SEC chairman Mary Schapiro said the proposals, which run more than 500 pages, are intended to strengthen the integrity and improve the transparency of credit ratings.
New regulations, which were mandated by the Dodd-Frank financial-overhaul law passed last year, mandates credit raters to disclose more details about their ratings process and better manage conflicts of interest.
The new regulations also enhance the SEC’s existing rules governing credit ratings and Nationally Recognized Statistical Rating Organizations (NRSROs).
Under the new proposal, NRSROs would be required to: report on internal controls; protect against conflicts of interest; establish professional standards for credit analysts; publicly provide disclosure about the credit rating and the methodology used to determine it; and enhance their public disclosures about the performance of their credit ratings.
The SEC’s proposal also requires disclosure concerning third-party due diligence reports for asset-backed securities.
Ratings companies would also be required to review the activities of employees who leave to join firms whose products they have rated, and to notify the SEC when such moves occur.
The proposal would give the SEC authority to de-register firms found to have violated the conflict-of-interest rule.
However, none of new proposals strike directly at the heart of what many say is an inherent conflict of interest at the big three credit-rating agencies which all get paid by issuers.
The rules, which would apply to the 10 firms registered with the SEC, will go through a 60-day public comment period; a second vote by the commission is required to make them final.
