U.S. Securities and Exchange Commission (SEC) proposed new rules for credit
rating agencies as mandated by the Dodd-Frank Act.
the SEC proposal, credit rating agencies are required to:
- Report on
against conflicts of interest
professional standards for credit analysts
provide – along with the publication of the credit rating – disclosure
about the credit rating and the methodology used to determine it
their public disclosures about the performance of their credit ratings.
The SEC’s proposal also requires disclosure
concerning third-party due diligence reports for asset-backed securities.
with our message of years past, AFP will continue to be a proponent of policies
that encourage competition in the credit ratings market, increase transparency
and control/eliminate potential conflicts of interest in the ratings process,”
said Jeanine H. Arnett, Director, Government Relations & Public Policy for
firmly believe that fundamental changes to the current business models of
credit rating agencies must be enacted in order to correct the systemic
problems plaguing the system. AFP will continue to pursue policies that promote
real competition, greater credibility and reliability in ratings and the
elimination of conflicts of interest. AFP will strenuously oppose efforts by
the credit rating agencies to shift potential liability to issuers.”
supports the disclosure of additional information, Arnett said, but believes
that the requirements for disclosure should be independent of model. “Any
disclosure requirements should be applied to all NRSROs regardless of their
business model,” she said. “Disclosing additional
pieces of information will add transparency and credibility to the credit
rating process, allowing investors to evaluate rating methodologies and the
diligence with which each NRSRO scrutinizes existing ratings. Market
participants should have access to information that allows them make a
proactive assessment of an NRSRO’s surveillance process rather than discover
that it is flawed through adverse events.”
added that AFP does not support “interference with the rating methodologies
used by NRSROs. Disclosure of and adherence to those methodologies are
sufficient for a prudent investor to make an informed decision.”
Read the full proposal.
Read the SEC’s fact
sheet on the proposal.
on the proposal.
Read a statement by
SEC Chairman Mary Schapiro about the proposal.
discuss the proposal.