Credit Raters Face New SEC Rules

Restrictions on conflicts of interest are designed to prevent rating agencies from pandering to the bond issuers that pay the bills.

Credit-rating firms, whose lapses played a central role in the 2008 financial crisis, will face new restrictions on conflicts of interest under rules adopted by the U.S. Securities and Exchange Commission (SEC).

The rules, approved on a 3-2 vote today, require firms including Moody’s Investors Service and Standard & Poor’s to ensure they follow internal methods when grading debt and revising ratings. They will also have to boost disclosure on their accuracy, including a common way of presenting default and downgrade rates for bonds backed by loans for homes and commercial buildings.

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