The Securities and Exchange Commission on Wednesday approved final rules cracking down on credit rating agencies and asset-backed securities — two areas that SEC Chairwoman Mary Jo White said were “at the center of the financial crisis.”
In her opening remarks at the SEC open meeting at the agency’s Washington headquarters, White said the final rules in the “two closely related areas” give investors “powerful new tools” for independently evaluating the quality of asset-backed securities and credit ratings.
Said White: “ABS issuers and rating agencies will be held accountable under significant new rules governing their activities.”
The issuance of “flawed credit ratings by certain credit rating agencies was a key contributor to the financial crisis,” White said. “Investors purchased asset-backed securities — as well as other securities — in reliance on ratings they believed were based on independent, robust and methodical analysis. As is now well understood, that was all too often not the case.”
Since 2011, SEC staffers have examined annually each of the nationally recognized statistical rating organizations (NRSROs) registered with the Commission, as required by the Dodd-Frank Act.
“While the reports from these reviews have catalogued a number of improvements, they have also identified concerns that persist, including ones related to the management of conflicts of interest, internal supervisory controls, and post-employment activities of former staff of NRSROs,” White said.