Ratings firms 'broke SEC rules'

9 July 2008

Three agencies that provide consumers with credit ratings have broken rules set by the US regulator the Securities and Exchange Commission (SEC).

The firms were found to have not observed the necessary separation of analysts from fee negotiations, so as to ensure ratings were not influenced.

A SEC report which followed an inquiry into the activities of Fitch Ratings, Moody's and Standard & Poor's concluded that the agencies had failed to meet even the companies' own guidelines.

"While each rating agency has policies and procedures restricting analysts from participating in fee discussions with issuers, these policies still allowed key participants in the ratings process to participate in fee discussions," the report explained.

Only one of the three firms examined was found to have actively monitored negotiations to ensure that conflict of interest was avoided.

SEC last month proposed new measures, including expanding disclosure rules, to curb conflicts of interest that crop up in rating agency negotiations.

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