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U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
Opening Remarks Regarding Proposed Removal of Certain References to Credit Ratings under the Securities Exchange Act of 1934


Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

SEC Open Meeting
Washington, D.C.
April 27, 2011

Thank you, Chairman Schapiro. I, too, would like to thank the staff of the Division of Trading and Markets for their hard work in preparing for today's open meeting. I would also like to thank the staff in the other divisions and offices who worked on the proposing release, including the Office of General Counsel, the Division of Corporate Finance, and the Division of Risk, Strategy, and Financial Innovation.

I am happy to support your recommendation and will be very brief. Although the Commission has in prior times issued concept releases and rule proposals to seek comment on eliminating references to NRSROs and NRSRO ratings from Commission rules and forms, as Robert mentioned earlier, the effort today is due to a directive by Congress under Section 939A of the Dodd-Frank Act to “review any regulation issued by [the Commission] that requires the use of an assessment of the credit-worthiness of a security or money market instrument and any references to or requirements in such regulations regarding credit ratings.”1 After the Commission has completed that review, the statute provides that the Commission “remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness” as the Commission determines to be appropriate.

I believe that the proposal to eliminate the NRSRO ratings from Commission rules primarily should alleviate the appearance that the Commission has placed a “seal of approval” on such ratings. However, I want to point out that the proposed removal of credit ratings from the regulations should not be construed to suggest that credit ratings are not useful information to both retail and institutional investors, or that investors should avoid using this information as part of their investment decision making. In my view, the proposal is designed to directly benefit investors by encouraging greater due diligence and analysis by broker dealers when analyzing the creditworthiness and suitability of a financial instrument for their clients.

I look forward to reviewing public comments on the proposed alternative standards of creditworthiness, and I have no questions. Thank you again to the staff.

1 Pub. L. No. 111-203 939A(a)(1)-(2).



Modified: 04/27/2011