Jim Kaitz, President of the Association for Financial Professionals (AFP) issued the following statement regarding President Bush's signing of the Credit Rating Agency Reform Act of 2006.
"Confidence in the credit rating agencies and the ratings they issue is critical to the efficient operation of our nation's capital markets. Today's signing of the Credit Rating Agency Reform Act, will open the credit ratings market to competition and transparency and restore confidence in the credit rating market," said Jim Kaitz, AFP President and CEO. "Importantly, the new law gives the SEC the tools necessary to hold recognized rating agencies accountable if they fail to produce credible and reliable ratings," Kaitz concluded.
For over four years, AFP has called for reform of the credit ratings market. AFP's research has consistently shown that confidence in rating agencies and the ratings they issue is low. The SEC's current recognition process has created an artificial barrier to entry to the credit ratings market resulting in a lack of accountability, competition and innovation.
The Credit Rating Agency Reform Act establishes a new registration process setting a clear path to being designated as a Nationally Recognized Statistical Rating Organization (NRSRO). The legislation also provides prudent SEC oversight to ensure that registered credit rating agencies continue to issue credible and reliable ratings and protect against conflict of interests and misuse of nonpublic information.