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Securities Law

SEC to Hold Credit Rating Roundtable in May

The Securities and Exchange Commission will hold a public roundtable on Tuesday, May 14, to discuss an SEC staff report sent to Congress in December, which reviews possible conflicts of interest that arise under the so-called "issuer pay model" and recommends regulatory and statutory changes, among other things.

The municipal credit market also largely operates under the "issuer-pay model," with state and local governments paying credit rating agencies to rate their securities.

The Report to Congress on Assigned Ratings, which was required by The Dodd-Frank Act and focuses mostly on ratings of structured financial products, said the issuer pays model creates the potential for a credit rating agency to be influenced by its clients, which desire higher credit ratings.

The roundtable will be held at the SEC's Washington, D.C. headquarters and will be webcast live on the SEC's website.

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Hopefully as this discussion gets underway, participants will come to realize the "investor pay" model holds as many conflicts of interest as the "issuer pay" business model. To think investors don't have agendas when they buy, hold or sell bonds is simply naive or misinformed.
Posted by mdwjr | Tuesday, February 26 2013 at 5:44PM ET
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