From: David Hynes
Sent: March 5, 2007
Subject: File No. S7-07-07

Dear Sir or Madam,

I have become aware of your call for comment on proposed rule changes pertaining to the Credit Rating Agency Reform Act of 2006.

Our main area of comment falls within the scope of how we as investors are required to purchase securities rated by the agencies which rate our own investment programs. This requirement is a root cause of uncompetitive behaviour whereby it forces us to invest only in securities that are rated by the rating agencies we pay to rate our products even if we often believe we would be better served buying securities rated by other agencies.

If all of the rating agencies have the same ultimate objective with their analysis (which we believe to be the case), and on the whole use publicly available information with each agency having equal access to non-public or market sensitive information then the end result of their analysis will always be the same. Due to slight differences in methodology and weightings ascribed to various factors the timing of the forecasted outcome may differ somewhat but the agency with the most accurate credit forecast should enjoy the greatest business success having earned it by reputation.

Allowing a ‘bucket of up to 15%’ does not go nearly far enough to resolve this issue.

It merely ensures we (and other investors) remain hostage to the two largest rating agencies and stifles competition (and we would argue) quality of the service we receive from this sector. With 20+ years investment experience I do begin to wonder at some of the judgments of many of the credit analysts with 5 years or less experience who have never lived through challenging markets.

We would much prefer the bucket size be set at 100% whereby we can back our own judgments as to agencies know what they are doing in analyzing various security types so we can invest accordingly rather than having to invest in what the rating agencies get paid for approving.

Given that the ratings assigned to various borrowers are broadly similar (excepting of course Moody’s bank ratings now that Moody’s have lost the plot in that sector) it is difficult to imagine that even the rating agencies themselves can argue against investors being required to invest only in securities rated by themselves.

Further, we would much prefer if there were more NSRSO’s competing with each other, especially if we are not required to only buy securities rated by just one or two of them.

Please contact me (details below), if you require any further information from me regarding this submission.

Good luck with your review.


David Hynes
Northcross Capital LLP

7th Floor
36 Whitefriars Street,
London EC4Y 8BQ
United Kingdom