SEC to Install Checks on Credit-Rating Agencies

The SEC's Chairwomen, Mary Schapiro, gave a prepared testimony to the House Financial Services subcommittee on capital markets earlier, discussing so-called regulatory improvements the agency has undertaken since it was embarrassed by the Madoff scheme.

Among the changes highlighted by Schapiro, the SEC plans to create a new group whose sole purpose is to oversee credit-rating agencies such as Moody's (NYSE: MCO), S&P and Fitch. As these credit-rating companies are "paid by the issuers they rate", the group came under heavy fire as the financial system collapsed last year. Schapiro said that the SEC committee has already implemented several steps to improve transparency at the credit-rating agencies, including the routine and special evaluations of such companies.

Further, Schapiro briefly outlined several other changes which are now being initiated: a new focus on cases that could likely have the greatest systemic impact, the overhaul of the system for handling tips sent into the agency, and improvements in staff training. Schapiro also said that the SEC is looking at creating legislation which would incentivise whistleblowers, as a FT article puts it.

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