We knew that massive regulation reform was coming, and finally, the SEC has approved a new set of rules for credit rating agencies. This may be the first regulation-product of the financial crisis. The SEC set rules to increase the transparancy of the credit rating agencies (the major ones are Fitch, Moody’s, and Standard & Poor’s), enabling investors to inspect the processes and procedures used by these agencies when rating securities. The financial crisis has been partially caused by the overly-favorable ratings that were given to some types of collateralized securities. Investors relied on these inaccurate ratings, and put their money into what they thought were less-risky investments. When the market for these securities collapsed, many people were quick to blame credit rating agencies for failing to recognize the riskiness of these securities. The new rules approved by the SEC place certain restrictions on what types of securities may be rated, and the ability of the agencies to receive gifts from those that are rated.
It is likely that this is only the first of many new regulations to come in the near future. More regulations are expected not only for credit rating agencies, but for securities, financial reporting, and lending institutions (among others).