AFP’s Jim Kaitz Supports Credit Rating Duopoly Relief Act of 2005

Bethesda, MD - June 29, 2005 - At a Congressional hearing today , AFP President Jim Kaitz urged Congress to aggressively pursue enactment of the "Credit Rating Agency Duopoly Relief Act of 2005" and its rapid implementation by the Securities and Exchange Commission (SEC). Kaitz testified before the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises of the House Financial Service Committee. Read the full testimony.

The Credit Rating Agency Duopoly Relief Act of 2005 would require credit rating agencies to register with the SEC. Under the proposed legislation, a rating agency would need to meet specific criteria in order to register. Many of the criteria outlined in the legislation are the same as those that AFP has been recommending for several years. The proposal also eliminates the ambiguous Nationally Recognized Statistical Rating Organization (NRSRO) designation process in favor of a more transparent registration process, which will stimulate meaningful competition in the credit ratings market.

AFP’s research has consistently shown that confidence in rating agencies and their ratings is low and has continued to diminish over the past few years. The SEC’s existing recognition process has created an artificial barrier to entry to the credit ratings market. This barrier has led to a concentration of market power with the recognized rating agencies and a lack of competition and innovation in the credit ratings market.

AFP has recommended that ongoing oversight by the SEC must ensure that registered credit ratings agencies continue to issue credible and reliable ratings. Further, the Commission must periodically verify that registered credit rating agencies have and adhere to policies that protect non-public information and prevent conflicts of interest and unfair and abusive practices.

Kaitz pointed out that the proposed legislation gives the SEC the authority, flexibility, and guidance needed to conduct the necessary oversight without placing an overly restrictive legislative regime on either the Commission or the credit rating agencies.

In conclusion, Kaitz reiterated “The enactment of this legislation, along with the development by the SEC of an oversight system, will be meaningful steps to improving investor confidence in the rating agencies and global capital markets.”

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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. For more information about AFP visit http://www.AFPonline.org/