Tuesday, May 10, 2011
The SEC published on its website a request for public comment on the feasibility of a system in which a public or private utility or a self-regulatory organization would assign a nationally recognized statistical rating organization (NRSRO) to determine credit ratings for structured finance products. The Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the SEC study assigned ratings as part of a broader examination of credit ratings.
Section 939F of the Dodd-Frank Act directs the SEC to study the credit rating process for structured finance products and the conflicts associated with the “issuer-pay” and the “subscriber-pay” models. The Act also requires the SEC to study the feasibility of establishing a system in which a public or private utility or a self-regulatory organization assigns NRSROs to determine the credit ratings for structured finance products. In addition, the study must address the range of metrics that could be used to determine the accuracy of credit ratings for structured finance products, and alternative means for compensating NRSROs that would create incentives for accurate credit ratings for structured finance products. By July 21, 2012, the SEC is required to submit the findings of the study to Congress along with any recommendations for regulatory or statutory changes that the Commission determines should be made.
To better inform the study, the request asks interested parties to provide comments, proposals, data and analysis in response to questions presented in the request. The public comment period will remain open for 120 days following publication of the request in the Federal Register.