Credit rating agency law being finalized tomorrow

[Cate Long]

Tomorrow the House and Senate conference committee is finalizing the
language for credit rating agencies.

The push and shove is in full flight…

Senator Al Franken is promoting his amendment to establish a “ratings
board” that will assign a specific rater (Nationally Recognized
Statistical Rating Organizations [NRSRO]) to rate structured finance
deals.

If adopted his amendment will have the effect of creating at least one
independent rating for each structured finance deal. This would be
very useful for less sophisticated institutional investors who don’t
have in-house analytical staff. It would also be a useful check on the
major raters.

The Minneapolis Star Tribune is reporting that House Chairman Barney
Frank is proposing that the Franken proposal be studied and a report
given to Congress on the implementation issues within a year. It
sounds likely that a one year study will be written into the law. And
the new board will come to life after a year.

Beyond the Franken amendment the House conference members issued some
draft changes (page 11) today which incorporated specific language
related to issuer disclosure to credit rating agencies. The language
directs the SEC to rewrite the rules for issuer disclosure to raters
under Regulation FD… this may be equivalent disclosure… yes it may…

House draft language…

SEC. 939B. ELIMINATION OF EXEMPTION FROM FAIR DISCLOSURE RULE.

” Not later than 90 days after the date of enactment 25 of this
subtitle, the Securities Exchange Commission shall revise Regulation
FD (17 C.F.R. 243.100) to remove from such regulation the exemption
for entities whose primary business is the issuance of credit ratings
(17 C.F.R. 4 243.100(b)(2)(iii)).

http://shopyield.com/2010/06/14/credit-ratings-agencies-are-more-powerful-than-regulators-why-not-harness-that/