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May 24, 2022

SEC Must Do More To Reform the Corrupt, Conflict-Ridden Credit Ratings Process Before It Fuels Another Crisis and Crash

WASHINGTON, D.C.—Legal Director and Securities Specialist Stephen Hall issued the following statement on the filing of Better Markets’ Comment Letter to the Securities and Exchange Commission (SEC) in response to the agency’s proposed rule that would remove references to credit ratings from Regulation M:

“Even before the 2008 financial crisis, when wildly inflated credit ratings played a central role in nearly destroying the U.S. financial system and economy, we knew that corrupted ratings could have a profound and destructive impact on our markets.  The Dodd-Frank Act called for a series of reforms to make the credit rating industry more transparent, accountable, and above all, less prone to powerful conflicts of interest that inflate ratings in the pursuit of profits.  This Proposal will finally complete one of those reforms, the process of removing references to credit ratings from the SEC’s regulations, and it will play its part in making sure that regulators don’t rely on inflated or conflicted ratings as benchmarks.

“Unfortunately, this proposal is most important as a reminder of all the unfinished business the SEC must undertake to fix a long list of enduring weaknesses in the oversight of the credit rating industry.  Notwithstanding the many reforms in the Dodd-Frank Act—which were important to be sure—credit ratings still suffer from a series of intractable problems: powerful conflicts of interest still inflate ratings; the SEC’s examination and enforcement program still suffers from a lack of transparency and resolve; the NRSROs still avoid legal accountability in direct conflict with the Dodd-Frank Act; and the credit ratings field is still dominated by three NRSROs that stifle competition.

“In our letter, we support the Proposal, while calling upon the SEC to fortify its approach to the use of credit risk models.  More broadly, we call upon the SEC to tackle all of the regulatory challenges that still surround credit ratings, as they are required to do by law.   Reform of the credit rating system simply must be completed because, until it is, the risk to the markets remains grave and it is inevitable that the continuing deficiencies in credit ratings will surface once again as major sources of instability, necessitating another round of taxpayer bailouts to protect our financial system from collapse.”

Read our full comment letter here or click the button below.


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit


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