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October Act | |||
* Stronger than the Administration's Plan on Rating Agencies. The Accountability and Transparency in Rating Agencies Act expands on the initial credit rating agency legislation proposed by the Administration in that it: | |||
* Creates Accountability by Imposing Liability. The bill enhances the accountability of Nationally Recognized Statistical Rating Organizations (NRSROs) by clarifying the ability of individuals to sue NRSROs. The bill also clarifies that the limitation on the Securities and Exchange Commission (SEC) or any State not to regulate the substance of credit ratings or ratings methodologies does not afford a defense against civil anti-fraud actions. | |||
* Duty to Supervise. The bill adds a new duty to supervise an NRSRO's employees and authorizes the SEC to sanction supervisors for failing to do so. | |||
* Independent Board of Directors. The bill requires each NRSRO to have a board with at least one-third independent directors and these directors shall oversee policies and procedures aimed at preventing conflicts of interest and improving internal controls, among other things. | |||
* Mitigate conflicts of interests. The legislation also contains numerous new requirements designed to mitigate the conflicts of interest that arise out of the issuer-pays model for compensating NRSROs. Additionally, the bill significantly enhances the responsibilities and accountability of NRSRO compliance officers to address conflicts of interest issues. | |||
* Greater Public Disclosure. As a result of the bill, investors will gain access to more information about the internal operations and procedures of NRSROs. In addition, the public will now learn more about how NRSROs get paid. | |||
* Revolving-Door Protections. When certain NRSRO employees go to work for an issuer, the bill requires the NRSRO to conduct a 1-year look-back into the ratings in which the employee was involved to make sure that its procedures were followed and proper ratings were issued. The bill also requires NRSROs to report to the SEC, and for the SEC to make such reports public, the names of former NRSRO employees who go to work for issuers | |||
Failures | |||
Enron November 2001 Orange County California, Mercury Finance, Pacific Gas & Electric, Enron, WorldCom, Delphi, General Motors and Ford. | |||
FINANCIAL GATEKEEPERS: CAN THEY PROTECT INVESTORS?, Yasuyuki Fuchita, Robert E. Litan, eds., Brookings Institution Press and the Nomura Institute of Capital Markets Research, 2006 | FINANCIAL GATEKEEPERS: CAN THEY PROTECT INVESTORS?, Yasuyuki Fuchita, Robert E. Litan, eds., Brookings Institution Press and the Nomura Institute of Capital Markets Research, 2006 | ||
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{{reflist}} | {{reflist}} | ||
Revision as of 02:41, 2 March 2010
October Act
* Stronger than the Administration's Plan on Rating Agencies. The Accountability and Transparency in Rating Agencies Act expands on the initial credit rating agency legislation proposed by the Administration in that it:
* Creates Accountability by Imposing Liability. The bill enhances the accountability of Nationally Recognized Statistical Rating Organizations (NRSROs) by clarifying the ability of individuals to sue NRSROs. The bill also clarifies that the limitation on the Securities and Exchange Commission (SEC) or any State not to regulate the substance of credit ratings or ratings methodologies does not afford a defense against civil anti-fraud actions.
* Duty to Supervise. The bill adds a new duty to supervise an NRSRO's employees and authorizes the SEC to sanction supervisors for failing to do so.
* Independent Board of Directors. The bill requires each NRSRO to have a board with at least one-third independent directors and these directors shall oversee policies and procedures aimed at preventing conflicts of interest and improving internal controls, among other things.
* Mitigate conflicts of interests. The legislation also contains numerous new requirements designed to mitigate the conflicts of interest that arise out of the issuer-pays model for compensating NRSROs. Additionally, the bill significantly enhances the responsibilities and accountability of NRSRO compliance officers to address conflicts of interest issues.
* Greater Public Disclosure. As a result of the bill, investors will gain access to more information about the internal operations and procedures of NRSROs. In addition, the public will now learn more about how NRSROs get paid.
* Revolving-Door Protections. When certain NRSRO employees go to work for an issuer, the bill requires the NRSRO to conduct a 1-year look-back into the ratings in which the employee was involved to make sure that its procedures were followed and proper ratings were issued. The bill also requires NRSROs to report to the SEC, and for the SEC to make such reports public, the names of former NRSRO employees who go to work for issuers
Failures
Enron November 2001 Orange County California, Mercury Finance, Pacific Gas & Electric, Enron, WorldCom, Delphi, General Motors and Ford.
FINANCIAL GATEKEEPERS: CAN THEY PROTECT INVESTORS?, Yasuyuki Fuchita, Robert E. Litan, eds., Brookings Institution Press and the Nomura Institute of Capital Markets Research, 2006
San Diego Legal Studies Paper No. 07-46