratings they promulgate,” said Kaitz.

In his conclusion, Kaitz reiterated the importance of the rating agency issue and its impact on all institutional and individual participants in global capital markets. He urged Subcommittee members to continue to press the SEC to take appropriate action.

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The Association for Financial Professionals (AFP) in Bethesda, Maryland, supports more than 14,000 individual members from a wide range of industries throughout all stages of their careers in various aspects of treasury and financial management. AFP is the preferred resource for financial professionals for continuing education, financial tools and publications, career development, certifications, research, representation to legislators and regulators, and the development of industry standards.