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Alternative Market Briefing

K&L Gates anticipates sweeping reform across ratings agency industry

Wednesday, October 14, 2009

From the Opalesque team:

Citing the recent flurry of regulatory action targeted at the credit ratings agencies, law firm K&L Gates says in a recently released client update that it anticipates the government intends to “radically change the way credit ratings are issued, paid for, and litigated.”

Although it has taken a back seat to the healthcare debate, financial regulation is widely anticipated to be the next focus for government policymakers. Ratings agencies (identified as nationally recognized statistical rating organizations (NRSROs) by regulators) will be amongst those sectors likely to be targeted for a strict overhaul.

Most recently, Rep. Paul Kanjorski, Chair of the capital markets subcommittee (which falls under House Financial Services) focused his attention on ratings agencies, circulating a draft bill, which would give the SEC the power to determine rules by which ratings agencies perform their analysis and rate financial instruments and firms.

K&L Gates concludes its overview of the recent attention regulatory agencies have given to NSROs with the following conclusion:

“The NRSROs have been the targets of intense criticism, legislation and regulation at least since the demise of Enron Corp, whose debt was rated investment grade just before it filed for bankruptcy. Critics have asserted that the resulting reforms did not go to the heart of the problems that ......................

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