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House Committee Approves Credit Rating Agency Reform Legislation
June 14, 2006
FEI Summary
On June 14, 2006 the House Financial Services Committee approved H.R. 2990, the Credit Rating Agency Duopoly Relief Act of 2005. The legislation, which was introduced by Rep. Mike Fitzpatrick (R-PA), would overhaul the framework for registering and overseeing credit rating agencies. The bill aims to remove the Securities and Exchange Commission (SEC) from the process of approving certain credit rating agencies as “Nationally Recognized Statistical Rating Organizations” (NRSROs). Instead, under the bill, the SEC would register credit rating agencies that meet a new definition, and would oversee the companies through inspections, examinations, and enforcement.
Among the items that would be listed on an SEC registration by aspiring NRSROs are conflicts of interest; the procedures and methodologies used in determining credit ratings; credit ratings performance measurement statistics; and procedures for protecting non-public information. FEI’s Committee on Corporate Finance (CCF) was an early and forceful advocate for the provision addressing conflicts of interest.
Democrats offered an amendment that would have solicited greater input from the SEC on the legislation, and would have given the SEC more time to hammer out a voluntary framework for NRSRO recognition. The amendment failed by party-line vote.
H.R. 2990 now moves to a vote before the full House. The timing for the vote is uncertain.
For more information, please contact Mark Prysock (mprysock@FinancialExecutives.org), General Counsel, Financial Executives International (FEI).
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