SEC Publishes Proposals to Reduce Reliance on Credit Ratings
The Securities and Exchange Commission (SEC) has published for public comment proposed rule changes to make the limits and purposes of credit ratings clear to investors and ensure that the role assigned to ratings in SEC rules is consistent with the objectives of having investors make an independent judgment of credit risks. The SEC voted unanimously on 25 June to issue for public comment this third set of proposed recommendations to bring increased transparency to the credit ratings process and curb practices that contributed to recent turmoil in the credit markets. The Commission voted to propose the first two sets of recommendations on 11 June. “This action is designed to ensure that the role we assign to ratings in our rules is consistent with the objective of having investors make an independent judgment of the risks associated with a particular security,” said SEC chairman Christopher Cox. “It should be neither the purpose nor the effect of any SEC rule to discourage investors from paying close attention to what credit ratings actually mean.” Public comments on this third set of proposed rules should be received by the Commission no later than 5 September 2008.