Sherry announces results of CRA review

The Government is to significantly reform regulations governing credit rating agencies (CRAs) and research houses. Outlined in the review of CRAs and research houses released by Minister for Superannuation and Corporate Law Nick Sherry, the changes require CRAs to hold an Australian Financial Services Licence (AFSL) and produce an annual compliance report.

“Retail and wholesale investors in Australia rely heavily on information from CRAs and research houses to make investment decisions, so they play an important gate keeping role in the financial system and in the general level of system confidence,” Sherry said.

Sherry said requiring CRAs to hold an AFSL licence would uphold the highest standard of regulation in the financial system.

A CRA annual compliance report would outline to the Australian Securities and Investments Commission (ASIC) how they have complied with the code of conduct fundamentals that were recently updated by the International Organisation of Securities Commissions (IOSCO), including reporting on the quality and integrity of ratings processes, conflicts of interest and responsibilities to investors.

Research houses would also be responsible for issuing a compliance report, which would cover conflicts of interest and the methods and assumptions used in producing research house advice.

ASIC will ensure there is no reduction in CRA adherence to the regulatory measures put in place by the United States Securities and Exchange Commission now or in the future by strengthening surveillance arrangements and limits and bans on securities trading by CRA staff.

The Government will convene a gathering of key investor organisations to discuss the role they can play in developing initiatives to improve the development, due diligence and usage of ratings.