Credit-rating firms, whose lapses played a central role in the 2008 financial crisis, will face new restrictions on conflicts of interest under rules adopted by the
The rules, approved on a 3-2 vote, require firms including
Seeking to prevent graders from pandering to the bond issuers, who pay for the ratings, the rules include a strict prohibition on allowing sales motives to influence them. Firms also would have to re-examine the ratings of analysts who leave to join companies whose products they rated.
"This package of reforms will improve the overall quality of credit ratings and protect against the re-emergence of practices that contributed to the recent financial crisis," SEC Chair
The Dodd-Frank Act of 2010, enacted in response to the credit crisis, directed the
The rules require that firms such as S&P, Moody's and Fitch Ratings establish internal controls over the quality of ratings, including policies that provide for public input on ratings methodologies and a judgment of whether some innovative securities are simply too complex to rate.
The new requirements would apply to the
Banks eligible to accelerate sales of asset-backed bonds with minimal
They also will have to provide a process for reviewing soured assets that may be eligible to be repurchased.
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