The Securities and Exchange Commission’s plan to ease requirements that credit ratings be used for debt securities will have only a limited impact on the $5 billion rating industry because dozens of other government agencies continue to require the Wall Street grades, observers said.
The SEC is recommending the elimination of any reference to credit ratings in 11 of the 44 of its rules that contain these references, and some modification in 27 more rules, while still allowing money managers and broker dealers to rely on credit ratings if they choose. Current federal requirements have been widely criticized as giving the rating agencies a protected status and ensuring that they flourish despite flawed performance.
In the wake of the subprime debacle, the SEC has been reassessing the role of rating agencies such as Moody’s Investors Service and Standard & Poor’s amid evidence that they are riddled with conflicts of interest and lack transparency.
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