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The AFP calls for SEC accountability

Jim Kaitz, president of the Association for Financial Professionals (AFP), has called on the US Congress ?to hold the SEC accountable by demanding immediate action on the issues,? including questions about the credibility and reliability of credit ratings and conflicts of interest and abusive practices in the rating process. Kaitz testified before the Senate Committee on Banking, Housing and Urban Affairs.


Kaitz pointed out that the credit rating agencies and investor confidence in the ratings they issue are vital to the operation of global capital markets. But, as evidenced by AFP's research, confidence in rating agencies and their ratings has diminished over the past few years.


According to the AFP, the SEC has not taken any meaningful action to address the concerns of issuers and investors. Kaitz stated  ?These issues are far too important for the SEC to remain silent while the world waits for it to act.?


Kaitz outlined five concerns to Chairman Shelby and members of the Senate Committee:


? The SEC has created an artificial barrier to competition in the credit ratings market by not enumerating the criteria for recognition and only the Commission can remove the artificial barrier to competition it has created;

? The SEC has failed to exercise any meaningful oversight of the recognized credit rating agencies to ensure that they continue to merit recognition;

? The credit rating agencies have access to non-public information and are exempt from Regulation Fair Disclosure (FD), but SEC has done nothing to ensure that the agencies do not use the non-public information inappropriately;

? Unsolicited ratings, which are issued without the benefit of access to company management or non-public information and are often not an accurate reflection of an organization's financial condition, creating the potential for abuse and some organizations may feel compelled to pay for ratings they did not request; and

? Companies may feel pressured to purchase ancillary services, such as ratings evaluations and corporate governance reviews, in order to secure a fair rating.

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