Removal of Certain References to Credit Ratings Under the Securities Exchange Act

SIFMA provides comments to the Securities and Exchange Commission (SEC) on proposed amendments to remove of certain references to credit ratings under the Securities Exchange Act of 1934, Release No. 34-64352; File No. S7-15-11.  The proposed amendments would implement Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which requires federal agencies to review “any regulation . . . that requires the use of an assessment of the credit-worthiness of a security . . .” and to “modify any such regulations . . . to remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness as each respective agency shall determine as appropriate for such regulations.”

SIFMA reiterates the concerns expressed in its prior comment letters regarding the potential impact of replacing objective rules with standards premised on the subjective determinations of market participants. SIFMA suggests steps that could be taken to improve the subjective analysis required under the proposed amendments to the Net Capital Rule. SIFMA also suggests an alternative approach to determining eligibility for the Regulation M Exemptions based on objective factors.