UPDATE 3-US SEC mulls stricter rules for credit agencies

* Banks may have to share data used to rate bonds

* Credit agencies may have to disclose more rating history

* SEC meets Thursday to consider more credit agency rules

* SEC explores stronger liability for credit agencies
(Adds references to ratings, flash trades)

By Rachelle Younglai

WASHINGTON, Sept 15 (Reuters) - The U.S. Securities and
Exchange Commission may force banks to share data used to rate
bonds with all credit rating agencies, reducing the risk that
investors will buy securities with inflated ratings, two people
familiar with the regulator's thinking said.

Data would not be disclosed publicly, but would be shared
in an attempt to generate unsolicited ratings for their
products, one source said.

The SEC is scheduled to meet on Thursday to discuss rules
to improve oversight of the credit rating industry, long
dominated by Moody's Corp's (MCO.N) Moody's Investors Service,
McGraw-Hill Cos' (MHP.N) Standard & Poor's, and Fimalac SA's
(LBCP.PA) Fitch Ratings.

Global policymakers are trying to make credit agencies more
accountable after the firms assigned top ratings to products
linked to shoddy mortgages that later lost much of their value,
costing investors trillions of dollars.

The SEC may require banks and other issuers to disclose
preliminary ratings, to prevent them from shopping around for
the better ratings, the people familiar said. They requested
anonymity because the discussions are private.

The SEC may also require all credit agencies to reveal more
information about past ratings so investors could compare their
relative performance, with perhaps a one- or two-year time lag,
the people said.

This requirement would apply regardless whether agencies
are paid by issuers or by investors, they said.

The proposals remain in flex as the five SEC commissioners
debate the scope of any changes.

The regulator is expected to issue a general discussion
paper that questions whether credit agencies should be
regulated as "experts" under securities law, and thus subject
to tougher standards of liability.

Rating agencies are exempt from such regulation. In
contrast, auditors are considered experts, and are more easily
sued over their findings.

The SEC is also expected to consider removing references to
credit ratings in some of its rules -- a move that would force
Wall Street to do more due diligence. This measure is supported
by the Obama administration.

The SEC has already proposed removing references to the
ratings in most of its rules. However, the powerful mutual fund
industry has trampled over that plan because it would scrap a
requirement that money market funds hold investment-grade
securities.

The agency will not consider removing that particular
reference for money market funds at its Thursday meeting.

SEC spokesman John Nester said: "The commission will
consider measures to strengthen oversight of credit rating
agencies and improve the quality of ratings through greater
transparency and accountability."

At the same meeting, the SEC is expected to propose a ban
on flash trades -- or buy and sell orders that exchanges send
to a specific group of participants before revealing them
publicly.
(Reporting by Rachelle Younglai; Editing by Andrea Ricci,
Leslie Gevirtz and Matthew Lewis)