FLORHAM PARK, N.J., June 10 /PRNewswire/ -- In a letter sent today to The
Securities and Exchange Commission commenting on a proposed rulemaking to
define the term "nationally recognized statistical rating organization"
("NRSRO"), Financial Executives International's (FEI) Committee on Corporate
Finance urged the SEC to restrict rating agencies from providing both
advisory, fee-based services and rating services to the same issuer.
"We strongly believe a limitation of this type would reduce concerns
regarding rating inflation," wrote Dennis Ling, Senior Vice President, Finance
and Treasurer Avon Products, Inc., and Chairman of FEI's Committee on
Corporate Finance. "Beyond this, we ask the SEC to mandate that credit rating
agencies be required to identify the types of conflicts of interest that arise
in their business and the procedures they have implemented to address,
minimize or avoid those conflicts."
FEI's letter also called on the SEC to require complete transparency in
all of the business dealings that NRSROs, their related entities, and their
officers and directors have with issuers, not just the fee-based services
typically provided.
In response to proposed rulemaking by the SEC, the Committee on Corporate
Finance conducted a survey of FEI members and found the following:
-- Of 91 companies surveyed, most companies (94%) agree that agencies
should implement policies to prevent disclosure of non-public
information.
-- A substantial majority (94% or 86 companies) agree that agencies should
document their internal controls to address any conflicts of interest
between rating work and other services.
-- A total of 87% of respondents agreed that borrowers and investors would
benefit from agency disclosure of assumptions behind their credit
ratings.
In addition to addressing the critical issue of conflicts of interest,
FEI's letter provided responses to the definition of NRSRO as well as to the
interpretations provided by SEC staff on:
Publicly available credit ratings
Issue-specific credit opinions
Limited coverage NRSROs
Current credit opinions
General acceptance in the financial markets
Analyst experience and training
Contacts with management
Misuse of nonpublic information
Financial resources
Statistical models
Provisional NRSRO status
Number of ratings per analyst
The full text of the letter is available at
http://www.fei.org/committees/CCF/comment_letters.cfm
Financial Executives International (FEI) is the leading advocate for the
views of corporate financial management. Its 15,000 members hold
policy-making positions as chief financial officers, treasurers and
controllers. FEI enhances member professional development through peer
networking, career management services, conferences, teleconferences and
publications. Members participate in the activities of 85 chapters, 74 in the
U.S, 11 in Canada.
Financial Executives Research Foundation (FERF) is the non-profit
501(c)(3) research affiliate of FEI. FERF researchers identify key financial
issues and develop impartial, timely research reports to FEI members and non-
members alike, in a variety of publication formats.
For more information, visit http://www.fei.org.
Contact:
Scott Sunshine Chris Allen
TowersGroup FEI
(212) 354-5020 (973) 765-1058
scottsunshine@towerspr.com callen@fei.org
SOURCE Financial Executives International
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Related links:
http://www.fei.org/committees/CCF/comment_letters.cfm
http://www.fei.org
Company News On-Call:
http://www.prnewswire.com/comp/310650.html
CONTACT:
Chris Allen of FEI, +1-973-765-1058, or
callen@fei.org; or Scott Sunshine of TowersGroup,
+1-212-354-5020, scottsunshine@towerspr.com
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