{"id":1904,"date":"2008-03-10T17:36:24","date_gmt":"2008-03-10T21:36:24","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1904"},"modified":"2008-03-10T17:36:24","modified_gmt":"2008-03-10T21:36:24","slug":"credit-rating-agencies-an-early-canadian-review","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1904","title":{"rendered":"Credit Rating Agencies: An Early Canadian Review"},"content":{"rendered":"

I came across a paper in my travels: Enhancing the Accountability of Credit Rating Agencies: The Case for a Disclosure-Based Approach<\/a> by Professor St\u00e9phane Rousseau of the Universit\u00e9 de Montr\u00e9al.<\/p>\n

To my shame, I have to confess that I haven’t done anything more than skim it quickly at this point … but it does look interesting, provides a Canadian context, and I’m referencing it on PrefBlog because I want to find it later!<\/p>\n

Update<\/strong>: On a related note is the commentary on National Policy 51-201<\/a>:<\/p>\n

\n

Why is disclosure to credit rating agencies in the necessary course of business when disclosure to equity analysts is not? Credit rating agencies analyze issuers\u2019 debt for public consumption; equity analysts analyze issuers\u2019 equity for public consumption.<\/em><\/p>\n

The CSA\u2019s view is that there is a fundamental distinction between disclosure to credit rating agencies and disclosure to equity analysts, which lies in the purpose for which the information is used. While research reports prepared by equity analysts can be targeted to an analyst\u2019s firm\u2019s clients, credit ratings are directed to a wider public audience. We also note that credit rating agencies are not in business to trade, as principal or agent, in the securities they are called upon to rate. This is distinguishable from the equity analyst who typically works for an investment bank whose activities include trading, underwriting and advisory services.<\/p>\n

As the SEC indicated in response to similar comments about the exclusion of rating agencies from the reach of Regulation FD, \u201c[r]atings organizations\u2026have a mission of public disclosure; the objective and result of the ratings process is a widely available publication of the rating when it is completed.\u201d The CSA adopts this analysis. In paragraph 3.3(2)(g) of the Policy, the CSA indicates that communications to credit rating agencies would generally be considered in the \u201cnecessary course of business,\u201d provided that the information is disclosed for the purpose of assisting the agency to formulate a credit rating and the agency\u2019s ratings generally are or will be publicly available.<\/p>\n

Further, securities legislation often affords companies or their securities status based on obtaining specified ratings from approved rating agencies. Consequently, ratings form part of the statutory framework of provincial securities legislation in a way that analysts\u2019 reports do not. We have amended the Policy to highlight this distinction (see subsection 3.3(7) of the Policy).<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

I came across a paper in my travels: Enhancing the Accountability of Credit Rating Agencies: The Case for a Disclosure-Based Approach by Professor St\u00e9phane Rousseau of the Universit\u00e9 de Montr\u00e9al. To my shame, I have …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-1904","post","type-post","status-publish","format-standard","hentry","category-interesting-external-papers"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1904","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1904"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1904\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1904"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1904"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1904"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}