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Debt Rating Firms Hit By SEC

The powerful US Securities and Exchange Commission (SEC) has issued a veiled rebuke to ratings agencies such as Moody’s and Standard and Poor’s with news that they have relaxed the type of investments which money market funds can invest into. Historically these massive money market funds have not been able to invest in certain assets where Moody’s or Standard and Poor’s credit ratings were low – in future they will now be able to ignore these ratings for short term investments.

Many in the US see this as the SEC’s way of getting back at the ratings companies, these vital cogs in the financial wheel which did not spot the credit crisis coming. In a separate development the SEC has written to all US ratings companies and demanded to know what measures they use and how they arrive at their ratings.

When you consider that the ratings issued by these giants such as Moody’s and Standard and Poor’s can literally add or deduct millions of pounds from the cost of a company’s finances, they do play a massive part in the markets. While it would be foolish to assume that every rating which they arrive at is perfect, historically they have been praised for using information in and out of the public domain to assist investors and bankers. Unfortunately it looks as though times are changing.....will the UK follow suit?

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