Securities and Exchange Commission chairwoman Mary Schapiro criticized the prevailing pay model for ratings agencies on Tuesday.
Currently, municipalities and corporations pay rating agencies to rate their bonds.
Speaking at the annual meeting of the Securities Industry and Financial Markets Association, Schapiro said, “The issuer-pays model has inherent conflicts in it.”
There may be alternatives to having the issuer pay for their ratings, she said. The SEC will soon come out with a report on this topic, she continued.
Credit ratings had a big role in the 2008-2009 financial crisis, Schapiro said. The SEC has eliminated references to credit ratings in 18 rules. Furthermore, it has proposed to eliminate them from 13 more, she said.