The International Organization of Securities Commissions (IOSCO) has published a consultation report on Code of Conduct Fundamentals for Credit Rating Agencies, which proposes significant revisions and updates to the current IOSCO code of conduct for credit rating agencies (IOSCO CRA Code).

The IOSCO CRA Code is intended to offer a set of robust, practical measures as a guide to and a framework for CRAs with respect to protecting the integrity of the rating process, ensuring that issuers and users of credit ratings, including investors, are treated fairly, and safeguarding confidential material information provided them by issuers.

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The IOSCO CRA Code was first published in 2004 when few jurisdictions had laws governing activities of CRAs. It was later revised in 2008 after the outbreak of the global financial crisis to include significant disclosure provisions that addressed concerns regarding the quality of information that CRAs relied on, suggestions that CRAs were too slow to review existing ratings and make downgrades as appropriate, and the possible conflict of interest arising from CRAs advising issuers on how to design structured finance products.

IOSCO proposes to revise the IOSCO CRA Code to take into account the fact that CRAs are now supervised by regional and national authorities. The goal is to create an updated IOSCO CRA Code that works in harmony with the CRA registration and oversight programs that many IOSCO members have implemented in recent years, and that continues to operate as the international standard for CRA self-governance.

The proposed revisions result, in part, from the experience of IOSCO members in supervising CRAs. They also are informed by IOSCO´s previous work on CRAs, including a survey report describing the key risk controls established by CRAs to promote the integrity of the credit rating process and the procedures established to manage conflicts of interest.

The proposed revisions are designed to strengthen the IOSCO CRA Code by:

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  • enhancing provisions regarding protecting the integrity of the credit rating process, managing conflicts of interest, providing transparency, and safeguarding non-public information;
  • adding measures regarding governance, training, and risk management; and
  • seeking to improve the clarity of the IOSCO CRA Code.

Comments should be submitted on or before 28 March 2014.