In a letter to the US Securities and Exchange Commission, the Association for Financial Professionals voiced its concerns that the SEC’s most recent proposal defining the recognition process for credit rating agencies still does not allow for a truly competitive market.
The proposal, “Definition of National Recognized Statistical Rating Organization,” still needs work, according the organization. The AFP renewed its call on the SEC to take steps to eliminate artificial barriers to entry into the credit rating market and provide prudent oversight that ensures investor confidence in the rating process.
“While we are pleased that the SEC has taken steps to define the recognition process by accepting many of our recommendations, we believe that the SEC’s proposed definition largely maintains the status quo instead of truly opening up the credit rating process to innovation and competition,” said Jim Kaitz, president and CEO of the Association for Financial Professionals.
“To reflect the active role we envision for the SEC, we are calling on them to abandon the ‘national recognized’ requirements and instead establish a more market-driven definition and process that would be best summed up in a new designation called ‘Registered Credit Rating Agency,'” concluded Kaitz. “This new designation would more accurately reflect the role we recommend for the SEC in recognizing and overseeing credit rating agencies and would increase investor confidence in credit ratings and improve the efficiency of capital markets.”