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06/27/08 -- SEC Votes to Downgrade the Role of the Rating Agencies.
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The Securities and Exchange Commission, at a June 25, 2008, meeting, proposed sweeping changes to the agency?s rules on the use of credit ratings.
The SEC said the changes were due in part to concerns that the agency?s use of the ratings may have contributed to a blind reliance on them on the part of investors.
?The entire package of reforms is born of the subprime mortgage crisis, and the resulting credit crunch,? said Chairman Christopher Cox. ?These events of recent months have had a profound effect on our economy and our markets, and they have galvanized regulators and policy makers not only in this country but around the world to re-examine every aspect of the regulatory framework governing credit rating agencies.?
The changes are the third part of a larger package of rule changes affecting the disclosure and governance practices of the rating agencies?the first two stages were approved by the SEC on June 11.
In February, Cox told a Senate Banking Committee hearing he had directed the SEC staff to find alternatives to the Commission?s reliance on credit ratings, particularly in monitoring the risk of investments held by the institutions the agency regulates.
The proposal would eliminate references to the use of credit ratings in 11 rules or forms, substitute a new standard in 26 rules or forms, and recommend leaving six rules unchanged.
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