SEC seeks more financial transparency
By Rachelle Younglai
WASHINGTON (Reuters) - The Securities and Exchange Commission aims to increase the transparency of Wall Street's disclosures and has more than 3 dozen investigations underway amid the fallout from the subprime mortgage crisis, Chairman Christopher Cox said on Thursday.
Investors have been "deeply affected" by market chaos unleashed by subprime lending and securitization practices, Cox told a Senate Banking Committee hearing on the state of U.S. financial markets.
"Because these law enforcement investigations are underway, specific details remain confidential. It has not yet been determined in any particular case whether or not securities laws were broken," Cox said.
Separately, the FBI said on Thursday it had recently opened two more investigations for a total of 16 corporations now being probed as part of its crackdown on subprime mortgage industry fraud.
Cox said the SEC is reviewing the accounting treatment of securitized subprime loans, capital adequacy at big investment banks, the "quality of issuer disclosure" by companies involved in structured finance and the role of credit rating companies in subprime valuations.
Cox said the SEC is also keeping a close eye on money market funds, which have been hit by a devaluation in their assets.
"While we have seen some instances of funds requiring infusions of capital from the corporate parents of fund advisers, we are not aware of any money market fund that is threatened with having to re-price below $1," Cox said.
Money market funds are normally considered very safe short-term investments but several of them have come under pressure over the past few months because of the credit crisis and their exposure to securities related to subprime mortgages.
The SEC has set up an agency-wide subprime task force and is reviewing the role of the credit rating agencies, which have been accused of assigning top ratings to structured finance products like mortgage-backed securities without conducting due diligence.
The SEC is trying to determine whether the credit raters' role in bringing residential mortgage-backed securities and collateralized debt obligations to market impaired their ability to be impartial in their ratings.
The SEC is considering requiring credit rating agencies to differentiate between corporate bonds and structured finance products as well as make disclosures on past ratings.
A final report on the credit rating firms is expected by early summer, said Cox. He testified along with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke on the state of the economy and financial markets.
The last time the chairmen of the three entities appeared together before the Senate Banking Committee was in the aftermath of the September 11, 2001 attacks that roiled global markets.
(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)
