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

A-Team Insight Blogs

SEC Proposes First in Series of Rule Amendments to Remove References to Credit Ratings

Share article

The Securities and Exchange Commission today voted unanimously to propose amendments to its rules that would remove credit ratings as one of the conditions for companies seeking to use short-form registration when registering securities for public sale.

Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires federal agencies to review how existing regulations rely on credit ratings and remove such references from their rules as appropriate.

This marks the first in a series of upcoming SEC proposals in accordance with Dodd-Frank to remove references to credit ratings contained within existing Commission rules and replace them with alternative criteria.

“Over-reliance on credit ratings has been one of the factors cited as contributing to the financial crisis,” said SEC chairman Mary Schapiro. “I look forward to hearing from companies that are currently eligible for short-form registration as to whether there are alternative criteria that would preserve their eligibility.”

The SEC’s proposal focuses on the use of credit ratings as a condition of so-called “short-form” eligibility. Companies that are “short-form eligible” also are allowed to register securities “on the shelf.” Shelf registration provides companies considerable flexibility in deciding when to access the public securities markets.

The SEC’s proposed rule amendments would remove the NRSRO investment grade ratings condition included in SEC forms S-3 and F-3 for offerings of non-convertible securities, such as debt securities. And instead of ratings, the new short-form test for shelf-offering eligibility of companies would be tied to the amount of debt and other non-convertible securities they have sold in the past three years

Public comments on the SEC’s proposal should be submitted by 28 March 2011.

Related content

WEBINAR

Recorded Webinar: How far should counterparty screening go? Balancing the ideal and the realistic

Counterparty screening is a regulatory requirement, but do you know enough about your clients’ clients, and beyond? How can you source this information and how does it benefit your business? How far do you need to dig into entity ownership structures? This webinar discusses these challenges and how they relate to your organisation, whether you’re...

EVENT

Data Management Summit USA Virtual

The highly successful Data Management Summit USA Virtual was held in September 2020 and explored how sell side and buy side financial institutions are navigating the global crisis and adapting their data strategies to manage in today’s new normal environment.

GUIDE

RegTech Suppliers Guide 2020/2021

Welcome to the second edition of A-Team Group’s RegTech Suppliers Guide, an essential aid for financial institutions sourcing innovative solutions to improve their regulatory response, and a showcase for encumbent and new RegTech vendors with offerings designed to match market demand. Available free of charge and based on an industry-wide survey, the guide provides a...