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The SEC's Proposed Rating Agency Rules: Unresolved Conflicts

John P. Hunt

University of California, Davis - School of Law

June 26, 2008

On June 16, the SEC made public new rules intended to increase transparency and reduce conflicts of interest in the credit rating process for fixed-income instruments. The proposal may be most important for what it does not do: The SEC does not plan to forbid the "issuer-pays" system, in which the rating agencies are paid by the parties whose products are being evaluated. Although the SEC apparently has the power to ban issuer-pays and recognizes that the arrangement creates potential conflicts of interest, the proposed rules address issuer-pays only through a half measure that appears unlikely to be effective.

Number of Pages in PDF File: 6

Keywords: rating agencies, credit crisis, SEC

JEL Classification: G18

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Date posted: October 15, 2008 ; Last revised: November 21, 2008

Suggested Citation

Hunt, John P., The SEC's Proposed Rating Agency Rules: Unresolved Conflicts (June 26, 2008). Available at SSRN: http://ssrn.com/abstract=1284709 or http://dx.doi.org/10.2139/ssrn.1284709

Contact Information

John P. Hunt (Contact Author)
University of California, Davis - School of Law ( email )
Martin Luther King, Jr. Hall
Davis, CA CA 95616-5201
United States
(530) 752-5052 (Phone)
HOME PAGE: http://ratingagencylawblog.wordpress.com/

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