Speech by SEC Commissioner:
Statement at SEC Open Meeting Regarding Proposing Release on Security Ratings
Commissioner Kathleen L. Casey
U.S. Securities and Exchange Commission
February 9, 2011
Thank you, Chairman Schapiro, and thanks very much to the Staff — especially the Division of Corporation Finance — for your hard work on today’s proposal.
I support today’s proposal, but I want to emphasize how important commentators’ input will be in helping us to craft final rules.
As has already been noted, today’s proposal is substantially similar to our proposal in 2008 to replace the investment-grade criterion for shelf eligibility with a criterion based on the volume of non-convertible securities issued. However, in light of the mandatory nature of Section 939A of the Dodd-Frank Act, it is imperative that commentators weigh in once again on today’s proposal and, most importantly, on the appropriate means to address the potential loss of shelf eligibility for some issuers — a consequence that was clearly not intended by Congress.
As the Release discusses, an effect of this proposal is that some companies that are currently eligible to offer securities on a shelf registration statement pursuant to the investment-grade criterion would lose shelf eligibility. Because the benefits of shelf eligibility for a company — including reduced costs and increased speed and certainty of access to the capital markets — are significant, it is important that the rules that we ultimately adopt ensure that we do not reduce the availability or benefits of shelf eligibility to companies.
The Staff has spent considerable time researching the number and types of issuers that may lose shelf eligibility as a result of the proposed rules, and examining various potential mechanisms intended to mitigate or eliminate this consequence.
Our analysis of the affected issuers is limited, however, by the information available to us; accordingly, commentators’ views as to whether we have properly assessed the impact of the proposal will be invaluable.
In addition, because we are not yet satisfied that any one or more of the mechanisms that we have considered to address this consequence will be effective and appropriate, commentators’ input on these or other possible means to ensure the continuity of treatment of issuers that are currently shelf-eligible under the investment-grade criterion will likewise be tremendously important.
Thanks once again to the Staff — especially Meredith, Paula, Felicia and Blair — for your continued tireless efforts on this release during an incredibly busy time for all of the Divisions and Offices. I have no questions for the Staff at this time.