Commission Considers Proposal to Reduce Reliance on Credit Ratings

At the SEC's June 25, 2008 open meeting, the Commission took up a proposal to increase investor protection by reducing reliance on credit ratings.  According to Chairman Cox's opening statement:

The recommendations we consider today are designed to ensure that the role we assign to ratings in our rules is consistent with the objective of having investors make an independent judgment of the risks associated with a particular security.

The concern is that because of the references to credit ratings throughout the SEC's rules, investors have come to place undue reliance on the credit ratings, instead of conducting their own due diligence.