SEC delays action on credit rating agency rules

By Rachelle Younglai

WASHINGTON (Reuters) - Securities regulators on Wednesday delayed action on adopting stricter rules to rein in the credit rating agencies until December 3.

The Securities and Exchange Commission had planned on addressing a number of new disclosure rules for the rating agencies at an open meeting on Wednesday but pulled the item at the last minute and rescheduled it for an open meeting in two weeks.

"Originally, we had planned to spread the consideration of the credit rating agency rules over two meetings since that is the way we proposed them," SEC Chairman Christopher Cox said at Wednesday's meeting.

"But the commissioners and staff have agreed that the best way to proceed is to do the entire package of rules in one meeting... This rulemaking remains a high priority for the commission."

That means in two weeks the SEC will consider proposals such as one requiring credit raters to reveal more information about their ratings for complex products, including those linked to risky mortgages.

Other proposals include one to crack down on conflicts of interest at the rating firms, which are paid by the entities being assessed or by subscribers.

Those proposals include prohibiting anyone who participates in determining a credit rating from negotiating the fee that the issuer pays for it.

The SEC will also consider a proposal reviled by the securitization industry, which would require rating agencies to differentiate between structured finance products and corporate bonds.

The top three credit rating agencies Standard & Poor's (MHP.N), Moody's Investors Service (MCO.N) and Fitch Ratings (LBCP.PA), have been criticized for assigning top ratings to complex securities that later dropped in value when the U.S. housing market collapsed.

Global policymakers are convinced that more needs to be done to highlight the differences between a 'AAA' rating for a security linked to subprime mortgages and a plain vanilla corporate bond.

At an economic summit in Washington D.C. last weekend, leaders of the world's 20 largest economies targeted the credit rating agencies and said regulators need to ensure that the firms differentiate ratings for complex products.

Later, Cox told reporters that the SEC is going to deal with all the subjects raised in the agency's proposals. "We will be not only making final rules but also asking additional questions around the same topics," Cox said.

Other proposals opposed by industry include one that would remove references to credit ratings in most of the SEC's rules.

Cox said the agency may hold another meeting in December to address other commission work.

(Editing by Tim Dobbyn, Leslie Gevirtz)