Back in January when securities lawyers were predicting what 2009 held in store for the SEC, lots of people predicted more credit rating agency regulations. Thursday, the SEC followed through with a number of credit rating agency proposals.
The proposals with the most potential to shake up the current ratings environment are:
- Create a system that allows competing rating agencies to obtain access to the same information about a structured finance product to enable competing ratings of the same product. The increased competition may result in more accurate ratings;
- Require the disclosure of “preliminary ratings” obtained from a previous rating agency to discourage ratings shopping; and
- Require that an issuer that includes a credit rating in a registration statement obtain the consent of the rating agency, thus resulting in potential liability for the rating agency under the Securities Act similar to how other experts are treated. The SEC acknowledges this could be a far-reaching change and is only seeking comment as to whether it should propose such a rule at this time.