Corporate Governance

Reform Suggestions on Rating Agencies

By Fei-Lu Qian

Given the critical role that credit rating agencies have played in the financial crisis, the Council of Institutional Investors (CII) released a white paper on the regulation of credit rating agencies calling for stronger oversight and accountability of them. The paper entitled, ?Rethinking Regulation of Credit Rating Agencies: An Institutional Investor Perspective,? written by Frank Partnoy of the University of San Diego School of Law goes through the pros and cons of reforms that have been proposed for the agencies.

The paper recommends that Congress create a new Credit Rating Agency Oversight Board with the power to regulate rating agency practices such as disclosure. At minimum, Congress should give more authority to the SEC to oversee the agencies. Second, the paper recommends that the rating agencies should not be exempt from liability under the Securities Act of 1933 and make them subject to private rights of action under the country?s securities laws.

Full post as published by PomTalk on April 14, 2009 (boomark / email).