In her speech oakley sunglasses, Casey offers several sound recommendations for changing the current system. One is removing regulatory requirements within many SEC rules that require the use of what are known as NRSROs, or nationally recognized statistical rating organizations. The intent of NRSRO regulation was to identify the criteria by which rating agencies could be accredited. In practice, however, it has helped to protect a small group of rating agencies from competition. At the same time, some users of ratings have overlooked their limitations and failed to adequately investigate the securities they were purchasing.
Clearly, the current business model used by rating agencies warrants scrutiny. As it works now, companies issuing debt pay the rating agencies for their reviews, as part of the cost of accessing the capital markets. That makes it easy for analysts, who are given close access to management, to buy into the story for the firm that management outlines, says James Gellert, president of Rapid Ratings, also a ratings agency.
Further opening competition within the rating industry makes sense. While the existing rating system was just one factor that led to turmoil in the financial industry, it remains a critical one. If we’re going to limit the likelihood of future upheavals Cheap NFL Jersey oakley sunglasses, both investors and issuers need a system that consistently provides quality Cheap NFL Jersey, objective ratings. ###
Rating agencies have been under the gun for the past year or so, accused of coddling their corporate clients in order to maintain lucrative contracts, and thus failing to foresee the problems inherent in many structured financial securities, as well as with troubled companies, that helped to bring about the current economic troubles.
To be sure oakley sunglasses, Gellert, whose company offers its rating on a subscription basis, has a self-interest in highlighting the shortcomings of the current system. However, he’s not the only one pointing out the flaws. In a speech earlier this month, Kathleen Casey, a commissioner with the SEC, noted that the ongoing financial crisis has “validated these long-standing concerns” regarding the rating industry’s compensation arrangements and oligopolistic pricing and practices.
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