The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

More Ratings Regulations Progress in US with House Financial Services Committee Vote

This week more progress has been achieved in the US with regards to the regulatory crackdown on credit ratings agencies: the House Financial Services Committee has thrown its support behind the bill to increase oversight of this corner of the market. The bill, which was first proposed by Paul Kanjorski, chairman of the House subcommittee on capital markets, goes one step further than the Obama administration’s proposed reforms for the sector by making these agencies collectively liable for inaccuracies in their ratings.

The aim of the new regulation is to try to reduce the conflicts of interests at ratings firms and make it easier to sue them when they provide investors with inaccurate findings. It would require these agencies to be liable under securities law for inaccuracies in their ratings, which would mean that they would be regulated as “experts” under securities law, in the same way as auditors, who can currently be more easily sued over their findings.

The bill would also require these firms to provide more information to the market about how they have been paid for their ratings services and would grant the Securities and Exchange Commission (SEC) more power to oversee their practices. Moreover, the ratings firms would need to appoint more independent members to their boards of directors in order to reduce the chances of conflicts of interests occurring.

The support of the House committee brings the proposals one step further to enactment, but they still have a long way to go as the Senate is moving on a far slower schedule than the House.

Unsurprisingly, the ratings agencies are not keen to face a potential barrage of lawsuits and have been vigorously lobbying for these proposals to be dropped. They have employed the tactic of suggesting that this development would push up costs for end investors for their services in the long run.

Related content

WEBINAR

Recorded Webinar: The post-Brexit UK sanctions regime – how to stay safe and compliant

When the Brexit transition period came to an end on 31 December 2020, a new sanctions regime was introduced in the UK under legislation set out in the Sanctions and Anti-Money Laundering Act 2018 (aka the Sanctions Act). The regime is fundamentally different to that of the EU, requiring financial institutions to rethink their response...

BLOG

The UK Regulatory Regime after Brexit – What Comes Next?

By Martin Lovick, Director, and Bobby Johal, Managing Director, ACA Compliance Group. A regime in transition Investment managers are – quite rightly – focusing near-term on the cliff-edge nature of the UK/EU negotiations on future trade arrangements. Their contingency planning will have already considered the likely loss of passporting rights for UK firms exporting their...

EVENT

Data Management Summit London

The Data Management Summit Virtual explores how financial institutions are shifting from defensive to offensive data management strategies, to improve operational efficiency and revenue enhancing opportunities. We’ll be putting the business lens on data and deep diving into the data management capabilities needed to deliver on business outcomes.

GUIDE

Regulatory Data Handbook 2020/2021 – Eighth Edition

This eighth edition of A-Team Group’s Regulatory Data Handbook is a ‘must-have’ for capital markets participants during this period of unprecedented change. Available free of charge, it profiles every regulation that impacts capital markets data management practices giving you: A detailed overview of each regulation with key dates, data and data management implications, links to...