Submits Letter to Senate Banking Committee In Support of Legislation Being
Considered This Week
FLORHAM PARK, N.J., Aug. 2 /PRNewswire/ -- Financial Executives
International's (FEI) Committee on Corporate Finance (CCF) today announced
its formal support of The Credit Rating Agency Reform Act of 2006, the
Senate's version of H.R. 2990. FEI is the leading professional association
for CFOs and other senior financial executives. The CCF submitted a letter
to Senate Banking Committee Chairman, Senator Richard Shelby, and Ranking
Minority Member, Senator Paul Sarbanes, in support of the legislation being
considered this week by the committee.
While FEI's CCF recognizes the vital role that credit rating agencies
play in the U.S. and world financial markets, CCF believes that credit
rating agency reforms should be pursued. FEI's CEO and President, Colleen
Cunningham, testified before the U.S. Senate Committee on Banking, Housing
and Urban Affairs at their March hearing to assess the current oversight
and operation of credit rating agencies.
"FEI's Committee on Corporate Finance supports the legislation because
it addresses the three issues that are of greatest importance to our
members: competition, accountability and conflicts of interest," commented
Cunningham. "Of particular significance to our members was the focus on the
conflicts of interest issue. Provisions in this legislation successfully
tackle conflicts of interest head-on and we are deeply satisfied with their
inclusion."
CCF is pleased that the bill specifically authorizes the SEC to
prohibit NRSROs from providing fee-based advisory services to its rated
clients. CCF has strongly stated from the outset that credit rating
agencies should not offer such consulting services to their rated clients
and that the subtle pressure to purchase such services should not be a part
of corporate dealings with credit rating firms.
With regard to the competition issue, CCF is aware that with more than
100 credit rating agencies (CRAs) operating worldwide, and only five that
are designated as NRSROs by the SEC, there is a need for increased
competition.
"The bill does away with the current no-action process for recognizing
NRSROs and replaces it with a transparent, voluntary registration process,"
said Cunningham. "This will almost certainly attract more credit rating
agencies to the industry, which should lead to increased competition,
better pricing, and new product introduction. This will benefit both
issuers and investors."
On the accountability issue, CCF considers this bill to take two
important steps to increase transparency for the way in which NRSROs
conduct business: (1) requires periodic, updated filings with the SEC and
(2) grants the SEC disciplinary authority to take action against any NRSRO
that fails to comply with its own policies.
"Moreover, this legislation adequately addresses some of the First
Amendment issues raised by some. By making the NRSRO registration process
voluntary, it alleviates any concerns that a CRA's free speech might be
impeded," commented Cunningham. "Overall we are extremely pleased that the
House has passed this bill and we strongly encourage the Senate to consider
similar legislation this year."
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 planning services, conferences, publications, and
special reports and research. Members participate in the activities of 86
chapters, 75 of which are in the United States and 11 in Canada. For more
information, visit http://www.fei.org.
FEI's Committee on Corporate Finance (CCF) was established in 1980 and
is authorized to formulate statements and positions on capital markets and
the capital structure and financial resources of corporations, including
policies, practices, rules, regulations, principles and standards. CCF
addresses issues that include: debt and investment management, risk
management, mergers and acquisitions, economic and financial analysis,
financial communications, annual meetings and annual reports, and
stockholder and investor relations.
SOURCE Financial Executives International
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Related links:
http://www.fei.org
CONTACT:
Kristen Crofoot of Financial Dynamics,
+1-212-850-5692, kristen.crofoot@fd.com
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