SEC is requesting Public Comment on Proposed NSRO rating rules

 

On May 10, 2011 the SEC requested for public comment ideas that will ultimately reduce the potential conflict of interest of a NRSRO assigning a credit rating for a structured product instrument.  The comment period will end on or about September 10, 2011.   

The study will be asking the public to comment on four areas: 

• The credit rating process for structured finance products and the potential conflicts of interest associated with the issuer-pay and the subscriber-pay models.

•  The feasibility of establishing a system in which a public or private utility or an SRO assigns an NRSRO(s) to determine the credit ratings for structured finance

• The range of metrics one could use to determine the accuracy of credit ratings for structured finance products.

•  Alternative means for compensating NRSRO(s) that would create incentives for accurate credit ratings for structured finance products.

In addition, Section 939F provides that, after submission of the report to Congress resulting from the study, the Commission shall, by rule, as the Commission determines is necessary or appropriate in the public interest or for the protection of investors, establish a system for the assignment of NRSRO’s to determine the initial credit ratings of structured finance products, in a manner that prevents the issuer, sponsor, or underwriter of the structured finance product from selecting the NRSRO’s that will determine the initial credit ratings and monitor such credit ratings.