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SEC proposes credit rating transparency, integrity rules

May 19 2011 Stuart Gittleman, Compliance Complete

The Securities and Exchange Commission unanimously voted Wednesday to propose new rules and amendments for increasing the transparency and improving the integrity of credit ratings. Comments on the 517-page proposal should be received within 60 days of its publication in the Federal Register, which is expected soon. "In passing the Dodd-Frank [Wall Street Reform and Consumer Protection] Act, Congress noted that credit ratings applied to structured financial products proved inaccurate and contributed significantly to the mismanagement of risks by financial institutions and investors," SEC Chairman Mary Schapiro said. The proposal would implement the Dodd-Frank Act regarding credit ratings, nationally recognized statistical rating organizations and third-party due-diligence providers, which are hired by issuers and underwriters of asset-backed securities to review a sample of the underlying assets. The reviews, which are frequently required in connection with rating an ABS, typically

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