Federal regulators want Congress to help them decide whether and how to oversee the “nationally recognized statistical rating organizations.”[@@]
Annette Nazareth, director of the market regulation division at the U.S. Securities and Exchange Commission, recommended Tuesday that Congress hold a series of hearings on “NRSRO” issues.
“A well-thought out regulatory regime could provide significant benefits in such cases as record-keeping and addressing conflicts of interest in the industry,” Nazareth said at a credit rating agency hearing organized by a U.S. House Financial Services Committee subcommittee, according to a written version of her testimony. “
The SEC gave birth to the current NRSRO system in 1975, when it began to relying on rating agencies to distinguish between various grades of securities, then issued a series of “no-action letters” that helped give extra weight to the ratings of 5 agencies: A.M. Best Company Inc., Oldwick, N.J.; Dominion Bond Rating Service Ltd., Toronto; Fitch Inc., Chicago; Moody’s Investors Service Inc., New York; and Standard & Poor’s, New York.
The rating agencies argue that their “rating activities are journalistic and are afforded a high level of protection under the First Amendment,” Nazareth said.