The SEC today proposed nine rules to improve the role of credit-rating agencies. The proposals include prohibiting agencies from issuing a rating on a structured product without full information about underlying assets; barring them from structuring the same products that they rate; requiring that all ratings be made public; publishing ratings statistics; prohibiting the staff involved in ratings from negotiating fees or receiving gifts over $25; and requiring disclosure about due diligence and frequency of rating revisions.
SEC Chairman Christopher Cox said in prepared remarks at a public hearing today that the proposed rules are born of the subprime mortgage crisis and the resulting credit crunch. The complexity of the structured products themselves combined with the lack of quality information about the underlying assets to make it exceptionally difficult for anyone to determine a credit rating at all.
Public comment is being sought on the proposals for up to 90 days. The SEC will hold a second public hearing June 25 in Washington.