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U.S. SEC seeks to reduce credit raters' conflicts of interest

Dec 19 2012 Aruna Viswanatha, Reuters

U.S. securities regulators on Tuesday outlined potential ways to reduce conflicts of interest at the country's largest credit-rating agencies, but failed to take a strong stand on specific industry reforms. Instead, the Securities and Exchange Commission's report abstained on the next steps and recommended further discussion of the matter. The SEC's report was required by a provision known as the "Franken" amendment in the 2010 Dodd-Frank Wall Street reform law. Named for Democratic Senator Al Franken of Minnesota, the provision required the SEC to conduct a review of the feasibility of a new system in which a public or private utility or board would assign work to the agencies on structured product ratings. Assigning ratings work would represent a sea change for the country's three largest credit-rating firms, Moody's Corp, McGraw-Hill Cos Inc's Standard & Poor's, and Fimalac SA's Fitch, which are all paid by the companies they rate. That "issuer-pay"

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