SEC Seeks Tighter Rules for Agencies Rating Debt
May 18, 2011 (Associated Press) WASHINGTON - Federal regulators are proposing tighter oversight of the agencies that rate the debt of companies and governments.
The ratings can affect a company's ability to raise or borrow money, and can influence how much investors pay for securities. The big three rating agencies were criticized for helping fuel the financial crisis by giving low-risk ratings to high-risk mortgage securities that later failed. Critics say the agencies have a conflict of interests because they are paid by the same companies they rate.
The Securities and Exchange Commission Wednesday advanced the rules for public comment after a 5-0 vote The rules, required under last year's financial overhaul, would force agencies to provide more details about how they determine ratings and bar the agencies' sales people from participating in the ratings process.