Federal regulators on Wednesday proposed new rules that could reduce the importance of Wall Street's credit rating industry, the latest government response to the financial crisis set off by mortgage securities.
At the same time, the Securities and Exchange Commission looked to ease barriers to U.S. investors trading with foreign brokerage firms – a move that Wall Street has pushed for, saying it would reduce costs for investors trading stocks on foreign exchanges. The proposal would cut the required amount of investments to qualify to deal directly with foreign brokerages to $25 million from $100 million.
SEC officials said the proposed change reflected the growing globalization of securities markets. A current requirement that foreign brokers soliciting business in overseas stocks with U.S. investors be “chaperoned” by a domestic brokerage participating in tandem has been unwieldy, they said.
The votes were 3-0 at a public meeting to propose and open to public comment for 60 days the rule changes related to the role of credit rating agencies and to U.S. investors trading overseas.
The three major rating agencies – Standard & Poor's, Moody's Investors Service and Fitch Ratings – have been widely criticized for failing to identify risks in subprime mortgage investments. The SEC earlier this month proposed new rules that would require ratings of complex securities, such as those underpinned by mortgages or student loans, to be distinguished from those for corporate or municipal bonds.