The Senate Banking Committee hears a call for a "simple, bright-line rule" to prevent credit raters from using their clout to gain consulting business.
Critics citing the potential for conflicts of interests at credit- rating agencies could do worse than look to the Sarbanes-Oxley Act as a model for a solution, the leader of a prominent organization of finance executives thinks.
The potential for conflict lies in the agencies' practice of offering rating services and consulting services to the same issuer. "A simple, bright-line rule" similar to Sarbox Title II, which lists specific activities that public accounting firms can no longer perform for their audit clients, would solve the conflict, according to Colleen Cunningham, president and chief executive officer of Financial Executives International. She testified before a Senate Banking Committee on Banking hearing on credit-rating agency reform on Tuesday.
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