CCF impacts new CRA Reform bill.

As FEI President and CEO Colleen Cunningham notes in her President's Page in this issue (page 6), FEI's Committee on Corporate Finance appears to have had significant influence on the successful passage of the Credit Agency Reform Act of 2006. The bill was signed into law in late September.

The language in the bill seems to borrow heavily from testimony that Cunningham made before the House Banking Committee last spring. The committee, under Cunningham's signature, sent a letter to the Senate Banking Committee this past summer urging passage of the measure. "By requiring periodic filings and by giving the SEC [Securities and Exchange Commission] the teeth to take action when necessary, the legislation will greatly enhance the accountability of rating agencies," the letter read in part. "Both investors and issuers stand to gain by having more information about the rating agencies available to them, and more rating agencies to choose from."

As Cunningham noted in her column, only five credit rating agencies are currently designated as "Nationally Recognized Statistical Rating Organizations" (NRSROs) by the SEC. This group has long had a competitive advantage over its peers because the guidelines for many government, mutual fund and other institutional investment portfolios not only specify that their securities have minimum credit ratings, but also require that the ratings come from NRSROs.

"The members of the committee are delighted with the outcome of this bill," noted Mark Prysock, FEI's general counsel and the staff liaison to CCF. "Our conflict of interest concerns were addressed in the legislation, and the legislation has actually been enacted. Six months ago, it didn't look so promising."