SEC to avoid credit raters

AMERICA’S top financial watchdog voted to propose reducing credit rating agencies’ input into several key documents for securities offerings yesterday.

The Securities and Exchange Commission (SEC) voted 5-0 that forms to be completed by companies registering securities for a sale should no longer require rating references provided by the agencies.

The move is the latest bid to scale back investors’ reliance on credit agencies after the financial crisis showed they gave top ratings to toxic subprime-backed securities and institutions that failed.

The SEC’s proposal would affect agencies such as Standard & Poor’s, Moody’s and Fitch Ratings, but is not expected to seriously hurt the industry. The proposal echoes previous plans to reduce the agencies’ hold over the quality of securities and debt. In 2008 a similar proposal was raised but never finalised. In 2009 the SEC did reduce the number of regulations that needed agency ratings.

•Separately, the SEC revealed yesterday that it was investigating whether US traders were using exchange traded funds (ETFs) as a means of disguising insider trading. It said ETFs could potentially be used to hide trading patterns.