SEC nominees pledge action on rating agencies

WASHINGTON (Reuters) - U.S. lawmakers sought to ensure on Tuesday that nominees to the Securities and Exchange Commission would be vigilant in overseeing the credit rating agencies following the subprime mortgage crisis.

If confirmed, one of the major issues likely to be faced by the three nominees is an agency plan being developed to strengthen rules for credit raters.

Firms such as Moody's Corp (MCO.N), Standard & Poor's (MHP.N) and Fimalac SA's (LBCP.PA) Fitch unit have been criticized for failing to properly analyze securities backed by mortgages before assigning top ratings.

"Are you committed to using the tools that Congress provided to the commission to ensure thorough oversight of the credit rating agencies," Sen. Richard Shelby, an Alabama Republican, asked at a nomination hearing.

Since February, the five-member commission has been operating with three Republicans -- Paul Atkins, Kathleen Casey and SEC Chairman Christopher Cox -- at a time when the agency is faced with fallout from the mortgage crisis and the near collapse of investment firm Bear Stearns.

Earlier this year, the White House nominated two former SEC staffers Elisse Walter and Luis Aguilar for the open Democratic commissioner spots. The Bush administration recently nominated law professor Troy Paredes to fill the Republican position that will be vacated by Atkins.

Senate Banking Committee Chairman Christopher Dodd asked the nominees for suggestions on what kind of additional credit rating agency rules the SEC should consider.

Paredes, a professor at Washington University School of Law, said one possibility worthy of serious consideration is the disclosure of rating agencies' track records and performance.

Aguilar, a partner at law firm McKenna Long & Aldridge, said it was appropriate for the SEC to "take a hard look" at credit raters' transparency and accountability, as well as the amount of competition among players in the industry.

Walter, who has worked as a securities regulator for about three decades, said the SEC might tackle topics such as conflicts of interest.

After the hearing, Dodd told reporters he would be moving to have the committee vote on the SEC nominees as soon as possible. "I am prepared to move ahead on them," he said.

The full Senate would then have to vote on them.

REVISITING PROXY ACCESS

Dodd, a Connecticut Democrat, also brought up "proxy access" and asked the nominees whether they believed shareholders should have access to the corporate proxy, with a path to nominating directors.

All three said they were open to revisiting the issue after the SEC in November limited shareholders' access in a divisive vote that split along party lines.

"I believe shareholders, as owners of their companies, are entitled to their voice," said Aguilar.

Walter, a former deputy director with the SEC's corporation finance division, said "a shareholder's job as an owner of a corporation is to elect the stewards of that corporation."

Paredes said he would consider the topic with an open mind. "The role of shareholders in corporate accountability is vitally important," he said. "There are ways in which that balance could be improved."

SEC Chairman Cox has said he would revisit the proxy issue once he had a full complement of commissioners, but with the administration about to change hands in January, there may not be enough time this year .

The SEC has a number of important issues on the table this year and have been pushing investment banks to increase their capital and liquidity levels after Bear Stearns was driven to the brink of bankruptcy. The near collapse of the investment bank has led to criticism of the agency, which has limited supervision of the biggest firms.

(Additional reporting by John Poirier; Editing by Tim Dobbyn)