Financial Regulatory Forum

Global disclosure 2011 review: trends and new mandates in public filings

By John Mackie

NEW YORK, Dec. 22 (Business Law Currents) – The global push for increased transparency by public issuers continued in 2011, with developments on a number of fronts. U.S disclosure trends included Dodd-Frank related mandates and event-driven disclosures. Canada continued to refine its disclosure regime, seeing voices weigh in from the Canadian Securities Administrators and the Supreme Court. Regulators in the UK, meanwhile, pressed issuers to emphasize clarity over quantity in their disclosures. Business Law Currents takes a closer look at the global disclosure picture in 2011, highlighting this year’s trends, developments, concerns and challenges.

Among the hot disclosure topics for 2011 were Chinese issuers, the natural disasters in Japan, and the regulation of credit rating agencies. On a regional basis, the Supreme Courts in both the U.S. and Canada provided their thoughts regarding materiality assessments in a disclosure context. (more…)

Start-up rating agencies urge national regulators to promote competition, change

By Rachel Wolcott

Aug. 15  (Thomson Reuters Accelus) –  Even as national governments cry foul over recent sovereign ratings downgrades, new rules and regulation aimed at rating agencies is making it harder for newcomers to break into the ratings market. Standard & Poor’s (S&P), Moody’s Investors Service and Fitch Ratings may have come under renewed fire because of the sovereign debt crisis, but rules set out in the United States’ 2006 Credit Rating Agency Reform Act and the Dodd-Frank Act have yet to open up the market as hoped.

The European Union, via the European Securities and Markets Authority, has also taken steps to clamp down on ratings agencies, but there again the ratings oligopoly remains largely unchallenged. Now, new entrants to the ratings market are urging regulators and legislators on both sides of the Atlantic to focus their efforts on promoting competition in the sector.

(more…)

Dodd-Frank and SEC blaze new trail for credit ratings

NEW YORK, April 19 (Westlaw Business) – Dodd-Frank’s credit-rating provisions do more than just hamstring ratings agencies; they also open new frontiers of opportunity.

Already on the wane as a result of their collective role in the world financial crisis, the influence of the big ratings agencies will soon take another hit as the Dodd-Frank financial regulation overhaul formally strips these analysts of their aura of omniscience. Obscured in the conversation is what collateral effects may spring from this new regulation. (more…)

How to reduce the risk of future black swans: eliminate issuer-paid ratings

The following is a guest post by Kenneth Posner, author of “Stalking the Black Swan: Research & Decision-making in a World of Extreme Volatility.” The opinions expressed are his own.

Recently, the U.S. Financial Crisis Inquiry Commission (FCIC) held hearings on the role of the rating agencies in the near-death  experience of the U.S. financial system, an important topic given the disastrous performance of mortgage-backed securities rated AAA by Moody’s and Standard & Poors.

The problem with the rating agencies is not their role, but the oligopolistic domination of the business by these two firms. This domination is a direct result of the “issuer-paid model” under which rating agencies are paid by the issuers of securities, rather than investors.

FACTBOX-Winners and losers in the U.S. financial bill

WASHINGTON, June 25 (Reuters) – U.S. lawmakers are close to finalizing legislation that will overhaul the country’s financial system and usher in new rules for Wall Street.

A joint House of Representatives and Senate committee approved a bank regulation bill that lawmakers expect to pass each chamber separately in the coming days. It will then be ready for U.S. President Barack Obama to sign into law, possibly by July 4.

Below are some of the likely winners and losers under the regulation bill.

CREDIT RATING AGENCIES – WIN AND LOSE

* Credit rating agencies — such as Moody’s Corp, Standard & Poor’s and Fitch Ratings — will be subject to greater liability.

FACTBOX – Comparing EU and U.S. financial reform

LONDON, May 21 (Reuters) – The U.S. Senate approved a reform of Wall Street on Thursday and President Barack Obama may be signing into law the most sweeping changes to financial rules since the 1930s as soon as next month.

It implements pledges the United States, the European Union and other leading countries in the Group of Twenty made in 2009.

With the United States set to adopt its reform soon — and thus easily meet G20 deadlines — the EU has to play catch-up in some cases. Banks are watching carefully as transatlantic differences are emerging that will affect business models.

FACTBOX-Winners and losers in the U.S. Senate’s financial bill

May 21 (Reuters) – The U.S. Senate on Thursday approved a bill that would overhaul the country’s financial system and usher in new rules for Wall Street.

While last-minute changes are still possible, below are some of the likely winners and losers under the bill.

(more…)

ANALYSIS-Franken bill unlikely to make credit ratings more reliable

By Karen Brettell

NEW YORK, May 14 (Reuters) – Legislation designed to create more independent credit ratings for risky assets may not result in more reliable indicators of an asset’s future performance and details on how the process would work are still unclear.

The U.S. Senate on Thursday voted in favor of a proposal by Democratic Senator Al Franken to create a clearinghouse that will be comprised in majority by investors including pension and other fund managers, who will be responsible for assigning a rating agency to rate complex products at their inception.

By removing the decision on who allocates the first rating on these assets from the issuers, the legislation aims to remove ratings shopping wherein issuers of risky debt could seek out agencies that gave more favorable ratings to assets.

ANALYSIS-Credit rating agencies should not be dupes

By Dan Wilchins

NEW YORK, May 13 (Reuters) – New York Attorney General Andrew Cuomo is looking at whether investment banks duped credit rating agencies, but a bigger question is why the rating agencies failed to prevent the financial meltdown.

Banks may indeed have misled Moody’s Investors Service, Standard & Poor’s, and Fitch into giving higher ratings than some securities really merited, but rating agencies should have done more to avoid being fooled, critics said.

Until the structural problems with rating agencies are fixed, new credit bubbles will likely be inflated.

U.S. Senate panel releases documents on credit raters’ role in Abacus, financial crisis

The Senate Permanent Subcommittee on Investigations released a trove of internal messages and other exhibits from its look at the role credit-rating agencies played in the financial crisis, including several related to the Goldman Sachs Abacus trades at the heart of SEC fraud charges against the bank .  Reuters links to full file of exhibits.

(more…)

  •