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1 (July 13, 2006)

handle is hein.crs/crsuntaaezw0001 and id is 1 raw text is: Order Code RS22215 Updated July 13, 2006 CRS Report for Congress Received through the CRS Web Credit Rating Agencies: Current Federal Oversight and Congressional Concerns Michael V. Seitzinger Legislative Attorney American Law Division Summary Credit rating agencies rate the creditworthiness of public companies so that the public will have an objective opinion as to the risk of investment. These ratings have become an important component of the financial reputation of a rated company. However, especially since the bankruptcies of Enron and WorldCom, whose debt had been rated investment grade, there has been concern that perhaps credit rating agencies should be regulated. Section 702 of the Sarbanes-Oxley Act of 2002 required the Securities and Exchange Commission to study the role of credit rating agencies. Over the years, the SEC has issued reports and proposed rules, in particular concerning adoption of a definition for the term nationally recognized statistical rating organization, but no statutory or regulatory requirements have been enacted or issued. Congress may, however, continue to pursue the issue of regulation, since hearings have been held on the issue and proposed legislation has been introduced. On June 14, 2006, the House Committee on Financial Services approved an amended version of H.R. 2990, the Credit Rating Agency Duopoly Relief Act of 2006, which would set out procedures for registration by a credit rating agency with the SEC in order to be treated as a nationally recognized statistical rating organization. On July 12, 2006, the House passed H.R. 2990 in a version almost identical to the one approved by the Committee on Financial Services. This report will be updated as needed. Credit rating agencies rate the creditworthiness of public companies and the debts of those companies so that a potential creditor or investor will have a presumably professional, objective opinion as to the likely risk of any investment in a particular company. These ratings have become an important component of the financial reputation of a rated company. Ratings have taken on great significance in the market, with investors trusting that a good credit rating reflects the results of a careful, unbiased and accurate assessment by the credit rating agencies of the rated company.... Congressional Research Service + The Library of Congress

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